They’re called ‘marginal tax rates’ for a reason

I’m used to the media’s lazy “he said, she said” reporting. I’ve grown accustomed to major outlets internalizing Republican talking points. I’m not surprised anymore when Republican guests consistently outnumber Democratic guests in broadcast media, especially the Sunday shows.

But this kind of reporting is just unacceptable.

That raise actually might not be as good as it looks. The extra money is nice, but it could very well bump you into the next tax bracket, possibly leaving you with less money than you had before the raise.

The headline reads, “Math tips for the rest of us.”

Oh my.

When it comes issues like taxes, 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. Instead, we have items like the one USA Today ran.

This shouldn’t be necessary, but consider Dean Baker’s explanation of marginal tax rates.

This means that if the raise bumps you into a higher bracket then you pay more taxes only on the income in the higher bracket. Suppose that the tax bracket for income under $200k is 25 percent, and for income over $200k is 33 percent. If you get a raise that pushes your income from $195,000 to $205,000 then you only pay the higher 33 percent tax rate on the $5,000 that is above the $200k threshold not your whole income. Therefore, there is no (as in none, nada, not any) way that getting more money, and being pushed into a higher tax bracket will leave you with less money after taxes.

I remember ABC News ran a report a couple of years ago about some wealthy-but-dumb folks who intended to go out of their way to make $249,999.00 because they were afraid of the new tax burden the Obama administration might impose on them if they made a single dollar more. These people, in other words, intended to voluntarily lower their own incomes, on purpose, fearing it would leave them with less money.

The American tax system has never worked this way, because it would be idiotic. Even if policymakers agreed to higher rates on those making $250,000 or more, the higher rate would only apply to the money earned above that threshold. Those who make $255,000 would pay the higher rate on that $5,000, and would still keep the lower rates on their first $250,000 in income.

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.