The $250,000 Question: Poll Shows Obama’s Tax Plan Is Widely Misunderstood

[xchrom]

http://www.commondreams.org/view/2012/11/25-5

For the last four years, President Obama has been pushing his plan to raise tax rates on people’s income over $250,000, but a new poll indicates that most people still don’t understand one of the plan’s most basic concepts.

OK, it’s a poll conducted by my journalism grad students at NYU, and it’s not highly scientific. But I can say with a reasonable degree of certainty that it’s more accurate than the Gallup and Rasmussen polls were about the election.

Here’s the Obama plan in brief. The Bush tax cuts would be extended for households with an annual income under $250,000 (or $200,000 for individuals), but the tax cuts would expire on any income above $250,000. That means, for example, if you make $300,000, your tax rate would rise a few percentage points, to the Clinton-era rates, but only on the portion above $250,000; in this case, only on $50,000. Bottom line: no one—not a billionaire, not someone making $251,000—would have to pay more taxes on that first $250,000.

There’s a widespread misconception, however, and it’s causing a lot of unnecessary fear. It’s the faulty belief that if your income is above $250,000, you’d have to pay the higher rates on all your income, as if you were suddenly being moved entirely into a higher tax bracket. That is wrong.

[Demit]

1. Another thing that drives me crazy, and that even this Nation story doesn't point out, is that

the $250K annual income threshold is ADJUSTED gross income—the line on your income tax form after all deductions have been taken. So the incomes affected—the amounts that people think of as their annual salaries—would actually have to be much higher to be affected. It would vary according to what your deductions are, but...maybe $300K gross income? So if your annual gross income is $300K and your deductions total $50K, or $275K with deductions of $25K, you will not be affected by the new tax rate at all.

I know people's deductions vary widely, but I don't see this point stressed enough—that the income threshold of $250K is ADJUSTED GROSS income. I don't think people automatically understand that, and I think it would make a difference.