in our tax system- how do you give tax cuts only to people making BELOW a certain amount?

[dysfunctional press]

Obama always talks about people making less than $250,000 getting a tax-cut...but with our marginal rate system, wouldn't the people making MORE than $250k be getting the same tax cut on their first $250,000? doesn't that mean that instead of 95%, that actually 100% of tax-payers will be getting a tax-cut? whether someone makes $35,000 or $35million, and the savings is only $20 a year- a tax cut is a tax cut.

[RUMMYisFROSTED]

1. By setting the top marginal rate.

[dysfunctional press]

4. explain.

people paying the top marginal rate still pay the same rate as everyone in the lower marginal brackets on that portion of their income.

[RUMMYisFROSTED]

6. See #2

[dysfunctional press]

8. see #7.

[ThomWV]

2. First off you raise the minimim at which you tax at all

And then you simply raise the ramp up so that its progressive nature continues. Where you decide to max out the slope is up to our Congress and the tax code. Personally I think it was about right during Eisenhower's Administration.

[RUMMYisFROSTED]

5. 91%

Yep.

[SmileyRose]

12. You have to know no one paid 91%. Not a chance in hell.

I bet you (not really) a dime 80% of people who fell under the 91% tax rate never paid a single penny in federal income taxes.

Edit to add, the insane rates at the time obviously forced the predator class to invest in their business and people rather than take it as personal income.

[Jackpine Radical]

14. Tat is correct AFAIK.

That fact was not advertised at the time, but it was true.

[RUMMYisFROSTED]

15. Of course.

Everyone in that bracket has a team of tax lawyers/lobbyists.

[dysfunctional press]

7. my point is that you can't give tax breaks ONLY to people in the lower brackets...

because the people in the upper bracket(s) would still get those same breaks on that portion of their income.

[RUMMYisFROSTED]

10. Sure you can.

I'm not against giving the rich a tax break.

I prefer to give it to them at the botttom as opposed to the top. :think:

[dysfunctional press]

16. no, you can't.

if you give a tax break to the people at the bottom levels, the people at the top levels get that same break on that portion of their income.

you can give a tax break to everyone ABOVE a certain dollar amount, but if you give it to people BELOW a certain dollar amount, the people above that amount still get that break on that portion of their income.

[gristy]

17. The thing to realize is that each taxpayer pays taxes on ALL of their taxable income

When one files, one determines one's taxable income and then looks in a table to see the tax owed that corresponds to that taxable income. The GOVERNMENT gets to decide what number goes in that "tax owed" column, and they get to choose that number for each and every taxable income. If your income exceeds that covered by the table, then you use an equation. The GOVERNMENT gets to decide what that equation is.

[RUMMYisFROSTED]

18. Agreed (Get serious!)

But we're talking $25K a year. It doesn't even register with the "folks" I'm talking about. They spend that on pet dentistry every week.


Case #1: Schmo making $25K in a year; not getting taxed.

Case #2: Schmo making $100M in a year; not getting taxed on the first $25K. :rofl:

[customerserviceguy]

20. You can give tax credits

that are phased out and eliminated over a certain dollar amount. The earned income tax credit works that way.

Used to be a tax accountant back in the eighties.

[ThomWV]

19. You seem to be missing something on the nature of a progressive and marginal tax

Yes, everyone pays the same rate on the first thousand, then they pay a higher rate on the next thousand. When you hit the point of earnings where the poor man earns no more it is true that the rich man has paid exactly the same amount at exactly the same rate. However as the rich man goes on to earn more at each increments he pays a higher rate - not on the total amount earned but only on the amount above the bracket floor. You should have got this in economics 101, its pretty straight forward,

[gristy]

3. The tax tables can be made as progressive as the gov't wishes

Just think of it as a tax owed as a function of total taxable income. That ratio can be anything, it can be different for different taxable incomes, and the gov't gets to set the ratio.

[SmileyRose]

9. Well

if they get a 2% cut on the first $250,000 but those over $250 have to start paying taxes on capital gains as regular income - or heck, give them a break and keep it at 15% but do away with the cap on income subject to FICA and Medicare tax - you could lower EVERYONE's percentage on that if we do -

[.... callchet ....]

11. Very very very good point.

What the rich lose in the over $250k they will get back in how their first $250k is taxed.

And guess what, I bet they knew that when they figured it out so they would not hurt the rich.

[FormerDittoHead]

13. I think you're right. It's a tax cut for everyone.

The Right always wants "across the board" tax cuts, which means say, 3% from the TOP, and THAT'S not what's happening...

But I'm thinking you're right, however. The LOWER rate(s) will be reduced, and so that portion of high-income people's tax will be reduced as well.

However, unlike before, the AMOUNT of 'break' given to individuals won't be concentrated only upon those with the highest incomes.

[muriel_volestrangler]

21. You lower the point at which the higher marginal rate kicks in, as well as lowering the lower rate

I find it helps to think of a graph of tax paid v. gross income. Consider a scheme where, now, you pay no tax on the first $20,000; tax at 25% on the next $40,000; and at 50% on amounts above that (red on the graph below). If you want to keep the higher earners paying the same, but decrease the amount for those in the middle, then you say "no tax on the first $20,000; tax at 16.7% on the next $30,000; and at 50% on amounts above that" (yellow line). Or you could say "no tax on the first $30,000; tax at 25% on the next $20,000; and at 50% on amounts above that" (blue line)