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Posted at 1:00 PM ET, 12/20/2010

How much is $250,000?

By Ezra Klein

When it comes to "adjustable gross income" -- which is the number that decides your tax bracket -- it's really about $315,000. David Leonhardt explains:

Earning $250,000 in adjustable gross income is different from earning $250,000 in total income. High-income households tend to take a significant number of deductions. At our request, Roberton Williams at the Tax Policy Center analyzed the total income of households with $240,000 to $260,000 a year in taxable income. On average, they made $315,000 in adjusted gross income, including $32,000 in capital gains and dividends. So when you hear talk about taxes on people making at least $250,000 a year, it really tends to mean taxes on income above $315,000 a year.

By Ezra Klein  | December 20, 2010; 1:00 PM ET
Categories:  Taxes  
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Comments

I don't really see the argument that 250K isn't much money. More generally, I see the argument that many small business owners have revenues that are significantly in excess of that mark, which is a statistically supportable argument. They are also apparently all morons who have no idea that business expenses are tax deductible. I haven't see this statistically supported, but if enough people say it it must be true.

Posted by: eggnogfool | December 20, 2010 1:16 PM | Report abuse

EXCELLENT short post -- and point, Ezra.

In completely other news, I'd love for you to write more about possible upcoming issues in the lame duck session, especially including nominations and the omnibus lands bill.

Posted by: paul65 | December 20, 2010 1:26 PM | Report abuse

I'm confused. At first, Leonhardt seems to be discussing the difference between total income and adjusted gross income (AGI). But then he switches gears to the difference between AGI and taxable income.

Both differences are important. The former difference is particularly important because it's mostly about monies that are on your W-2, but don't show up on your 1040, such as contributions to retirement plans which are paid out of pre-tax dollars. You can disappear 15% of your income from the tax man just in retirement plan contributions, so that's serious money in the low six figure bracket.

Posted by: rt42 | December 20, 2010 1:40 PM | Report abuse

Also, his use of the word "households" when he really means "married, filing jointly.

I believe the limit on single people in his original proposal was $200,000?

Posted by: jnc4p | December 20, 2010 2:16 PM | Report abuse

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