Krugman: 'Imaginary Notches' (for the tax challenged)

March 3, 2009, 12:38 PM

Imaginary notches

Oy. No, your income tax doesn’t suddenly shoot up if your taxable income (line 43 on 1040) rises one penny into a new bracket. To belabor the obvious, the tax code specifies marginal rates: your rate rises from 33 to 35 percent if your taxable income exceeds $372,950, but only the income above $372,950 pays the higher rate.

http://krugman.blogs.nytimes.com/2009/03/03/imaginary-notches/

Krugman was responding to this:

Does ABC News understand how income tax works?

Published Tue, Mar 3, 2009
by Jamison Foser

ABC News reports on "upper-income taxpayers" who are trying to reduce their income so they avoid proposed tax increases on those earning more than $250,000.

According to ABC, one attorney "plans to cut back on her business to get her annual income under the quarter million mark should the Obama tax plan be passed by Congress and become law." According to the attorney: "We are going to try to figure out how to make our income $249,999.00." ABC also quotes a dentist who is trying to figure out how to reduce her income.

This is stunningly wrong.

http://mediamatters.org/countyfair/200903030013?show=1