There's another thing that a LOT of people seem to have a misconception about regarding our "progressive" tax system. Some people seem to be under the impression that the wealthy pay a higher percentage of tax on ALL of their earnings and this is simply not the case. The fact is, everyone's first dollar's of earnings are taxed exactly the same as everyone else's. Up until the first marginal tax bracket, EVERYONE (wealthy and poor alike) are taxed at 10%. Then going up to the next income tax bracket, the earnings between the first and third tax bracket are taxed at 15%.
I think the right like to play a sympathy game as if the "poor", overtaxed wealthy of this country pay 35% on ALL of their earnings. The fact is, for a couple filing jointly, those 35% tax rates don't kick in except on earnings in excess of $250,000. The earnings up to that threshhold are taxed at lower rates. The wealthy would like you to believe that if they make $251,000 a year that they pay $87,850 in taxes (taxing ALL earnings at 35%). The fact is, only the $1,000 (in excess of the $250,000) is taxed at 35%.
And of course, this doesn't even begin to take into account all the deductions and favored tax rates. Yes, some people end up paying no income taxes at all thanks to all the credits and deductions available. And let's not forget that capital gains and dividends are taxed at only 15%...A major source of income for the wealthy. As a result, the EFFECTIVE tax rate that America's wealthiest pay (on total income) is in many cases lower than the income taxes paid by some of our middle class Americans.
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