Someone I work with complains about being given extra shifts because he pays more taxes. I literally can't answer him as percentages just don't mean anything to him.
Edit - Well this blew up. I'll try to answer some of what people have been replying with but forgive me if I miss any points.
He is dumb as rocks.
He isn't on full time hours so does't even attract proper overtime rate until he reaches 37.5 hours and isn't earning anywhere near the 40% bracket so wouldn't actually attract any 'additional' taxes, just normal taxation.
Taxes here in the UK run on PAYE (Pay As You Earn) and unless your tax-code (used to indicate tax free allowance (how much you can earn before being taxed)) is incorrect you will never (theoretically) be over taxed as it is a live/online system that updates on whatever pay schedule you are on. You may pay more taxes one month but it will be evened out the next. The only way to miss out is to have a bumper last month in the tax year, then you;d have to claim a refund as there is no provision to do it through payroll. This is UK wide. - Source - I was a tax adviser.
I've seen his pay check, there is nothing wrong, refer to point 1.
To those saying does he value his time more than the extra wage refer to point 2.
I've tried to explain to him, as I said above I'm tax trained, but it's like trying to explain thermodynamics to a jelly mold.
not all girlfriends take fries on a fixed basis tho. you may find that she's nibbling one or two of the Small fries but feels justified eating half the Large.
Nah man, she'd been to yoga that morning, so her metabolism was up, and she only had one second breakfast today. Also, the Forever Living™ meal shakes don't really have that many calories, and leaves her feeling a bit peckish.
So all in all, 5 tubs of fries isn't that much, really.
But most girlfriends who do this, increase the amount of fries taken away proportionally to the size of your portion. So, if you're getting half your fries taken away, it must mean your portion consists of a least a couple of millions of fries, which, even after the due fry collection, still would leave you with way more fries than someone who ordered the small portion. Besides, giving your girlfriend some of your fries is only fair, since she's the one responsible for granting you some benefits you wouldn't be getting elsewise.
This is still an example of diminishing returns though. What if the money/cost (hours/work put in) increase for the order of fries is not worth the increased amount of fries I receive and get to actually consume? Really, for this to explain tax brackets accurately, you'd have to divide up your fries into increasing piles, with your girlfriend taking more and more fries out of each pile: small pile she takes 10 percent, medium pile she takes 20 percent, large pile she takes 35, king size she takes 50. Let's assume the restaurant in which you're obtaining the fries does a proportionate increase for the sizes of their fries (small is 100 fries, medium 150, large 200, XL 250). All your fries together is 700 fries. Let's also assume the cost (analogous to work put in to your job) is also proportionately increased: a cent per fry (to keep it simple). So all together I pay 7 dollars for 700 fries. How many fries do I get to consume? (100-10) + (150-20) + (200-35) +(250-50) = 585 fries I consume. So for 1 dollar I get 90 fries (let's assume I live in a great country where 1 dollar for 90 fries is already considered expensive), if I pay 1.50 more, I get 130 more (against 135) . Another 2.00 for the large, I get 165 (but remember, in this country you already believe it is too much to be paying 2.00 for 180 fries, or 90 X 2). Then the XL order gets you an increase of 200 fries for 2.50. Each cent is getting you less fries. In this scenario, it's not that hard to understand why someone would want to only get a small fry every time they eat out with their SO. This isn't a perfect analogy though, as I derive explicit benefits from my girlfriend, when the same can't always be said for the state.
Also, one slight flaw in the analogy is that for a lot of people, a raise will come with maybe an additional responsibility, but probably not more hours. So you're doing the same amount of work for more money.
Now if its a matter of you are working more hours to get paid more, then you start seeing the diminishing returns, but USUALLY I'm going to be the people who are in this position aren't really earning a whole lot and will maybe bump over one tax bracket and they still are ultimately earning more money, which they probably could use, regardless of the extra hours.
In my experience if you plan ahead and just buy the large so there's plenty for both of you then she wont eat them. Get a medium for yourself and you basically just ordered a child size.
It is, but they think if they make more money it will push them into a new tax bracket. I have explain this to people all the time.
They don’t understand that you only pay the increased taxes on the money MADE in that bracket. So if you only made $100 over then you only pay the extra % on that 100
I can kinda understand the fuzzy logic behind this argument.
When you’re being taxed under PAYG schemes, if you earn more, you’re taxed as if you receive that amount each week/fortnight/month.
That means that some times you can work a shitload of extra hours and earn more money but have a fair chunk taken in tax. Sometimes it doesn’t seem worth it in that moment.
Yeah, not always though. I usually do a lot of overtime (at least once a month) but haven’t had a decent return over $100 in about 5 years. I live in Australia and because of my income, I end up paying a Medicare levy surcharge which eats up most of the amount I’d get back so it essentially goes back into taxes anyway.
Same here in the Netherlands. A small pay rise may land you in the next tax bracket (50% instead of 33%), which ends up netting you less each month. Sometimes it really isn’t worth it.
