Search Box

Wednesday, September 29, 2010

Tax brackets

There has been a lot of publicity recently about whether or not Congress should let the Bush tax cuts expire for the wealthiest taxpayers, i.e., single people making above $200,000 a year or married couples making above $250,000.

We've all heard the arguments for and against, with those for letting them expire saying that the wealthiest should pay their fair share and that we need to reduce the deficit. Those against letting them expire say that doing so would hurt small businesses and that in many communities that amount of money doesn't really make you wealthy.

I lean towards extending the tax cuts, but it's not a passionate feeling.

What I do feel strongly about -- and am surprised there hasn't been any talk about -- is how ludicrous it is to have only one tax bracket for people making above $250,000. True, a single guy making $200,000 in, say, Nebraska, is going to have a pretty nice lifestyle. But a married couple in Manhattan who both work and make $250,000 to support themselves and three children are not rich by any stretch. They will have very little discretionary spending money.

So why should they be taxed at the same rate as a couple who make a million dollars a year? There should be gradations of tax rates for those who make over half a million a year, a million a year, and five million a year. To lump a hedge fund manager who makes ten million a year in with a dentist and his accountant wife who together make a quarter million a year is ludicrous. They should be in different tax brackets.

Of course, it's the hedge fund managers and their ilk who finance political campaigns (both Democrat and Republican) for the most part, so don't expect any change.

Addendum, 9/30/10: The very next day the NY Times ran an article saying the exact same thing. I take it all back!


Anonymous said...

John -- I have often wondered the same thing: why is the tax rate the same for someone earning $200,000/$250,000 and someone earning a million or more? It hardly seems fair, to the extent that taxes are supposed to be "fair." Your last paragraph probably answers the question, but I too am surprised that there appears to be little or no discussion of this topic. Julie

John Craig said...

Julie --
Hadn't heard from you in a while, was wondering if you were still reading.

Yes, the tax code definitely needs updating; part of the problem may be that the brackets were set a while ago. Most of the people I know who are in that bracket don't consider themselves rich.