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June 14, 2009

Perspective On Tax Increases

-- by Dave Johnson

This post originally appeared at Speak Out California.

People get hysterical when talking about tax increases.  They say wealthy people will pack up and leave (parking their yachts in the Nevada desert?)  They say companies will relocate.

For perspective, if there is a 2% tax increase on incomes over $500,000 a person with $600,000 taxable income will pay $38.42 more in taxes per week.

If you think people who make $600,000 a year can't afford $38.42 per week, and will leave behind their beautiful house and connections and friends, I suggest you should think again.

Notes:  Taxable income is income after all deductions.  Tax rates only apply to the income in that bracket, so a person with $600,000 in taxable income will pay the increased taxes on $100,000 if the taxes apply at $500,000.  This means a 2% tax increase applies to that $100,000 only, which is $2,000 per year, or $38.42 per week.

Click through to Speak Out California.

Posted by Dave Johnson at June 14, 2009 9:00 AM


Many people who should know better think that a rate for a particular bracket applies to their entire income. Typically, one can't disabuse them of that notion because "when you're explaining, your losing." They yawn.

I've proposed a very narrow tax bracket, say $500 or $1000 wide, somewhere over $100,000 (say, at $120,000). Set the rate for that bracket at some low number such as 3%, and watch people twist and turn and contort themselves to shoehorn themselves into that bracket. I expect the tax revenues to increase from that, because most people who aim for that bracket would otherwise have lower income.

Posted by: John M 307 [TypeKey Profile Page] at June 14, 2009 10:12 AM

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