Prospect of earning more than $250,000 terrifies business owner, because Obama

Via Kevin Roose, meet the business owner who is so afraid of (and clueless about) marginal tax brackets that she thinks she'd be better off earning less money than entering the top marginal income bracket:

Kristina Collins, a chiropractor in McLean, Va., said she and her husband planned to closely monitor the business income from their joint practice to avoid crossing the income threshold for higher taxes outlined by President Obama on earnings above $200,000 for individuals and $250,000 for couples.

Ms. Collins said she felt torn by being near the cutoff line and disappointed that federal tax policy was providing a disincentive to keep expanding a business she founded in 1998.

'If we're really close and it's near the end-year, maybe we'll just close down for a while and go on vacation,' she said.

The thing that this chiropractor doesn't seem to understand is that the top marginal tax rate only applies to income earned in excess of $250,000 (or $200,000 for single filers). Under President Obama's plan, the top marginal tax rate will go up by 4.6 percent. That means if she and her husband earn $350,000 in taxable income, their taxes would be $4,600 higher under Obama's plan than under current policy. The only thing that gets taxed at a higher rate is the $100,000 in taxable income they earn above $250,000.

The point is, they'd still better off making more money. There's absolutely no advantage whatsoever to forgoing income. This is not exactly rocket science, but it's a shockingly widespread misconception. Last year, USA Today printed an op-ed devoted to promulgating the terrible advice that you should reject a raise that pushes you into a new marginal tax bracket, requesting something non-financial, such as a new parking space instead of more cash.

The most pathetic part of this story is that this chiropractor probably actually isn't even going to hit the tax bracket anyway, yet is filled with baseless fear of what would happen if she did. (It reminds me of Joe the Plumber, who was worried about what would happen if his imaginary plumbing company ever made more than a quarter million in profits.)

So this isn't just clueless, it's irrelevant. It's an imaginary problem, twice over. And it's exactly the sort of thinking that gives the GOP its political base.