|
?:reviewBody
|
-
‘Tax Brackets Explained’ Imgur Post Claim An Imgur post claiming to explain tax brackets and how they work accurately describes the manner in which income increases are taxed incrementally versus an earner's entire salary. Rating True Like this fact check? Reporting In late February 2020, an Imgur user shared a popular post on a popular topic (tax brackets explained), urging others to help educate others on how taxation supposedly works: Tax brackets explained. Help educate others! Alongside images of several pockets of money (which supposedly represented tax brackets), text made up the bulk of the images’ claims: Let’s say you are an individual earning $84,000 a year. Florida is where wokes go to die... Please enable JavaScript Florida is where wokes go to die How much do you owe in federal income tax? We can find out by looking at the 2019 tax brackets. A common mistake is to think you find your bracket and then pay that rate on all of your income. So you’d owe 22 percent, or $18,480. That’s not right. Here’s how it actually works. Your money is divided into the brackets. (I like to think of them as pockets.) Only $9,700 can fit in the first pocket. So you pay 10 percent on that money. Then the income you earn past $9,700 goes into the next pocket. And you owe 12 percent on that money. Then you need the next pocket once you earn more than $39,475. And you owe 22 percent on money in that pocket. And so on. But what if you get a raise and earn another $1,000? Do you get bumped into the next bracket? Remember, we need to think of the brackets like pockets. So getting a raise doesn’t mean you all of a sudden pay more in taxes. Rather, it means only the money that doesn’t fit in the previous pockets gets pushed to the 24 percent pocket. In this case, only $800 would get pushed to the next pocket. So when Ocasio-Cortez says the top tax rate should be 70 percent, she is saying that after we’ve filled all the previous pockets, income should be taxed at 70 percent. (She hasn’t said much about what the threshold should be or how many brackets there should be.) That Imgur gallery post consisted of five images; normally we’d embed that many, but based on their design elements, the screengrabs appeared to come from a Vox.com post. On January 18 2019, Vox published a piece (How tax brackets actually work, with the subhead, Show this video to politicians who say Democrats want to take away 70 percent of your income) which referenced a slightly earlier Vox article; the subsequent coverage involved a follow-up video. (The images in the Imgur post did not appear in the later article.) A linked January 7 2019 article , headlined How marginal tax rates actually work, explained with a cartoon, included the images and text. The item’s first paragraph provided context about Vox’s creation of the images, which was around a debate over comments about a 70 percent marginal tax rate proposed by Rep Alexandria Ocasio-Cortez (D-New York): Rep. Alexandria Ocasio-Cortez (D-NY) proposed a top tax rate of 70 percent to finance a Green New Deal — an array of programs to sharply cut down America’s carbon emissions — in a 60 Minutes interview [in January 2019]. Conservative critics, including prominent Republican leaders, immediately tried to paint her proposal as an effort to take away 70 percent of Americans’ income. That’s a common misunderstanding of how tax brackets work. Rather, Ocasio-Cortez’s informal proposal would take away 70 percent of your income over a certain threshold. Vox’s follow-up article, linked first above, cited several examples of commentary from critics about that specific proposal. Vox’s quotations showed lawmakers and pundits — Steve Scalise, Grover Norquist, and Fox News’ Ashley Earhardt among them — claiming, falsely, that Ocasio-Cortez proposed a 70 percent tax on all income. Vox maintained that claim was often a purposeful misinterpretation of a 70 percent marginal tax rate: To be clear, Ocasio-Cortez floated the idea of a 70 percent top tax rate on the superwealthy, which is a pretty popular position. Now, one could argue that a top rate of 70 percent is too high, even for high earners. But that’s not what these conservatives are saying. Rather, they’re saying that raising the top tax rate will actually take money away from Americans, or you. This is just not how tax brackets work in America; these political actors are entrenching a common misunderstanding about taxes to further an ideological agenda. Vox’s infographic and appended coverage claimed that pundits and opposing lawmakers were misrepresenting Ocasio-Cortez’s statements; those excerpted criticisms contained claims (again, falsely) that a 70 percent marginal tax rate was equivalent to a 70 percent tax rate across the board. And, Vox maintained, a 70 percent marginal tax