Economics Stack Exchange Archive

Better to make $999,999 to avoid the higher tax rate if made over one million dollars?

• posted by: netrox on 2012-04-18
• tagged: taxation, taxes, politics
• score: 1

That’s the question. Some people tell me that if Obama (for an example) imposes say 40% tax rate on people making 1,000,000 dollars, people would just make less than 1,000,000 dollars and still keep the 28% rate. But I think how it works is that 40% is effective only on the amount you make over 1,000,000 dollars and it doesn’t apply to the first 999,999 dollars? Right? In other words, if you make 1,100,000, the first 999,999 is taxed at 28% rate and the 100,001 is taxed at 40%?

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