[extropy-chat] [SALT] The DEpopulation Problem, this Friday (for forwarding)
brian_a_lee at hotmail.com
Fri Aug 13 14:54:33 UTC 2004
>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
>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
So deductions never come out of the lowest bracket unless your lowest
bracket is also your highest bracket.
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