If that's the case then his employers need someone competent handling their payroll. His entire withholding shouldn't shift to a different basis if his income goes up by $1k, just that $1k should be withheld at a higher rate.

Granted. And I have some experience with this, and the rigamarole you need to go through when a grandparent is going into assisted living, making sure they have enough income to pay for long enough that they will be covered, but not so much that they are ineligible.

But this is a problem at the opposite end of the spectrum (and highlights the absurdity of healthcare costs). A cutoff of medicaid at $20k or so is not a problem for people making 200k+ a year.

I still would want to see an actual hard example before I would believe that someone would actually be getting less by earning more. I don't believe there's an actual income band where someone is effectively in a tax bracket of over 100%, _even with_ a contrived set of credits/deductions.

That's not how brackets work.

As a hypothetical example, you pay:
0% on your 1st $10k
10% on your 2nd $10k
20% between $20k and 70k
and 33% after that.
That doesn't mean at 100k you are paying 33k in taxes. It means you are paying $1k on your 2nd 10k, 10k on your next 50k, and 10k on your next 30k, for a grand total of 21k. At no point did you bring home less because you are making more.

Also, I understand how increasing tax rates may create less of an incentive to make more money. But a disincentive? Come on! I may only get to directly benefit from 60c out of every dollar I earn after 200k. But that doesn't mean that I see no benefit from it. I would just get a slightly smaller marginal return than I was before.

While that's true, they are "phased out" for just that reason. They don't decrease faster than your income is increasing. a $1,000 credit might phase out between 100k and 110k of income. That means that for each extra 1k of gross income your net income is only increasing by 900. It is not decreasing!

I haven't used pfSense, but have used m0n0 for quire a while. If you're concerned about your old hardware crapping out (or don't have any lying around), you should be able to put your own box together for under $200 easily that will have far more horsepower than anything you can buy for even close to that price. You can easily use a CF card for booting and pick a fanless board. You can avoid all moving parts and hopefully up the reliability quite a bit.
If rolling your own box is beyond your skills or time, in additioning to putting my own box together I've also gotten two units from these guys:
http://www.logicsupply.com/categories/firewall_systems
in rackmountable units, but they also make smaller ones (10"x2"x7"). They also have boxes running untangle (which I haven't used myself either).

I wasn't trying to make the case that there is no intent to distribute with bittorrent, but that rather than actually comitting the illegal act you are engaged in a conspiracy to commit it. My point was more that it is not a 1:1 comparison with transferring a file via FTP, not that it renders you law-proof. There is a fundamental difference between a distributed action and a unilateral action. They may be similar and have the same ends, but it isn't quite right to claim that uploading 100% of a file to 1 person is quite the same as uploading 1% of a file to 100 people.
You are acting as part of a crowd, which may make your culpability worse. I believe that in some cases conspiracy only requires planning to be charged, not necessarily action on your part. So you could begin downloading a torrent, and never successfully download (or upload) any pieces, and potentially still be guilty of conspiracy.

Granted this would be computationally impractical, but what if rather than distributing the actual work, you distributed hashes of the work only. For example you take a 12 byte segment of the work and generate a MD5 hash of it. (We can substitute whatever value of 12 bytes would gaurantee no collisions The uploader sends the downloader a sequence of these hashes. The downloader then attempts to generate each possible 12 byte segment until it gets a match and then concatenates them.
They aren't actually sending you the contraband bytes, or something that can directly be turned into them.
This would be somewhat analogous to asking someone (about the book they are reading):
Is the 1st letter A?
Is the 1st letter B?
etc. until they say yes.
And continuing for each subsequent letter.
Horrendously inefficient, but are you copying it? revaling it?

Is telling someone the answer is 42 really the same as telling them the question is what do you get when you multiply 6 by nine? (Unless they have access to a planet sized computer.)

I agree that this seems a bit silly, but there is a difference here.
Transferring a file over FTP, for example, you are sending all the pieces to one person.
With bittorrent, you are sending some of the pieces to one person, some to another. Unless you are the sole seeder, it is highly likely that anyone is getting the copy solely from you.
One could make a tortured analogy to illegal drug manufacture. While it might be illegal to sell some drug, the chemicals one could use to create it are not. Even if some are, the chemicals that in turn make those up may not be. If you go far enough down the chain you will eventually arrive at something which can legally be distributed.
So if you take these perfectly legal components, and distribute each one to a different person, are you culpable when they exchange these pieces amongst themselves and manufacture an illegal end product?

Yes, I know that you could then make an argument that you are conspiring with them to commit this illegal act. But IANAL and certainly IANAAL (Australian Lawyer), so I'll leave the technicalities of conspiracy to wiser heads.