Monday, April 20, 2009

Another Botched Story on Taxes


Is it too much to ask that journalists actually know what they are writing about, prior to writing an article that will stay on the front of Yahoo! Finance all weekend and Monday?  I guess so:

Ellen Parnell and her husband, Donald Parnell Jr., seem like the kind of well-off couple President Barack Obama has in mind when he suggests raising taxes on families earning more than $250,000 a year. A surgeon at Fort Sanders Sevier Medical Center in Sevierville, Tenn., he drives an Infiniti. They vacation at a beach resort every year.

Yet, right now he is working seven days a week. The car is more than a decade old, the vacation home in Sandestin, Fla., comes at a moderate weekly rate because members of Ms. Parnell's extended family own it. Her family of five would like more room than they have in their 2,500-square-foot home, yet they can't afford anything larger. The downturn has them skittish about paying for renovations.

"I'm not complaining, but the reality is Obama may call me wealthy, but I thought we were just good old middle class," says Ms. Parnell. "Our needs are being met, but we don't have a load of cash to cover wants."

Under Mr. Obama's budget proposal, two of the highest tax brackets would see rates rise, and deductions would be reduced for households earning more than $250,000 annually. President Obama said Wednesday, "We've made a clear promise that families that earn less than $250,000 will not see their taxes increase by a single dime."

Yes, they may see rates rise, but only on their 250,001st dollar.  The tax increase is on the marginal rate, which means that someone earning $249k and $251k will be paying roughly the same amount of taxes. 

That being said, this proposal by Matt has merit: 
I wouldn’t have a problem with launching a new, slightly higher rate, starting at $500,000 and a higher one starting at $1 million and another at $2 million another at $4 million another at $8 million and another at $16 million. I don’t see any reason to think that the progressivity of the scale should max out at $250,000 when obviously there’s a huge difference between someone earning that much money and someone earning ten times that amount.


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