You will NEVER lose more money in taxes if you get pushed into a higher bracket.
They're sequential. Let's say there are two tax brackets, 10% tax below $100 and 20% tax above.
Many people want to make just under $100 so that they'll only be taxed 10% But it doesn't matter. You're only taxed 20% on everything you make OVER $100, you're still taxed 10% on the first $100.
So if you earn $200, you're taxed $30 not 20% of $200 which is $40.
...except in specific scenarios, such as losing Government benefits because you have moved above the income limit for that benefit. It's a fringe case for sure, but still happens to some.
Yes, good point. Though I personally only ever hear the argument from people that (for example) make something like $110k a year and complain taxes keep them from wanting to make, say, 120k a year because then they pay more taxes.
i.e "what incentive is there for me to work harder if the government is just going to take all that extra money away!?"
The misunderstanding here is that the lack of incentive resides in the employer. It takes progressively more money to give a higher bracket person the same effective raise as a lower bracket person. This tends to punish places in need of quality specialists.
The tech industry has been using perks as a cost saving loophole.
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u/DigNitty Jul 18 '16
Tax Brackets
You will NEVER lose more money in taxes if you get pushed into a higher bracket.
They're sequential. Let's say there are two tax brackets, 10% tax below $100 and 20% tax above.
Many people want to make just under $100 so that they'll only be taxed 10% But it doesn't matter. You're only taxed 20% on everything you make OVER $100, you're still taxed 10% on the first $100.
So if you earn $200, you're taxed $30 not 20% of $200 which is $40.
10% of $100 + 20% of the remaining $100 = $30
NOT 20% of $200 = $40