Fox's Gretchen Carlson mangled the facts on tax policy to suggest it would be reasonable for people to reduce their incomes in response to a tax rate increase for the wealthiest Americans. In fact, if tax rates increase on the wealthiest Americans, it would make no sense for them to decrease their income in response.
President Obama has proposed extending the Bush tax cuts for most tax cuts but letting them expire for taxpayers earning more than $250,000.
On Fox & Friends, Carlson read an email from a viewer with a medical practice who responded to Obama's plan by saying: "If my taxes go over 35%, I will decrease the number of patients I see daily to reduce my income, which means my staff will also reduce their income." Carlson responded to the email by claiming: "That is the reality that a lot of physicians and small business owners are going to be facing."
In fact, if tax rates increased for individuals making over $250,000, it would still benefit people if they earned more than $250,000. Only the income individuals earn over $250,000 would be taxed at a higher rate. All of their income below $250,000 would still be taxed at the same rate it is now. As Slate's Matt Yglesias explained in July:
The way U.S. income tax brackets work is that taxes are levied on marginal income. In other words, the rate applied to income earned over the $250,000 threshold is irrelevant to the first $250,000 worth of taxable income. If you have $250,010 of taxable earnings then only that last $10 is taxed at the higher rate. In all cases, higher pre-tax earnings lead to higher after-tax income.
New York Times public editor Margaret Sullivan recently responded to the Times' own failure to explain how Obama's tax proposal would work. Like Fox, the Times had uncritically quoted a medical professional saying that she would decrease her income in response to any tax rate increase. Sullivan pointed out that the person the Times quoted "appeared to believe that if the income went over 'the cutoff line,' that all of their income would be taxed at a higher rate. That's not the case. Only the amount over the limit is taxed at the higher rate."
Sullivan also reported that the Times' business editor concluded the paper "should do a better job of making clear how marginal tax rates work."