rate was not at all equivalent to a 70 percent rate of tax. According to the Peter G. Peterson Foundation (an organization focused on fiscal matters, rated highly unbiased and factual on Media Bias/Fact Check) in March 2019 , Vox’s claim about pockets of income taxed at varying rates is accurate. An initial question about how income is taxed in the United States contained an answer which, in part, explained the standard deduction available to taxpayers depending on filing status: Some income is not subject to taxation. For example, 87 percent of taxpayers take the standard deduction, which allows them to reduce their income by a fixed amount — currently $12,000 for single taxpayers and $24,000 for married couples. The remaining 13 percent of taxpayers itemize their deductions, which means that their taxable income is adjusted based on specific financial activities such as charitable contributions and mortgage interest payments. The next question’s answer defined tax brackets as ranges of taxable income that are subject to tax at a specified rate, explaining: For example, in 2018, taxable income from $9,525 to $38,700 was taxed at a marginal rate of 12 percent for single individuals. A single individual with taxable income of $39,000 would pay 10 percent on the first $9,525, 12 percent on the next $29,175, and 22 percent on the last $300 (see table). So far, we have the standard deduction in play — $12,000 for single filers, and $24,000 for married filers. If a single person earns $35,000, their taxable income would be $23,000 — $35,000 minus $12,000. That person would then pay 10 percent tax on the first $9,525, accounting for $21,535 of their total income of $35,000. From there, $35,000 minus $21,535 is $13,465, and that amount would be taxable at a rate of 12 percent. So the $35,000 income earner would not, under a marginal tax rate of 70 percent, be paying 70 percent of $35,000 in tax. The first $12,000 is tax-free for every taxpayer — which is why it is also known as the standard deduction. They would pay 10 percent tax on the next $9,535; we don’t need a calculator to move the decimal and figure out $953.50 is the amount of tax paid in the first bucket or pocket. Our $35,000 wage earner — who we are assuming for the sake of this thought experiment is neither married nor has dependents — has an additional $13,465 of taxable income, taxed at a rate of 12 percent. Of $13,465, 12 percent is $1,615.80. Our putative taxpayer earns a neat $35,000 a year. They pay no tax on the standard deduction of $12,000, ten percent tax on $9,535 ($953.50), and 12 percent tax on $13,465 ($1,615.80). So their total tax liability in this respect is $953.50 plus $1,615.80 — $2569.30. And of $35,000, $2,569.30 is 7.34 percent — not 70 percent. In the same article, the foundation included a chart of tax brackets and marginal income rates — one each for single, head of household, married (filing jointly), and married (filing separately): Note that the top tax rate of 37 percent was far lower than 70 percent. However, it kicked in at earning rates as low as $300,000 for married (filing separately) taxpayers. Myriad outlets reporting on the controversial proposal noted that the 70 percent marginal tax rate would apply to people making over $10 million a year, not families earning $500 or $600,000. A popular Imgur post called Tax brackets explained. Help educate others! claimed that marginal tax rates and tax brackets were misunderstood, and that people believed a top marginal tax rate meant average wage earners would be taxed at X high percentage rate on all their income. This was correctly represented in the Imgur post and the Vox article from which it drew — income between $12,000 and $24,000 (the standard deduction) is not taxed. From there, the next $9,000 and change is taxed at ten percent, and then up to between $38,700 and $77,400 is taxed at 12 percent. Proposed higher marginal tax rates of 70 percent would not even apply to a person earning $10 million — that rate would kick in only for income over $10 million . Conversely, if you earned $10,000,050, only $50 would be taxed at that 70 percent rate. Article Sources + Tax brackets explained. Help educate others! How tax brackets actually work How marginal tax rates actually work, explained with a cartoon Peterson Foundation HOW DO MARGINAL INCOME TAX RATES WORK — AND WHAT IF WE INCREASED THEM? Bill Gates: Taxing the rich is fine, but ‘extreme’ politicians like Alexandria Ocasio-Cortez are missing the point by focusing on income Posted in Fact Checks , Viral Content Tagged basically an outright lie , grover norquist , imgur , marginal tax rate , tax brackets , tax brackets explained , viral facebook posts , viral reddit posts
(en)
|
![[This page as RDF]](http://data.gesis.org/claimskg/static/rdf-icon.gif){kind=icon}