I've seen a lot of dumb news reports in my life, but I'm not sure anything can quite match this one from ABC News. The premise of the report is this: Barack Obama plans to raise taxes on people who make more than $250,000, so the reporter has gone and found people who earn a little more than that sum who plan to decrease their income so that they come in underneath the magic line.Now, the obvious objection here is that the tax code doesn't work that way. A tax increase affects the marginal dollar that a person gains. That's means only every dollar over $250,000 is taxed at a higher rate. Obama is not proposing a tax system whereby somebody who goes from $249,999 to $250,000 suddenly becomes poorer. Nobody has ever enacted a tax hike like that in the history of the United States.Just so we're clear on the math here, letting the upper-end of Bush's tax cuts expire means that income beyond $249,999 will be taxed at 39.6 percent rather than 35 percent. A family forgoing that final dollar is 60.4 cents poorer than if they had earned the money. Either way, their after-tax earnings on the first $249,999 are unchanged.But let's not just bash bad press coverage. The AP's Stephen Ohlemacher had a very good story on Obama's tax plans. The innovation? It explained how the plan would affect different families differently."A typical American family would get a tax cut under President Barack Obama's budget proposal, and their low-income neighbor would fare even better. Their wealthier counterparts, however, would face some steep tax increases, starting in 2011," he wrote. See? Not so hard. And later in the story, we get the numbers:
A typical family of four making $50,000 a year would receive a payment of $40, according to the Deloitte analysis. Before the stimulus package was enacted, that same family would have owed $760 in federal income taxes.A similar family making $35,000 a year would get a payment of $4,100, an increase of $1,200. The median household income was $50,233 in 2007, according to the Census Bureau.The stimulus package provided most working couples with a new tax credit of up to $800 for 2009 and 2010 — single filers get up to $400. Obama's budget proposal would make the credit permanent for families making less than $190,000 and individuals making less than $95,000.[...]a typical family of four making $300,000 a year would see their federal income taxes increase by $1,100, while a similar family making $500,000 would get an $11,300 increase, according to the Deloitte analysis. Single filers with no children would be hit with even bigger tax increases.
That's how it's done.
