Of Puppets and Marginal Tax Rates

George the PuppetThe puppet on the left is George. He looks friendly, doesn’t he? Well, he’s not. If you close his mouth, you can see him for the grim misanthrope that he is. But angry though he may be, we still love George for all the joy that he, as a puppet, provides for all the world, even if he would prefer it otherwise. And now for the news.

Remember Joe the Plumber? We all know that he was a liar, but even taken at his word, he would have paid almost no more in taxes. If you raise the top tax bracket from 35% to 39.6%, this will only effect the taxes on the money you make over a quarter million dollars. So if you make $250,001, you will owe 5 cents more, not $11,500! This is what we call a marginal tax.

This morning, Jonathan Chait wrote about how no one seems to understand marginal tax rates:

As Intel Dan has noted, pretty much the entire news media has misreported President Obama’s tax plan because reporters don’t understand how tax brackets work. You know who else doesn’t understand that? Democrats in Congress. Apparently Treasury Secretary Tim Geithner had to break out the hand puppets and head up to Capitol Hill for a quick lesson.

All I can say is that if Geithner really did break out the hand puppets, I’d like him a lot more. And God knows that George would have a few well chosen words for those guys.

Update

Robert Reich has an excellent article on this subject. Sorry: no puppets.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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