Thursday, February 09, 2012

What? (A question about a tax discussion...)

Having a discussion on a forum about politics. Very confused about this little nugget someone shared with me. Please help. Is this true?:

"When it is proposed that people pay a higher percentage of taxes on income over $250k, they do not mean that if you make $249k you pay 25% on $249k, but if you make $251k, you pay 30% on the ENTIRE $251k.

You would still only pay 25% on the first $249,999 and you would pay 30% only on the other $1,001."

So, what she's saying is that last bit, basically. Because I think the first bit is written a little confusingly. But if I'm making $251,000 annually, is it true that I would only be taxed 25% on the initial $249,999, and then anything ABOVE that would be taxed at 30%?

Because that don't sound right to me. :/


Keith Sader said...

Yes Faith, that's the way income tax brackets work. You are only taxed the higher rates income above a certain threshold. The income below that threshold is not taxed at the higher rate.

Old Fart said...

Yes, as Keith said, that is correct.

Of course, people who complain about rich folks not paying enough taxes, like B. Obama, W. Buffet, etc... and rich people who hide as much money FROM income tax as possible, like M. Romney, N. Gingrinch, etc... are free to pay MORE tax to the IRS if they wish to. The IRS would never refuse extra money.

A first step towards that end is they could simply NOT claim any deductions.

There are of course other options to making things more "fair".

Faith said...

That's fascinating to me. I guess I've always just been in the one bracket, and didn't realize that was how it worked, when it came down to it.

So why does everyone bitch and moan about the idea of taxes being raised on higher incomes? ::scratching head:: That's weird. :/

John Guzmán said...

Because they are not informed about how things work. They get their information from other people rather than the source. That is why I have always argued that defending policies for people making over X amount when you will never make that X amount is really, really good PR by the people that make X.

Like Old Fart said, there are other ways to make things fair. The more money you have or make, the more you have to pay a professional to "hid" your money from the government.

faithstwin said...

I don't understand the 'make things fair' comments. I mean, I get the anger over wealthy people who hide their money however they do it. But what needs to be 'fair'? Just curious.

Keith Sader said...

The fairness in this(my) case relates to favoring one kind of income, investment/stock in this case, over wages. Capital gains are taxed at 15% for every single nickel made on them. Wages are taxed at a much higher rate for the vast majority of wage-earners.

I'm still a fan of 'lower-the-rate, widen-the-base', but that type of sense is lost in today's political debate.

faithstwin said...

Ahhh- I see. I say we just fuck taxes all together and go back to how we were in 1899! =D

Faith said...

Hahahaha! Twin for President! :D