Senate Fiscal Cliff Bill Approved by House

[Psi U MC Vito]

Is it just me, or does that seem needlessly complex to anybodyv else?

[AGDee]

Originally Posted by Psi U MC Vito

Is it just me, or does that seem needlessly complex to anybodyv else?

It is a lot less complex than now than it has been at other points in history. Some of the tax brackets are in 1% increments in some years! It is designed to avoid the exact issue of making LESS money because you are in a new tax bracket.

If you were making $8925 and got a $2/year raise, you would zoom from paying 892.50 in taxes to paying $1339.05, leading to a net loss of $444.55 in pay. That *would* prevent people from wanting to make more money. In reality, you'd only have $.30 more in taxes.

[AOII Angel]

It's not like you have to get out a calculator and figure out your tax bill. It makes a lot of sense to do it this way.

[PiKA2001]

Originally Posted by Psi U MC Vito

Is it just me, or does that seem needlessly complex to anybodyv else?

It's not just you, our tax code is needlessly complex.

[UGAalum94]

Originally Posted by AOII Angel

No they wouldn't. You won't take home more money in a lower tax bracket. They are being taxed the same on the income up to that 25% tax bracket level. The income over is then taxed at a higher level. You CANNOT make more money by making less. This is the fallacy. I'm in the 1% already and know people in the 1% so I'll tell you that no one is going to stop making money so they can stop paying taxes. They may find a way to get out of paying taxes, but no one is going to stop making money. Period.

Yes, I knew that it didn't work that way in reality, but I understood the theoretical example to exist in a imaginary world with straight income breaks. The imaginary choice, as I understood it, was to be taxed at 25% of present pay or taxed at 50% of a 1%er's salary. In that kind of system, you'd see weird things happen at the thresholds between brackets. I totally know that's not what we've really got.

I also want to make clear that I wasn't claiming that people in the 1% would take home more money by having a lower income overall.

I think the folks talking about higher earners choosing not to max out salary-wise are saying that if they aren't going to net as much over a certain point, that perhaps they value the additional time they would gain not working more than the lesser amount of additional pay.

[ETA: I'm restating this another way: the choice isn't so much about making less because of taxes or what the rates themselves do to take home pay; it's about re-evaluating the opportunity costs of additional work in light of paying higher taxes on payment for that additional work. Someone who has this much control over their workload is pretty exceptional for reasons other than income, IMO.]


That's a plausible position to me, but it still means they will forgo some additional income which means they can't be spending that additional income in their local economy.

[AOII Angel]

Originally Posted by UGAalum94

Yes, I knew that it didn't work that way in reality, but I understood the theoretical example to exist in a imaginary world with straight income breaks. The imaginary choice, as I understood it, was to be taxed at 25% of present pay or taxed at 50% of a 1%er's salary. In that kind of system, you'd see weird things happen at the thresholds between brackets. I totally know that's not what we've really got.

I also want to make clear that I wasn't claiming that people in the 1% would take home more money by having a lower income overall.

I think the folks talking about higher earners choosing not to max out salary-wise are saying that if they aren't going to net as much over a certain point, that perhaps they value the additional time they would gain not working more than the lesser amount of additional pay.

[ETA: I'm restating this another way: the choice isn't so much about making less because of taxes or what the rates themselves do to take home pay; it's about re-evaluating the opportunity costs of additional work in light of paying higher taxes on payment for that additional work. Someone who has this much control over their workload is pretty exceptional for reasons other than income, IMO.]


That's a plausible position to me, but it still means they will forgo some additional income which means they can't be spending that additional income in their local economy.

Not plausible at all. It's a smoke screen. It's not like you can just stop working 10% for a 10% change in taxes. The work to income isn't that direct. I work very hard...no, I don't work manual labor, but I can't put a dollar amount to every movement I make. I also don't get to scale back because I'm being taxed more. That means a competitor takes my business or maybe I get fired.

[HQWest]

I had a professor once who explained it in terms of Prada. If you make $250K a year, it might be a nice birthday present to get a $1200 Prada bag. If you make $25-30K a year - that bag could be one or two months' rent.

Same goes for the problem with a flat tax. Yes you can eliminate some red tape if you make a 10% flat tax. The Dept. of Treasury is woefully underfunded so the government would not save much in terms of reduced labor costs, but they might gain some because they could audit more and keep track of non-payers. However - to a family that makes $25-30K paying $2.5-3K in taxes is a lot. To that family making $250K - yes, they would pay a lot more in net taxes - $25K, but it would not be the difference between them being able to pay rent or get new coats for the kids that year.

A 10% flat tax would make the net tax paid for half the country go up while cutting taxes for the top one percent down to 1/4 of what they pay now? The 1%ers would also then not have as great an incentive as they have had to give generously to philanthropic projects. Tax deductable donations would go away. There is the possibility that people hiding money off shore would bring that money back - but the flaw in trickle down economic theory is that just because they have the money, doesn't mean they will spend it or invest it in businesses here. In fact, it may lead people to accumulate enough money that they can live off investments, and then under the 10% income tax plan, the very wealthy would pay no taxes.

[DeltaBetaBaby]

I am a small business owner who is turning away work contracts because I have too much on my plate right now. I have never once considered my tax rates in making that decision.

[UGAalum94]

Originally Posted by AOII Angel

Not plausible at all. It's a smoke screen. It's not like you can just stop working 10% for a 10% change in taxes. The work to income isn't that direct. I work very hard...no, I don't work manual labor, but I can't put a dollar amount to every movement I make. I also don't get to scale back because I'm being taxed more. That means a competitor takes my business or maybe I get fired.

A smoke screen for what?

I've conceded several times that the number of folks who can control their work this way is limited. It's interesting that you seem to believe that because it's not true for you that it is impossible that it is true for anyone.

[DeltaBetaBaby]

Originally Posted by UGAalum94

A smoke screen for what?

I've conceded several times that the number of folks who can control their work this way is limited. It's interesting that you seem to believe that because it's not true for you that it is impossible that it is true for anyone.

Because it is a meaningless argument. We shouldn't raise taxes on everyone in the 1% because some of the people in the 1% will work less? So what? You know what happens when I pass on a contract? Someone else gets it, and then THEY pay taxes on it. In fact, spreading around the contracts so that two people are making 100K/year is far better for the economy than giving it all to me to earn 200K/year, is it not?

[UGAalum94]

Originally Posted by DeltaBetaBaby

Because it is a meaningless argument. We shouldn't raise taxes on everyone in the 1% because some of the people in the 1% will work less? So what? You know what happens when I pass on a contract? Someone else gets it, and then THEY pay taxes on it. In fact, spreading around the contracts so that two people are making 100K/year is far better for the economy than giving it all to me to earn 200K/year, is it not?

No doubt people are making that claim, but I'm not. I'm pointing out merely that tax rates could plausibly affect individual behavior, and that behavior can have localized economic effects, rather than significant effects on tax revenue.

[AOII Angel]

I mean it's a smokescreen to trick gullible people into thinking that the person making $450,000 has real problems. People with businesses don't become successful by cutting back and spending more time with family. It's a little secret of the 1% I'll pass on to you. If taxes are raised or reimbursement plummets or raw ingredients/labor/costs increase, the 1% find a way to work harder and find new ways to make money to make up for that loss. It is not in the make-up of highly successful people to throw up their hands and say, "Oh well, since I'm being taxed more, I might as well spend more time at home." Not in a million years. It's why you hear about doctors working 120 hour weeks and never seeing their children, business people being workaholics, lawyers sleeping under their desks... Keep telling yourself that story.