|January 20th, 2016|
|taxes, politics [html]|
Under this plan the marginal income tax rate would be:To see why this is weird, let's look at our current tax brackets. Here's the amount of money you have to earn  before the government will start taxing you at the current highest rate, 39.6%:
- 37 percent on income between $250,000 and $500,000.
- 43 percent on income between $500,000 and $2 million.
- 48 percent on income between $2 million and $10 million.
- 52 percent on income above $10 million.
|Married filing jointly||$464,850|
|Married filing separately||$232,425|
By getting rid of this, Sanders does a few things:
- Taxes on married individuals who earn $232k-$800k and would be filing separately regardless are lower under his plan than they are now.
- Married people with joint incomes over $250k do better to file separately if both spouses have income.
- Married people can take advantage of this, filing separately instead of jointly, and potentially pay less tax than they do today. For equal income couples, this is anyone in the range $464k-$1.6M.
- Taxes are simpler.
I like simplicitly, but I don't think getting rid of tax bracket categories once you pass $250k is worth it. Too many people's taxes would effectively be lowered under this plan, once they responded by switching to separate filing.
(If you want simplicitly I'd much rather have a tax setup in the form of "give everyone $X and then taxeveryone at Y%".)
Update 2016-01-21: David points out that maybe Sanders isn't meaning to change things here and I misunderstood their use of "household". To be sure we would need to ask the campaign, but the idea is that since the separate limits are generally exactly half the joint limits that Sanders may have thought this was too much detail to go into and plans to keep things as they are. In which case this post is a long argument for "let's not change something that no one intends to change".
 I've left out the "head of household" category which is not relevant here.