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View Diary: President Obama speaks to nation about fiscal cliff saying a deal is within sight - full transcript (41 comments)

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  •  What do you mean--phase out on incomes >250K? (1+ / 0-)
    Recommended by:
    elwior

    Could you elaborate on that?

    It's the Central Limit Theorem, Stupid!

    by smartdemmg on Mon Dec 31, 2012 at 11:09:58 AM PST

    •  It would mean that itemized deductions would (2+ / 0-)
      Recommended by:
      elwior, HappyinNM

      be gradually reduced as income exceeds $250K.  eg, the effective marginal rate will increase on income over 250k due to decreases in itemized deductions.

    •  It's apparently a phase out of tax deductions. (3+ / 0-)
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      elwior, indubitably, smartdemmg

      Trying to prevent billionaires from paying no taxes by using aggressive deductions. But, they have not provided details so I don't know if this would apply to the mortgage deduction for McMansions, or second and third homes or what.

       

      The means is the ends in the process of becoming. - Mahatma Gandhi

      by HoundDog on Mon Dec 31, 2012 at 11:30:12 AM PST

      [ Parent ]

      •  Probably reinstatement of "Pease limitations." (4+ / 0-)
        Recommended by:
        elwior, glynis, HappyinNM, smartdemmg

        So it would be haircut on the total of itemized deductions to the tune of 3% of AGI or something. ie, if my AGI is $250,100, I reduce my itemized deductions by 3% of the excess over $250K, or $3.  That's small potatoes on amounts just over the threshold, but it grows rapidly as AGI increases.

        •  yes, this is what it means (2+ / 0-)
          Recommended by:
          johnny wurster, smartdemmg

          according to what Ezra Klein has tweeted/written.

          •  Makes sense. (1+ / 0-)
            Recommended by:
            smartdemmg

            So, assuming a 3% AGI haircut (IIRC, the old Pease haircut), the effective marginal rate on income over $400K would be about 40.7%: 39.6% + 1.1% due to reductions in deductions.  And then the rate would be 44.5% for things like interest income, fX gains, and nonqualified dividends due to imposition of the medicare surtax.

            Well, that'd be the rate for taxpayers in FL, TX, and other states w/ no state income tax, anyways.

            (I don't remember if Pease limitations had any carve-outs for charitable contributions or investment interest expense or anything.  I don't think so, but I could be wrong.  And I'm too lazy to look it up to confirm)

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