Federal income tax cuts expire at the end of this year. Or should we say that taxes rise on New Year's Day? Or that tax rates revive when that ball in Times Square reaches its nadir?
No matter what you call what will happen a few months hence tax-wise, Blawgletter cannot, for the life of us, figure out One Simple Thing.
We've heard and read lots about keeping current tax rates in place for poor people and the middle class. We've also witnessed Much Discussion, tax-wise, about "the wealthiest Americans" (NYTimes) or "high-income earners" (WSJ). But What Does It Mean to distinguish between wealthy/high-income people, on the one hand, and everybody else, on the other?
As best we can tell, the rule we learned in law school Taxation will keep applying: Your federal income tax rate starts small at the low-end and rises as your income grows.
In 2009, for instance, you paid 10 percent on every taxable dollar you earned up to $16,700; 15 percent for taxable dollars between $16,700 and $67,900; 25 percent between $67,900 and $137,050; 28 percent between $137,050 and $208,850; 33 percent from $208,0850 through $372,950; and 35 percent for everything above $372,950.
All of which means, we think, that the Debate over expiring tax cuts, raising taxes, and reviving old rates at the end of this year boils down to a Debate over the ascending rates that'll apply to income above $250,000.
Why, we wonder, does the Debate relate to "the wealthiest Americans" and "high-income earners" instead of "earnings in excess of $250,000"?
We can see why politicos would want to personalize the discussion. We guess they picture electoral gold. But would it kill journalistas to make clear that people who make $250,001 won't suddenly see their IRS bill jump from an average of less than 25 percent to more than 33 percent?
Too hard to explain? How about: Big earners would pay at higher rate only to extent they reap over $250,000. Or: Obama would preserve tax rates for incomes up to a quarter-million dollars, raise rates for excess amounts.