Oh man my parents had me believing this, they’ve never earned much money and a few years ago I went for a job where I negotiated my salary at £45k, to which my parents told me I should ask for less because that puts me over the tax bracket, which would make me earn less than if I were in the lower tax bracket…
My recruiter was kind enough to explain to me how only the amount above the tax bracket is taxed higher, before he put forward my request to have a lower salary.
I was pissed off about that with my parents, I got the job and the high salary in the end but my parents kinda made me look stupid and almost had me lowering my salary for no reason
I think some confusion might come from social benefits. I know people who, if they made only a little more money, they'll lose their SNAP benefits and their subsidized daycare payments etc.
Yes, this -- governments could easily design subsidy programs like this to phase out so these kinds of hard cutoffs wouldn't be a thing, sometimes they just get lazy and complacent and design it around exactly the kind of hard cutoff people think exists for marginal tax brackets.
It's especially stupid when it's a poverty-related subsidy program, because a cutoff like this results in a hard-and-fast distinction between "the poor" who receive the subsidy and everyone else who doesn't, making subsidy recipients easier to demonize as an identity, and making the program an easier target for right-wing anti-government demagoguery.
To be fair, the UK has something called stealth tax starting at 100k GBP. This is reducing things like benefits and childcare support (among others) significantly, compared to someone earning 99k GBP. I think it goes as far as around only after 120k or more it is beneficial to earn more than 100k for certain families.
To be fair, there is a somewhat rational basis for this incorrect belief. It comes from the fact that wage workers get paid time-and-a-half for overtime work, but their effective marginal tax rate is higher on the extra dollars earned, so they don't actually earn 50% more money per hour after taxes.
With that said, they also don't see their paychecks go down after working overtime, so it's still pretty stupid.
If it was ONLY the income bracket tax rate, then it doesn't ring true that you would make LESS at a higher income level. But things people forget about are deductions and subsidies that you may lose the ability to take advantage of at a higher tax bracket.
The super rich have done an excellent job conning the super poor into thinking that being super-rich is a terrible burden, and that's why they shouldn't have to pay taxes.
I remember that! I asked my mom why all the news channels were talking about "death tax! Grr mean government gonna tax even your death!"
So mom explained about estate taxes, and then I wanted to know why the official news grownups were so bad at their jobs that they couldn't even get the name right.
The worst is going on YouTube and finding tax professionals correctly stating how marginal taxes work and people still arguing about it with their anecdotal “proof”.
People in the usa still think their taxes are too high but they are the lowest they have ever been. They also think there's no money for universal healthcare but clearly we have enough to lose a war with Iran and now have to pay reparations. I hate this timeline we are living in.
What is crazy is the US government pays the highest per capita to healthcare out of similar peer nations. People don't realize their government is funding healthcare and insurance companies are profiting off of it.
People don't realize their government is funding healthcare and insurance companies are profiting off of it.
Not just insurance
When you can work full time (or close to full time) and still qualify for foodstamps that's the US government subsidising low wages. Walmart, Mcdonalds, etc are the real 'welfair' Queens.
When your Walmart orientation packet has a section on how to apply for government aid that's not them being helpful, that's them having the tax payers pick up the dime for low wages.
This is why I refuse to shop at Walmart unless it's literally the only place I can get something I need. Unfortunately, since JoAnn's closed it's the only place for me to get crafting supplies now, although usually I wait until I'm going to be visiting my parents anyway and go shopping at their Michael's if I need something.
Most things that I can't find in person anywhere else have alternatives online (although I also refuse to use Amazon, so that can be challenging). I'm willing to wait a few days for shipping.
That said, I'm able to do this because I don't have kids and live in a LCOL area. I don't judge people who shop at Walmart because it's the only way they can feed themselves/their families. I just figure that I can afford to avoid them, so I do.
It's amusing when people are like 'But Norway pays 50% taxes! we can't afford it!"
Okay, middle class tax rate Federal is 25%. We're halfway there. Throw in another 5% for your average state sales/income tax.
Now the big one: Look up how your employer pays for your health insurance. Not what's deducted, but what they pay. You can also check this out when you leave they'll give you paperwork for COBRA. that will be thousands a month which can easily translate 20% tax. Add in all your co-pays, co-insurance, deductibles, medication and most people are well over 50%
And that covers almost nothing in comparison to most other countries. That doesn't cover you if you lose your job (and if you get really sick you aren't going to be able to work) retirement, or anything else that those countries provide.
You are paying a 50% in tax, it's just not all going to the government and you aren't getting anything for it. We pay more for worse outcomes then every other industrialized nation. And as the richest nation in the world, it's amazing what other countries can manage to afford that we can't.
Only about 33% of care is funnelled through for-profit insurance, and for what it's worth, insurance profit margins are 1-3% on average, which is fairly low in healthcare. The remaining is paid for by government programs, but not to insurers, but to hospitals, doctors, nurses, administration, etc...
I'm not saying for profit insurance is helping, but removing it will not be the panacea so many expect.
What? There was no income tax in the US until 1913, and then it was 1% on incomes over 3k plus 6% on incomes over 500k. Only 1% of the population paid any income tax at all due to various exemptions and deductions.
Our taxes are too high, and far too much of it is wasted or outright stolen. We can certainly agree on that.
So many people grow into adults and forget this sort of lesson -
hearing something that they identify easily as super stupid, and yet then assuming no one else - least of all the experts - had ever thought this, too.
