Reply to 40% of people making 500K/year are living paycheck to paycheck

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[quote=Anonymous][quote]And here’s the part people really don’t see coming.

Lower and mid-income households still get credits and tax advantages that phase out as income rises. Once you’re in the $300K+ range, most of these are gone.

Examples of what phases out:

Child Tax Credit: up to $2K per child
0% capital gains bracket (vs 15–20% for higher earners)
Premium tax credits (health insurance subsidies, can be thousands/year)
Student loan interest deduction
Saver’s Credit for retirement contributions

Now look at the math:
$275K household (2 kids)
Take-home after taxes: ~$195K
Child tax credits: +$4K
Lower capital gains taxes / other breaks: +$3K–$5K
Savings needed: ~$25K
Spendable: ~$175K–$180K

$400K household (2 kids)
Take-home after taxes: ~$250K
Credits: $0 (phased out)
Higher capital gains taxes
Savings needed: ~$70K–$90K
Spendable: ~$160K–$180K
The wild part

After taxes, lost credits, and required savings:
A $275K household can end up with the same or even slightly more usable money than a $400K household.

That’s the real compression. Higher income looks much bigger on paper, but a lot of it disappears through taxes, lost benefits, and the need to self-fund retirement.

This is the problem of our budensome tax system unitl you can break out to the 1m+ you really are just the same as 250-300k[/quote]

There are a lot of factual mistakes. The child tax credit doesn’t phase out until $400K, so a $275K household gets the full credit and even at $400K you may still get most or all of it.

The 0% capital gains bracket phases out around ~$94K taxable income, so both $275K and $400K households are already paying 15–20%—no difference there.

ACA subsidies phase out around ~$120–150K, student loan interest around ~$185K, and the Saver’s Credit around ~$76K, so neither income level qualifies for any of those.

The take-home numbers are also a little stretched in both directions. for 275k in DC its about 180-190k. for 400 its 255-265k.

FInally, the 'Savings Needed" is ridiculous--this is a choice, and an effect of additional income. No reason that a household already making more money "needs" to save 50k.

A  $400K household still clearly nets and can spend significantly more than a $275K one--not the full 125k, but likely 80k. So that's the progressive tax system at work.

[/quote]

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