If you earn >250K

[Anonymous]

assuming that Obama is elected and he inacts his tax plan to cut taxes for the "middle class" and raise taxes for the "wealthy", does anyone know how if they calculate income based on your gross or your adjusted gross? IOW, if you earn more than 250K a year, but your AGI is less than 250K (b/c of itemized deductions), would you still be considered as part of what he defines as "middle class" or would you fall into the higher tax bracket?

On a side note, I think Obama is the man for the job, and I'm voting for him regardless of the possiblity of higher taxes, but I do want to start planning if that is the case. Also, wouldn't it be nice if they factored in cost of living instead of just assuming that anyone making 250K a year is "wealthy" regardless of weather they live in MI or DC!!

[Anonymous]

Interesting, I'm eager to hear the responses.

I've been considering the idea of SAH (I already did this once when DS was younger) my added income puts us just over the 300K mark (and I have TONS of itemized deductions, I'm a 1099), but if I quit, we would go just above the 200K mark. The answer might just give me that extra push. I'm making my decision after Novermber anyways.

[Anonymous]

AMT kills all of this discussion and affects most people down to $200K or so.

[Anonymous]

Op here - I confess I really don't get the whole AMT thing but I do know we were affected by it last year - our AGI was right below 250K, we paid AMT but also got a nice refund. Not really understanding what PP means by "AMT kills all this" - please eloborate

[jsteele]

PP is correct that AMT is a wild card, but to simply address the original question, Obama will restore the top two tax rates to their pre-Bush-Tax-Cuts level. Those tax brackets affect taxable income above $250,000. So, it is adjusted gross income and only that portion that falls into the upper brackets.

[Anonymous]

thanks Jsteele

[Anonymous]

There is another possible tax increase for those making over $250K under the Obama plan - larger fraction of wages taxed for social security. Currently social security is only charged on your first ~100K of wages, and anything over that doesn't have social security taken out. Obama has suggested increasing that, although by using a "donut hole". The first ~$100K would be taxed as currently, then no tax for 100-250K, then 250K+ would be taxed again, although it looks like at a reduced rate. But in this case, it would be assessed per individual. So a couple making 200K+200K wouldn't see any new social security taxes, but an individual making 300K would.

[Anonymous]

I recommend to anyone curious about Obama's economic policy to read the article in the Sunday New York Times about it from 2 weeks ago. Very informative and it lays out his plans quite well while giving a good dicussion of the pros and cons.

[Anonymous]

wouldn't it be nice if they factored in cost of living instead of just assuming that anyone making 250K a year is "wealthy" regardless of weather they live in MI or DC!!

That would be the day! Of course, that's sure to knock out a huge chunk of the people that would otherwise be impacted, so naturally they wouldn't do that. Just once (aside from government employee salary scale), though, I'd love to see some recognition for the fact that the cost of livign differs highly from one area of the country to another.

To the PP who cited the NYT article - would you mind posting the link?

[Anonymous]

http://www.nytimes.com/2008/08/24/magazine/24Obamanomics-t.html?ref=magazine

Not sure if you need an account or not to view it (I have one so I don't know if others need it).

[Anonymous]

I may be wrong on this, but it seems to me to be silly to focus on details of a plan that will have to go through Congress, where it will be subject to negotiation and amendment. I am not an expert on either the legislative process or tax law, so please correct me if I'm wrong.

[Anonymous]

Just wait until Obama decides how much to increase the capital gains tax.

[Anonymous]

Anonymous wrote:I may be wrong on this, but it seems to me to be silly to focus on details of a plan that will have to go through Congress, where it will be subject to negotiation and amendment. I am not an expert on either the legislative process or tax law, so please correct me if I'm wrong.

If a Congressman or Senator has something "attached" to a bill that is in his/hers state's interest than it almost doesn't matter what the bill is that is voted on. That is why it is hard to interpret different laws, policys, and Acts because there is so much that is piggy-backed on to these things that you don't know if your representative is vetoing/voting for the "main" Act or whatever the line item might be.

[Anonymous]

Most of Obama's planned "increases" in tax for the wealthiest Americans are not new taxes, but would be accomplished by NOT extending the Bush tax cuts which are set to expire over the next few years. In that sense, there is very little Obama has to do to bring about the changes.

Of course, Congress could try and extend the cuts or do something completely different, but with a Democratically controlled congress it seems unlikely they would stray to far from the Obama plan.

[Anonymous]

it seems to me to be silly to focus on details of a plan that will have to go through Congress

You're absolutely right, but I think the prospects of getting something much closer to what Obama is suggesting are much greater than McCain's proposals since Obama would be dealing with a Congress where Dems would control both houses. That makes McCain's policies a much bigger wild-card and Obama's a much bigger likelihood of coming true.