Help get the word out (more poor messaging) [View all]

[WhaTHellsgoingonhere]

I was listening to the Ed Schultz Show (radio) last week and a guy calls in, says he makes $255,000, and won't vote for Obama because his taxes are going to go up about $8000 if Obama gets re-elected. He calculated that by taxing *all* of his gross income at 39% versus taxing *all* of his gross income at 36%. A soft ball, right? Ed's going to hit this one out of the park? Right?



The guy -- who I initially assumed was a Republican tool when he threw out the $255,000 number -- then asked something reasonable (paraphrasing), "I'm confused, is it *all* of my income or just the amount over $250,000? If it's the latter, then that's not a big deal at all." Ed farted around and then told the guy to suck it up. What an opportunity lost! I called his show but couldn't get through, so I emailed and tweeted him.

Fortunately, someone calls in and *almost* explains it correctly. He explained that the 3% only applies to the $5000 over $250K. Ed says, "That's what I understand." So this caller says that the guy will only pay an extra $150 in taxes (3% of $5000).

Hopefully, every single one of you reading this have already noted that this explanation misses the mark, too.

What I was hoping to hear Ed say was something like this:
Dude! Your taxes won't go up at all! Surely your taxable income is well under $250,000. Right?! Heck! You can make $270,000 and probably not be affected! First, the tax rates aren't applied to your gross income, they are applied to your *taxable* income (AGI). Second, the tax rates are *marginal* rates. So, the 39% tax rate will be applied to just taxable income above $250K. In other words, if you make $270,000 but have $25,000 in deductions, your taxes won't go up at all!