If Obama is going to tax my hypothetical $315k, why not decrease my income to $249,999 to save more?
I think my question was poorly phrased because nobody seemed to get it...
Obama wants to give insane tax increases to people making over $250,000, but if you were to request an income of $249,999 you earn a whole lot more by not paying these taxes. In fact, EVEN IF YOU MADE $315,000 AND REQUESTED TO BE PAID $249,999, YOU'D STILL BE PAID MORE IF YOU WERE TO PAY HIS INSANE TAXES!
If I made $315,000 and paid 45% in taxes, I get to keep $173,250.
If I made $250,000 and paid 45% in taxes, I get to keep $137,500.
However, if I requested my pay be no more than $249,999 so I had a lower tax...
If I made $249,999 and paid 30% in taxes, I get to keep $174,999.
So, making $315,000 would be worse than making $249,999. Why would I want my employer to pay me $315,000 if I'm just going to have to pay way more in taxes? I'll take the $249,999 - thanks.
- Scott KLv 71 decade agoFavorite Answer
Obviously, you weren't an econ major. You would be crazy not to take whatever you could unless it was a toss up. The government could tax you at 99% and you would take it if it were the best you could do under the circumstances.
- John de WittLv 71 decade ago
It doesn't work quite like that, since it the higher rate only applies to the income over the cutoff amount. On the other hand, it does mean that you may find that the marginal return on your labors for the extra money simply isn't worth it. I've been in that situation, and instead of working a normal 168 hours per month I could work 144, working 85% of the hours for 93% of the net income. Since I paid child support as a percentage of my income, working less actually made it even more attractive. And that's what some will do: they'll just do less, and there won't be a significant increase in tax revenues from those individuals, and the decreased productivity will also limit tax income to the government from a trickle-down effect. In my circumstances, the government winds up having to spend money for somebody to do the work I choose not to do, so there's a net loss to Uncle Sam, but it feels good to the "soak the rich" crowd, so I guess it's worth the money to them.
- yutsnarkLv 71 decade ago
Once again, I urge you to read what "Go Ahead And Delete It" wrote. There's a common, but serious misunderstanding here. In the graduated system, the increased rate only applies to the amount that exceeds $250,000. So you'd still be paying the lower rate on the first quarter million, and the higher rate on everything above that. In no case will you earn more money but take home less.
EDIT: Also read Obamabot, who gives more detail and clearly knows this stuff better than I do.
- 1 decade ago
Your making two errors. The first is to calculate your tax, you have to divide your net salary after deductions into the brackets. So the amount of tax you would pay 15% on the first amount, 20%, 30% - whatever the brackets are. So you only pay the 45% tax on the 65,000 in income.
So if you make a dollar more, your tax only goes up 45 cents more.
The second, is I don't think you have the brackets right. The brackets have to reflect deductions (say the standard deduction) and the payroll and sdi taxes. This makes the actual 'brackets' more continuous.
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- EdwardLv 41 decade ago
Personally...if you hand me a winning lottery ticket, I'm not that resentful about Obama's top tax rate...however if you tell me that in order to make more than $250k I need to work hard 24 hours a day then I'm not interested....I'd rather enjoy life, take more vacations and stay below $250k
Here's a comment I found on the New York Times...it's how myself and a lot of people feel
If only it were so easy just to tax the rich and give to the poor.
My wife and I are in the over $250K category after both of us went to college for 8-10 years and have managed to build up a small legal services business. This business has recently began to reap the benefits. We lived like starving students all through college before getting to this point. We have already decided that if Obama is elected and he manages to raise income taxes to well over fifty percent (39.6% + 12.4% payroll tax), we will cut back our business, take more vacations, etc. until we are in the under $250 income range. We are just not willing to pay half of everything we earn to the government.
That’s the problem with liberals. They think that if they raise taxes, the supposed “rich” are going to work just as hard to pay for all of their entitlement programs. Sorry, it doesn’t work that way. It’s very counterproductive. Look at the stagnant economies of Europe. All it does is make the successful want to work less, keep their income down, or try to hide income.
Socialism has been proven to be a failure and will always be a failure because it doesn’t take into account human nature.
— Posted by Dan
- Dakine44Lv 51 decade ago
You sure are worried about this aren't you. Your figures only work because you use magic tax brackets and a non progressive tax rate.
Using your figures, at $315000, you would pay %30 on the first 249999, and %45 on the additional 15001, thus keeping $183249.85 as opposed to the $173250 figure you came up with. In reality because of progressive tax rates, you would keep even more.
- hands.adrianLv 51 decade ago
Your premise is wrong.
Tax is applied in "brackets".
Everybody pays the same tax rate on the first $x of income.
You pay the $250k rate only on the portion of your income above $250k.
If you earn more, you take home more.
e.g. the highest rate is 35%, but nobody pays 35% on all their income. We all pay 10% on the first $16k. People who make $400k pay 35% on their top $42k. They pay 10% on their bottom $16k. You will not take home more by earning less, under anybody's plan. It just does not work that way.Source(s): I write payroll software.
- Anonymous1 decade ago
Well, you aren't illiterate, but when it comes to numbers you are inumerate.
We have a graduated, progressive income tax. You pay 10% on the first 8 grand or so, 15 percent on the income between 8 grand and around 32 grand, 25% on the income above 32 grand and less than around 78 grand and so on.
You don't pay the marginal rate on your whole income.
I can actually tell you are in no danger of ever paying the top rate by reading these "questions" of yours.
When you take remedial mathematics, ponder this equation:
0.1 * 8,025 + ( .15 * (32.550 - 8025) ) + (0.25 * (78850 - 32550) ... (0.35 * (357,700 0- 164,500)).
- yo-hanLv 51 decade ago
I'm one of 95% of Americans who get substantial tax cut under Obama's plan, so in short: I don't give a ****
- 1 decade ago
I just told you the last time you asked this.
The first 250k is taxed at the same rate for everybody, whether they make 250k or 5 million. The higher rate only kicks in after 250k.
Seems like a problem you will never have to worry about though.