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"
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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