RICH MORONS DECREASING OWN INCOME…. When it comes to policy issues like the federal tax code, it’s easy for people to get anxious and confused. Ideally, we’d have professional journalists and responsible news outlets that can help the public get the facts they need.
In reality, however, we have a few too many reports like this one from ABC News’ Emily Friedman.
The premise of the piece is, on its face, odd. ABC News found wealthy Americans in the top 2% of wage earners who are, believe it or not, actively trying to figure out how to lower their income. Apparently, these folks have heard that President Obama wants to raise taxes on those who make more than $250,000 a year, so ABC spotlighted some of these folks who are seemingly desperate to get to below the threshold.
One lawyer in Louisiana said, “We are going to try to figure out how to make our income $249,999.00…. We have to find a way out where we can make just what we need to just under the line so we can benefit from Obama’s tax plan. Why kill yourself working if you’re going to give it all away to people who aren’t working as hard?”
Jon Chait described this as possibly the dumbest news report he’s ever seen.
Now, the obvious here is that the tax code doesn’t work that way. A tax increase effects the marginal dollar that a person gains. That’s means only every dollar over $250,000 is taxed at a higher rate. Obama is not proposing a tax system whereby somebody who goes from $249,999 to $250,000 suddenly becomes poorer. Nobody has ever enacted a tax hike like that in the history of the United States. […]
The article then quotes a financial advisor who explains the way that tax brackets rates work, but then quotes a right-wing business professor and the subjects of her article fulminating about class warfare. Pretty clearly the reporter started off on her mistaken premise, found some subjects who shared her ignorance, and then came across a financial advisor who gently corrected her. But, instead of nixing the collosally uninformed article, or writing a different kind of article (“Rich Morons Decreasing Own Income Due To Lack of Tax Code Knowledge”) she instead plowed ahead with her initial premise.
Jamison Foser, who called ABC News’ report “stunningly wrong,” also explained:
The ABC article is based on the premise that an individual’s entire income is taxed at the same rate. If that were the case, it would be possible for a family earning $249,999 to have a higher after-tax income than a family earning $255,000, because the family earning $249,999 would pay a lower tax rate.
But that isn’t actually how income tax works. In reality, a family earning $255,000 will pay the higher tax rate only on its last $5,001 in income; the first $249,999 will continue to be taxed at the old rate. So intentionally lowering your income from $255,000 to $249,999 is counter-productive; it will result in a lower after-tax income.
The people ABC quoted don’t seem to understand that. Worse, ABC doesn’t seem to understand it, either.
There’s no excuse for journalism that’s this bad. Americans need professional news outlets that debunk misconceptions like these, not fuel the fire of ignorance.