Taxing the rich - what is the cutoff?

[Schneed10]

Originally Posted by onlydarksets

Schneed- thanks, this gives a practical point for discussion.

One problem, though is that your childcare costs are off. It's around $1200/kid in NoVa (it goes down as they get older and the teacher/student ratios decrease, and, obviously, goes away once they hit grade school). We have 2 kids in daycare, so that puts a big hurt on the budget. I realize it's temporary, but who's to say a 3rd isn't in the picture? That gets into a separate issue, though - having kids you can't afford.

Also, it looks like you added AMT as income - wouldn't that reduce income?

First, on childcare, I'm assuming that if you're making $250K as a couple, you're typically not a young couple. I imagined two 40-year old parents with accomplished careers, with one high schooler, one middle schooler, and one 5 year old. Jack up the childcare cost if you feel necessary, I can see that.

As for the bolded part, I added it as income because it's a tax return, money they get back from the government every year. If not for AMT, this couple would get back more than $35K each year in tax returns. With AMT, they only get back $21K.

In reality, nobody gets a tax return this big because people claim more than 0 on their W-2 at work, hence less tax is taken out from their paycheck. But that's a zero-sum affect in this example. If this couple were doing that, their 61K income tax liability would be reduced by the same amount in which their tax return went down.