Reply to How many people here understand what taxable income is and how marginal tax rates work?

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[quote=Freeman][quote=Anonymous]Not the PP, but I guess I am in your 1%.  I am right on that margin, and I hired a nanny. That negligible increase does make a difference to me and if it increases too much, I will have to let my nanny go.

I am a believer in we all got ourselves into this mess, we should all be a part of getting ourselves out of it.   The democrats seem more intent on paying entitlements to more than 50% of Americans than getting at the root cause of our fiscal problems.   All I hear is that I make too much.  I don't make too much.  It would be different if I lived in Iowa, but I live in suburban DC, and my $200K, which varies with the economy, doesn't go very far.   If I have a successful year in my business, I'll get hit.  Why should I bust my butt to have a successful year, then?  Such a disincentive.  [/quote]

You'll "get hit" with what exactly? If the proposed changes were implemented(Taxing income over $250k), do you realize how you would be affected? I have no idea what you make in a successful year, so I'll use a $300k year for my example. Under current rules with no deductions, credits, or other factors taken into account, that extra $100k(Going from $200k to $300k) would mean you would pay an additional $33k in taxes, at a 33% rate. If the proposed taxes on those making greater than $250k was passed, the rate on the amount above $250k would be taxed at 36% instead, meaning you would pay a total of $34,500. A grand total of an extra $1500. I'd hardly call that getting "hit", particularly when it would only amount to .5% of your annual income. If you only made $260k, the difference would be $300.

Given those numbers, under what circumstances under the proposed tax system would you feel it would not be worth it to have a successful year? By your own statement, you can get by with $200k. To pay even that extra $1500 in taxes, you would have to earn an extra $100k above that. I can't see any scenario where you wouldn't still have a strong incentive to earn more money. My household income is actually close to the $250k mark as well, and I expect to surpass it within the next two years or less. However, I understand that the differences under either scenario are minor at that level of income, and the only way it would affect anyone's incentive to earn more is if they truly don't understand how the marginal tax rates work. Would you really turn down a $100k in order to not pay $1500 in taxes?[/quote]

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