A Small business man's perspective

Came across this great article just after Joe the Plumber came out on debate day...

Joe the Plumber's attitude always reminds me of people that I have worked with over the years, at hourly wage. They didn't want to work too much overtime, as it increased their taxes. I tried to explain to them how our progressive tax structure works, some got it others didn't. Yes if they earn more money they pay more taxes, but it doesn't effect the money they have already earned, just the extra. AT the end of the day if they work more Overtime they have more money..

some made up numbers:
Assume Tax Rates:
10% for up to $20,000
12% for up to $25,000
15% for up to $30,000

Sally makes base wages = $19,000, so tax rate = 10%, so taxes paid = $1,900, so take home $17,100

Billy makes base wages = $19,000, so tax rate = 10%, so taxes paid = $1,900, so take home $17,100
and makes Overtime = $2,000
so tax rate of 10% for first $1,000, so taxes paid = $100, so take home = $900
so tax rate of 12% for first $1,000 over $20k line, so taxes paid = $120, so take home = $880
Total Taxes paid = $1,900 + $100 + $120 = $2,120
Total Take home = $17,100 + $900 + $880 = $18,880 (or $1,780 more than Sally)

Jane makes base wages = $19,000, so tax rate = 10%, so taxes paid = $1,900, so take home $17,100
and makes Overtime = $7,000
so tax rate of 10% for first $1,000, so taxes paid = $100, so take home = $900
so tax rate of 12% for first $5,000 over $20k line, so taxes paid = $600, so take home = $4,400
so tax rate of 15% for first $1,000 over $25k line, so taxes paid = $150, so take home = $850
Total Taxes paid = $1,900 + $100 + $600 + $150 = $2,750
Total Take home = $17,100 + $900 + $4,400 + $850 = $23,250 (or $6,150 more than Sally and $4,370 more than Billy)

More Overtime = More money in your hands...simple right?