When things are even less like they seem than they seem to be:
These numbers look pretty accurate. Deferred income (which we use for partnership income) makes the difference larger, a lot larger.
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David Leonhardt: When $250,000 Equals $315,000 in the Tax Debate
David:
When $250,000 Equals $315,000 in the Tax Debate: We’ve heard from several readers who wanted to know how much money households with $250,000 a year in adjusted gross income — that is, those who would have been affected by the Democrats’ original proposal on the Bush tax cuts — actually make. The answer seems to be about $315,000 a year.
Some background: President Obama and other Democrats originally proposed the expiration of the Bush tax cuts on income above $250,000 a year. With the Republicans taking over the House, the Democrats retreated from that proposal and agreed to extend all the Bush tax cuts for two years. But Democrats say they still want to see these high-end cuts expire in 2012.
There are two aspects of the high-end cuts that often get lost in the public discussion. The first is households with more than $250,000 a year in adjusted gross income would still get a tax cut — on their first $250,000 of such income. On average, this tax cut would equal about $6,500 a year, regardless of whether a household had $250,000 in adjusted gross income or $1 million (or much more) in adjusted gross income. If all the Bush tax cuts are extended, by contrast, households making at least $1 million a year would receive an average annual tax cut of $104,000.
The second issue is that earning $250,000 in adjustable gross income is different from earning $250,000 in total income. High-income households tend to take a significant number of deductions. At our request, Roberton Williams at the Tax Policy Center analyzed the total income of households with $240,000 to $260,000 a year in adjusted gross income. On average, they made $315,000 in adjusted gross income, including $32,000 in capital gains and dividends.
So when you hear talk about taxes on people makes at least $250,000 a year, it really tends to means taxes on income above $315,000 a year.
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yrs,
rubato
Oh dear, someone's learning arithmetic!
Re: Oh dear, someone's learning arithmetic!
Baloney. And more baloney.
(a) There were no "tax cuts" under discussion. The question was whether rates would be higher in 2011 than they have been for the past 7 years. The only relevant question is (was) whether it is a good idea to raise taxes on America's most productive taxpayers during a severe recesion. And even the Democrats could see that was folly.
(b) Barry, in his most public statements, was never precise about what he meant by household incomes over $250 thousand. Did he mean total, gross income? Adjusted Gross Income? Taxable income? He was never clear. The policy wonks in the WH may have clarified the position, but not one American in a hundred could have said with any certainty what the $250k income mentioned by Barry actually referred to.
(c) AGI is calculated BEFORE deductions, so any mention of deductions in connection with the $250k figure is bogus. Furthermore, $250k is right about at the level where the only significant deductions are real estate taxes and home mortgage interest. The more exotic deductions don't start coming in until the income level gets significantly higher, and even these are greatly overestimated by the poor ignoranti.
(a) There were no "tax cuts" under discussion. The question was whether rates would be higher in 2011 than they have been for the past 7 years. The only relevant question is (was) whether it is a good idea to raise taxes on America's most productive taxpayers during a severe recesion. And even the Democrats could see that was folly.
(b) Barry, in his most public statements, was never precise about what he meant by household incomes over $250 thousand. Did he mean total, gross income? Adjusted Gross Income? Taxable income? He was never clear. The policy wonks in the WH may have clarified the position, but not one American in a hundred could have said with any certainty what the $250k income mentioned by Barry actually referred to.
(c) AGI is calculated BEFORE deductions, so any mention of deductions in connection with the $250k figure is bogus. Furthermore, $250k is right about at the level where the only significant deductions are real estate taxes and home mortgage interest. The more exotic deductions don't start coming in until the income level gets significantly higher, and even these are greatly overestimated by the poor ignoranti.
Re: Oh dear, someone's learning arithmetic!
Raise taxes? You mean if they did nothing the tax rates would remain the same? As I recall it, tax rates were lowered for a limited period of time, after which it was understood they would return to the pre-lowering rates. Of course the government could choose to extend the lower rates, but this would involve cutting the rates from what they would have been absent the legislation. At no time was a bill raising taxes ever considered. Do you have a different recollection? Was Congress really considering raising taxes?(a) There were no "tax cuts" under discussion. The question was whether rates would be higher in 2011 than they have been for the past 7 years. The only relevant question is (was) whether it is a good idea to raise taxes on America's most productive taxpayers during a severe recesion. And even the Democrats could see that was folly.
Re: Oh dear, someone's learning arithmetic!
Uh, not exactly....after which it was understood they would return to the pre-lowering rates.
More like "after which time the question of whether they should be raised or not would be re-visited"
What happened with the compromise package is that a tax increase that otherwise would have taken place was prevented.
There's simply no other way to describe it accurately, (Though the Dems have struggled manfully to try and come up with one.)
Re: Oh dear, someone's learning arithmetic!
I disagree Jim, if nothing was done, they would return to the pre tax cut levels; additional legislation was required for any continuing or further cuts. There was never any discussion of passing legislation to raise the tax levels, the increase was automatic absent further action by congress and the president. I fail to see how eliminating a temporary (per the legislation) discount amounts to increasing the tax rate Yes, it would have gone up absent the new legislation, but that's how the original law was written. A temporary tax cut is not a permanent entitlement to a lower rate.
Had Congress wanted to do it your way, they could have passed a permanent cut which could be repealed by legislation after a certain amount of time; by the language of the law, they chose not to do this.
Had Congress wanted to do it your way, they could have passed a permanent cut which could be repealed by legislation after a certain amount of time; by the language of the law, they chose not to do this.