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From: halle@hou2b.UUCP (J.HALLE)
Newsgroups: net.taxes,net.invest
Subject: Re: IRS has budget of $160 Million???
Message-ID: <792@hou2b.UUCP>
Date: Tue, 8-Jul-86 08:46:46 EDT
Article-I.D.: hou2b.792
Posted: Tue Jul  8 08:46:46 1986
Date-Received: Thu, 10-Jul-86 01:32:44 EDT
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Xref: watmath net.taxes:1222 net.invest:1565

Clayton E. Cramer writes
>3. Similarly true for people not reporting income -- reducing the 
>marginal tax rate reduces the advantage of not reporting income.  Also,
>spreading the brackets farther apart (or even taxing all income at the
>same rate) takes away reason to take questionable deductions so that 
>you can get below a particular tax rate.  (I know: I spent an hour once
>adding up the state utility tax on my electricity bills to get seven
>dollars more deduction to drop below a taxable income level to save
>more than $7 in taxes.)
The above comment is nonsense.  Increasing deductions solely to get to a lower
bracket is ridiculous.  Remember, it's a MARGINAL rate, not an overall rate.
An example.  38% bracket.  An additional $500 deduction will drop you to
the 33% bracket.  $500 deduction saves $190 in taxes.  $600 deduction saves
$223.  Now suppose you are $1500 from the 33% point.  $500 and $600 save
you $190 and $228 respectively.

The only way that the effect you gave ($7 yields $7) can occur is near a
range in the tables.  Since the tables are in $50 brackets and the taxes
are computed for a midpoint of the range, dropping down can have such an
effect.  But who cares.  The best you can do is to find an extra dollar to
save about 20.  No one at IRS will waste their time looking for that.

The moral is not to worry about tax brackets when filing.  Just find the
deduction.  The bracket is immaterial.  Worry about it when doing tax
PLANNING.  Now the net effect can influence decisions.