Tuesday, March 03, 2009

The Virtue of Making $249,000 as opposed to $251,000

Instapundit has a lot of links to various stories.

Recently, my wife and I were talking about the Obama policies and I noted that the Obama Budget calls for reducations in the mortgage interest deduction, the charitable giving deduction and other matters that would affect (at least initially), those making $250,000 or more.

I jokingly told her that we can never make more than $249,000 while the Obama plan is in place (not that we are in any danger of being there anytime soon). But I am not the only one making that calculus:
Can you say “going John Galt?” Upper-Income Taxpayers Look for Ways to Sidestep Obama Tax-Hike Plan. “A 63-year-old attorney based in Lafayette, La., who asked not to be named, told ABCNews.com that she plans to cut back on her business to get her annual income under the quarter million mark should the Obama tax plan be passed by Congress and become law. So far, Obama’s tax plan is being looked at skeptically by both Democrats and Republicans and therefore may not pass at all.”

But wait, there’s more:

Dr. Sharon Poczatek, who runs her own dental practice in Boulder, Colo., said that she too is trying to figure out ways to get out of paying the taxes proposed in Obama’s plan.

“I’ve put thought into how to get under $250,000,” said Poczatek. “It would mean working fewer days which means having fewer employees, seeing fewer patients and taking time off.”

“Generally it means being less productive,” she said.

“The motivation for a lot of people like me – dentists, entrepreneurs, lawyers – is that the more you work the more money you make,” said Poczatek. “But if I’m going to be working just to give it back to the government — it’s de-motivating and demoralizing.”

Via Doug Bandow, who comments: “Now that’s going to help us get out of the recession! Punish hard-working professionals and convince them to cut back services for the rest of us. Great thinking Mr. President. Or, to paraphrase George W. Bush: Heck of a job, Barack!”
Links in original omitted.

Seriously, Mr. Obama's plan is killing the impetus to be successful. People who make $250,000 or more know they are getting taxed more in terms of straight dollars and they accept that as a price for their success. However, the interesting phenomenon here is that Mr. Obama is changing the rules for those who make good money and contribute to government coffers. Thus, the perverse incentive to force people to make less than $250,000. The dentist's comments above should be a warning sign to everyone. I wouldn't be surprised if those people that aren't hired or fired because a business owner is looking to get under the $250,000 cap end up on the government payroll or worse, the government dole.

Why is Mr. Obama punishing the very people who drive the economy?

1 comment:

Anonymous said...

Mr. Obama doesn't seem to think about how people will react to his policies. It is very odd.

Basic economics (and common sense) indicates that people react to tax policy.

For the first time in our lives, my husband and I will make in the neighborhood of $250K. We have been building a business for close to twenty years. You can be very sure we will not make over $249,999 this year or any other.

Why would we work so hard so that someone else's mortgage gets paid before our children's college is taken care of?