I was surprised to read this week that putatively educated Americans ( a Louisiana lawyer, a Colorado dentist , an ABC News reporter ) don't understand the concept of marginal tax rates. Because of this lack of comprehension, per ABC, the lawyer and dentist are vowing to keep their taxable income below $250,000 to avoid President Obama's proposed tax increase: "I've put thought into how to get under $250,000," said [the ill-informed dentist]. "It would mean working fewer days which means having fewer employees, seeing fewer patients and taking time off." Apparently some clarification is called for . Below is a US federal income tax table for 2009 ( source ). This does not mean that if you bring in more than $372,951, every single dollar in your entire pile of money is taxed at 35%. Only Dollar #372,952 (plus whatever additional money you may earn) is taxed at that rate. Dollar #372,950 is taxed at 33%. Meanwhile, Dollar #1 is taxed at 10%. Hence the ter...
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