The Obamanation

[Happy Monkey]

The fine print can be misinterpreted in the same way that the article I posted could. The law you posted is (thankfully) more precise.

The way to parse that fine print is that it all applies to one tax unit, and it divides their income into piles. It doesn't divide tax units themselves into piles.

(1) Calendar year. Baseline is current law. Proposal is the surcharge on high income indivduals described in America's Affordable Health Choices Act of 2009. Tax units pay a 1 percent tax on modified AGI between $350,000 and $500,000 for couples ($280,000 and $400,000 for others), a 1.5 percent tax on modified AGI between $500,000 and $1,000,000 for couples ($400,000 and $800,000 for others), and a 5.4 percent tax on modified AGI exceeding $1,000,000 ($800,000 for others). Modified AGI is AGI less any deduction for investment interest.

So a couple puts up to $350,000 into one pile, and pays 0% on that.
If there's any left, they put up to $150,000 (half mill total) into the next pile, and pay 1% on that.
If there's any left, they put up to $500,000 into the next pile, and pay 1.5% on that.
And they pay 5.4% on the remainder.


I think it is largely the misunderstanding of this mechanic that leads people to claim that a progressive tax system "punishes success".