Understanding Taxes
USA Today wrote the following:
“That raise actually might not be as good as it looks. The extra money is nice, but it could very well bump you into the next tax bracket, possibly leaving you with less money than you had before the raise.”
Hmm, that’s not the way it works.
No, no and 286,000 times no! The tax system brackets give marginalrates. This means that if the raise bumps you into a higher bracket then you pay more taxes only on the income in the higher bracket. Suppose that the tax bracket for income under $200k is 25 percent, and for income over $200k is 33 percent. If you get a raise that pushes your income from $195,000 to $205,000 then you only pay the higher 33 percent tax rate on the $5,000 that is above the $200k threshold not your whole income. Therefore, there is no (as in none, nada, not any) way that getting more money, and being pushed into a higher tax bracket will leave you with less money after taxes.
If the main-stream media doesn’t understand this, than how can we expect Tea Baggers to comprehend it?
Tags: taxes
We can’t. Our only choice is to come up with equally silly (but attractive) nonsense.
I am willing to take the raise and tax liability of anyone who is afraid their raise will cause them to be left with less money that they had before the raise. For the betterment of humanity and the love of my fellow americans I am willing to do this.
Take the raise–but what I hate is they have never figured out to coordinate if you work two jobs the SSI, and tax thing–I have to do all the work….geesh.
So much for going Galt.
Joanne – Use Form 843 to claim refund of overpaid FICA.
Further, from Steve Benen:
http://www.washingtonmonthly.com/political-animal/2011_09/theyre_called_marginal_tax_rat032014.php
Thanx Belinsky. It helped on an audit, but is really annoying that for everything else the feds can track these days, my little old SSN wouldn’t kick back something to a tax refund or credit. I know they don’t want to give it back–but it sure costs them more for the filing, review, check issuance etc.. i wish we could just sign off w/ one employer, if cap is hit–so the other employer isn’t mandated to still collect.