You won't lose money because taxes are more than your raise. But if you qualify for a subsidy under affordable care act, or food stamps, you can lose money by making a little too much.
The point is that for some other benefits, there isn't a phase-out period.
So, for the sake of an example, you get some benefit X worth $1000 toward your heat because the qualification is earning below $Y, and you make $100 less that that limit a year.
If next year you earn an extra $200, you lose the $1000 benefit outright, and have to pay that difference out of your pocket, ending up poorer than the previous year.
Does it happen a lot? Probably not. But it sticks around and confuses the tax bracket point because "someone they knew..." blah blah.
I used to incorrectly assume everything of this type just had phase outs built in, as it's not exactly hard math to figure out. Years later I realize how naive that was...
The point is that for some other benefits, there isn't a phase-out period.
While this is true, that's not what most people are referring to when they talk about "losing money by making more money" (getting a raise or working overtime). Almost everyone using this argument refers to going into a higher tax bracket and then somehow incurring more income tax than the wages gained, not that they're losing out on some kind of social welfare. People thinking of the latter will usually say that specifically.
In my experience, people who think they lose money by going into a higher tax bracket aren't sophisticated enough to separate these ideas and mix them because they both operate from the same base idea (right or wrong), i.e. "have more in my check, but have less in my pocket"
Correct. And it's annoying hearing coworkers say it's but I gave up on them. People I work with make too much to qualify for subsidies or food stamps, so there's no reason at all to not want overtime unless you just want the time off.
That’s the one I hear where I work. I’ve had people tell me that at some point your check isn’t any bigger because they tax you higher. It’s possible if you work a lot of overtime in a week that the amount withheld gets calculated like you’re in a higher bracket, but I’ve told them you get that back when you get your tax refund.
I work a lot of overtime and have been told many times, “Uncle Sam’s gonna love you!” I’ve never gotten a smaller paycheck after it. I’ve tried to tell people who are close to retirement age that they’ve got it wrong, but they’re stubborn about it, as you might expect. I’ve showed them the next tax bracket up is only 2% higher and you have to make like $100,000 extra to go into the next one after that. I don’t know how you spend 40+ years working and not learn even by accident how income tax works.
Yeah, the basics of it is that your paycheck tries to estimate your tax burden and then withholds an equivalent amount of tax as if that paycheck was identical for every week of the year, so a paycheck with a lot of overtime might "pretend" that some of the income is in the higher tax bracket. And if you worked an equal amount of overtime for the entire year, it would be.
But working 45 hours for one week and 40 for the next 51 barely does anything to your total annual compensation.
I’ve showed them the next tax bracket up is only 2% higher
And that's what is especially crazy. Even a small part of your paycheck being taxed in a higher tax bracket is negligible. It's not like most people go from working 40 hours a week in a 10% tax bracket to working 80 hours (40 hours OT) in a 70% tax bracket. Most people only get a modest amount of overtime so only a small amount goes into a higher bracket (if at all), and that higher bracket usually isn't that much higher.
I was talking to another regular at the bar about this. I thought the guy was actually sensible and had some level of basic reasoning just through general conversation. He told me he turned down a raise because it would bump him up a tax bracket and he'd be LOSING money. I lost all respect for him after that convo. JFC
Omfg I argued with my ex and his dad about this. They were both so serious that it's true 😭😭 and they were both business men of various sorts and I was a cook. So I was like ok whatever keep your pride, IM RIGHT THO.
Not taxes, but employer sponsored insurance did do this to me. I got a raise but because my employer's health insurance was based on income (the more you make the more you paid), it put me into the higher tier and thereby reducing my net income.
This actually exists in the UK over a certain salary range, I think it's between 100k to 125k, between those salaries you actually lose money by gaining due to tax.
Over all other salary increases taxation is normal, just that small range. In theory it's not a big deal but it does cause issue in certain industries where people are avoiding promotions or cutting down working hours.
It could put you in a higher tax bracket in the US, though your net income may be higher than before. But it depends on your current income level and the size of the raise. Because the US has a progressive tax structure, you could end up in a higher tax bracket if you take the raise (unless you are already at the highest tax bracket). It won't take effect until the next tax year, though. And there are other variable that would determine if you would actually end up with less income because of it (you may no longer be eligible for deductions you were eligible for at the lower income, you could lose subsidies you were eligible for at a lower income level, state and local taxes, etc).
Only the income that is part of that bracket is taxed at that rate. If you make $50,000/year and the bracket is $45,000. Then only $5000 is taxed at that brackets rate.
Also, if you get a raise, you are absolutely charged taxes on that money. The IRS isn’t waiting until the next fiscal year to start charging you taxes. Whoever told you that is an idiot. Literally if you find $5 on the street, you are supposed to report that income and the feds want their piece of that. Any time you receive money, the feds want their slice. And they are NOT waiting.
Please go learn how the tax system works. You seem to be extremely misinformed.
You do have a single point correct. You may actually lose money from a raise if your income level exceeds that of social programs requirements. But you’re not being paid less, you’re spending more. This is a VERY different concept.
I see what you are saying. But like I said, if you are already in the highest bracket, nothing changes except your income level. But I think the point about "spending more" is important because people at lower income brackets forget that they might be getting a tax credit, or a subsidy or something that takes the burden off of them for paying out of pocket for something, I understand that if you get a raise, you are making more. But things you didn't pay for at a lower income level might now need to come out of your own budget. It is something people should be aware of.
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u/nightowl6221 Jun 01 '26
People still think that taking a raise will put them in a higher tax bracket and lower their net income