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Joined 2 years ago
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Cake day: June 16th, 2023

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  • But your tax bill doesn’t go up 5%.

    Ok, let’s get this close to real numbers. The cited tax brackets don’t exist, so I’ll go with the 24% to 32%. So if your earnings are 1 dollar into the 32% tax bracket, you are going from AGI $191,950 to $191,951. Your tax bill at $191,950 would be:

    $11,600 * 0.10 +
    $35,550 * 0.12 +
    $53,375 * 0.22 +
    $91,425 * 0.24 
    ---------------------------------
    $39,110.74
    

    And your tax bill at $191,951 would be:

    $11,600 * 0.10 +
    $35,550 * 0.12 +
    $53,375 * 0.22 +
    $91,425 * 0.24 +
    $1 * 0.32
    --------------------------------------
    $39,111.06
    

    Your tax bill goes up by a whopping $0.32 or 0.01% by earning that extra dollar, meaning you still got to keep $0.68 of that dollar. When they say that dollar would cause their tax bill to go up a lot, that’s pretty much exclusively owing to the misconception that people assume their tax bill would have gone to $61,424, so in the misconception that dollar would have cost them $22,313.


  • Would have to be mandated by workplace regulations, no company is going to voluntarily educate their employees that more money has no downside.

    I’ll also say this doesn’t help, it strangely avoids the actual numbers. It should state explicitly that his total taxes would be $1,600+$4,266+$2,827=$8692, and not $13200. Needs to include the scenarios specific results and contrasted with what the viewer would have assumed otherwise.




  • This all boils down to a common misconception about ‘tax brackets’.

    To simplify, pretend there’s a 28% tax bracket up to 100,000 dollars, and a 33% tax bracket when you hit 100k. The first 100k is always taxed at 28%, no matter what you make, and it’s only the incremental amount that gets taxed heavier. So here in this example, that would mean tax burden would be 28,000.33 instead of 28,000.28. These are not the exact brackets or percentages, but it’s at least showing the right magnitude of increase versus total amount.

    However, many people are “afraid” of bumping a higher tax bracket. They think the tax bill would go from 28,000.28 to 33,000.33. That the tax bracket bumps up all your liability. I remember growing up people saying “I have to watch out and not hit the bigger tax bracket, if I’m close then I need a big raise to make it worth it, or else the raise is going to cost me more than it would make me”. This a big driver of antipathy toward democrat tax policies, a belief that mild success will punish them, despite it only increasing on the incremental amount.