There are two aspects of the high-end cuts that often get lost in the public discussion. The first is households with more than $250,000 a year in adjusted gross income would still get a tax cut — on their first $250,000 of such income. On average, this tax cut would equal about $6,500 a year, regardless of whether a household had $250,000 in adjusted gross income or $1 million (or much more) in adjusted gross income. If all the Bush tax cuts are extended, by contrast, households making at least $1 million a year would receive an average annual tax cut of $104,000.We have seen numerous pieces telling us how difficult it is to make ends meet on a quarter mil (see Brad DeLong for the latest amusing example). Perhaps when you get closer to a third of a million, life is a bit easier.
The second issue is that earning $250,000 in adjustable gross income is different from earning $250,000 in total income. High-income households tend to take a significant number of deductions. At our request, Roberton Williams at the Tax Policy Center analyzed the total income of households with $240,000 to $260,000 a year in adjusted gross income. On average, they made $315,000 in adjusted gross income, including $32,000 in capital gains and dividends.
So when you hear talk about taxes on people makes at least $250,000 a year, it really tends to means taxes on income above $315,000 a year.
Comments, observations and thoughts from two bloggers on applied statistics, higher education and epidemiology. Joseph is an associate professor. Mark is a professional statistician and former math teacher.
Monday, December 27, 2010
"When $250,000 Equals $315,000"
Good post by David Leonhardt which I've been meaning to link to since it came out (the thing I'll miss most about the holidays is the excuse for procrastination):
Posted by Mark at 2:24 PM
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