[extropy-chat] [SALT] The DEpopulation Problem, this Friday (for forwarding)

Brian Lee brian_a_lee at hotmail.com
Fri Aug 13 14:54:33 UTC 2004

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>From: Mike Lorrey <mlorrey at yahoo.com>
>To: ExI chat list <extropy-chat at lists.extropy.org>
>Subject: Re: Re: [extropy-chat] [SALT] The DEpopulation Problem,this Friday
>(for forwarding)
>Date: Thu, 12 Aug 2004 13:48:45 -0700 (PDT)
>
>--- Brian Lee <brian_a_lee at hotmail.com> wrote:
> >
> > >From: Mike Lorrey <mlorrey at yahoo.com>
>
>How do you argue that? The deduction comes off the front end of income.
>The more you earn, the less that deduction is worth because it is a
>decreasing percentage of your income. Ergo, if you are in a higher tax
>bracket, any given deduction is worth less UNLESS it happens to drop
>you into a lower bracket.

No, any deductions come off your highest percentage first. Tax brackets work
by taxing a certain percentage of your income. For example the federal
brackets were (for a single person) in 2001 were:
Between  But Not Over  Base Tax  + Rate  Of the Amount Over
\$0 \$6,000 \$0 10% \$0
\$6000 \$26,250 \$600 15% \$6,000
\$26,250 \$63,550 \$3,637.50 27% \$26,250
\$63,550 \$132,600 \$13,708.50 30% \$63,550
\$132,600 \$288,350 \$34,423.50 35% \$132,600
\$288,350 - - - - - \$88,936.00 38.6% \$288,350

So if someone makes 300k and gets a \$3000 deduction it is worth 38.6% of
\$3000 or \$1158.
But if someone makes 35000, then the \$3000 deduction is worth only 27% of
\$3000 or \$810.

There's really no such thing as "dropping into a lower tax bracket" as being
advantageous in the US federal tax system but I think that many people
misunderstand and think that their entire income is taxed at the highest
rate. I know I've personally had to explain this to tons of friends and
relatives.

So deductions never come out of the lowest bracket unless your lowest
bracket is also your highest bracket.

BAL

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