Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP
Posting-Version: version B 2.10.1 6/24/83; site cornell.UUCP
Path: utzoo!watmath!clyde!floyd!vax135!cornell!wally
From: wally@cornell.UUCP (Wally Dietrich)
Newsgroups: net.taxes
Subject: Re: Tax Bracket Question - (nf)
Message-ID: <7196@cornell.UUCP>
Date: Thu, 29-Mar-84 11:13:56 EST
Article-I.D.: cornell.7196
Posted: Thu Mar 29 11:13:56 1984
Date-Received: Fri, 30-Mar-84 02:17:49 EST
References: <2876@fortune.UUCP>, <289@charm.UUCP>
Organization: Cornell Univ. CS Dept.
Lines: 27

[Eat me]
mam@charm.UUCP (Matthew Marcus) says the following:

        "While I'm discussing this dismal and depressing subject, I'd like
        to debunk a myth.  Many people think that if they acquire more than
        a certain amount over their 'normal' income, they will be 'put into
        a higher tax bracket' and their net income will decrease, so they
        scan the tax tables, looking for the breakpoint.  This fear rests
        on the assumption that at any income, the tax is some fraction of
        the income, said fraction rising as in a staircase curve.  This
        leads to a piecewise linear and DIScontinuous tax vs. income curve,
        wherein $.01 extra income can suddenly incur $$$$ extra tax. THIS
        IS NOT TRUE!"

He goes on to claim that the tax curve is piecewise linear and CONTINUOUS, so
you can never incur more that $.005 (he thinks) extra tax on that extra $0.01.

This is simply INCORRECT.  Using the Federal tax tables, you can pay several
dollars for earning one cent ($0.01) too many.  For example, if your taxable
income is $20,049.99, you will pay X dollars (I don't have the table handy).
If your taxable income is $20,050.00, you will pay X+9 dollars (it is around
$9, I don't know the exact number.)  This is one of the times an IRA is really
handy, although your bank may wonder why you are making a one cent deposit.

                                    Wally Dietrich