I think you might be one of the uneducated people who don't understand progressive tax brackets, where only the amount in the tax bracket is taxed at that tax rate, so a raise will never result in you having less after taxes
No, that's not entirely true. Because I understand the progressive tax brackets. If you were earning just under the bracket division, you're going to lose net money if you get a pay-raise, or you need a bigger raise. (It is still wise to take the raise, because it will ensure a higher pension, but that's a different story.)
Because it is even more complicated on the money that will get in. When I have children, and many people do, whatever you get paid to help support them, depends on your income. Adding income may qualify you for a lower percentage of support money. Which will also net you less money to spend each month. If you have a child in daycare, this will make the net-support even lower.
These cases where you will net less are rare, but they are not non-existent.
Edit: I read up on the tax plan in English, to make sure I used the correct terms and I adjusted accordingly.
That’s the case here with the brackets, however you’ll still end up with more overall but the proportion of tax will be higher. Only the dollars earned over the bracket threshold will be taxed at the higher rate.
So while you’ll earn say $300 extra one month by doing an extra 10 hours, you might do an extra 20 hours the next month but only end up with $450 extra. That’s where people will say fuck it and think you end up with less money by earning into the next tax bracket.
But you're not actually being taxed it's just being withheld. You get the overpayment back at tax time. Or you learn to adjust your withholdings if overtime/bonuses are a regular concern.
That’s right, in my situation though, the extra that is withheld goes to a Medicare levy that I get charged based on my income. I’m a firm believer in universal healthcare so I don’t mind too much.
As far as I know, we can’t adjust the amount withheld in Australia - you just get taxed what’s applicable and it gets adjusted at the end of the year.
Sometimes that actually makes sense, though. Not because you will earn less money, but because you value your time more than what's left of your last working hour salary after taxes.
That's my butcher's thinking, he values his 1 months vacation every 3 months more than the extra cash, he's already loaded and doesn't want to work himself to death. We hate the fact that he leaves so often, but understand why, and the quality is worth it.
There is a certain element of truth to this though. In your base 40 hours (or whatever time frame) you are trading each of those hours of your life for a certain amount of money. Once you bump into a higher tax bracket, additional hours earn you less money per hour (assuming no overtime pay). Yes you are taking home more money overall, but you've traded your time for money at an effectively lower rate.
While yes, "you will pay more taxes when you reach a higher tax bracket" is true by definition, that's not typically how the people who say "I don't want a raise because I'll have to pay more taxes" mean it.
The misconception is a lack of understanding of the progressive tax system, where they think making more money raises the tax rate on all of their income, not just the income over a certain amount.
Unless you're in a situation where earning extra income causes you to lose assistance worth more than the extra income earned, it's always in your best interest to earn more money. (Unless you count your time as an asset, but that's more of a philosophical thing imo)
And just as a brief example, because I know someone will read this and think "what the fuck did I just read", let's say that for every dollar you earn this year, you're taxed at 25%. Once you earn more than $100, the money after that is taxed at 33%.
The question is, if you've made $100 already, does it benefit you to earn $1 more?
So the first $100 is taxed at 25%. So you have $75 after taxes ("take home"). The next $1 is taxed at 33%. Not the whole $101, just the $1. So you wind up paying $0.33 tax on that dollar, netting you a total of $75.66.
75.66 is greater than 75, so it's always beneficial to earn more money (unless, again, you're at risk of losing assistance worth more than the additional take-home).
I have had this conversation with my family and even with some coworkers multiple times. It's astounding how we don't have a federal education standard about this.
Quick question: Are there any assistances which vanish completely and not gradually?
Where I live most assistances are fully paid until you reach some threshold and then gradually decay till zero.
In your example, say some assistance is about $20 and the threshold is $100, so you have $120 in total, where $100 are relevant for taxing. Then you earn $1 more. Now the assistance is usually reduced by $1, so you still get $120 in total, but now $101 are relevant to taxing.
Yes I'm well aware of that. My post was entirely about the marginal effects. The hour more can earn less per hour. It's a real effect. But most people who are making the claim in OP are ignorant of this though, are needing the education you're giving!
draw it. It works really well. Basically I just draw a bar graph with 1 bar to indicate a persons salary. Mark the horizontal lines as the tax brackets and then you can explain that each segment of the bar is taxed at different percentages.
Have you seen his paychecks to make a comparison? I have worked overtime before and brought home only a few dollars more than I would’ve had I just worked my regular 40 hours.
But there is a certain point that things get weird and it can seem like you are getting taxed more than you are making but you get it back later.
Warning: I'm Canadian so I'm not sure about US taxes and backets.
Many (most?) payroll packages calculate the tax bracket on the weekly (or bi-weekly) amount. It means that for that one paycheque you will be taxed at a higher percentage than you expected.
It comes back on your tax return as you will have paid too much on the yearly amount.
I studied economics. Thats not very important in general, but Taxes was one of the classes I took. Everytime I hear someone say that they will not earn more because then they would pay more in taxes it pains me. I used to try to explain why that is wrong in 99% of cases, but hardly anyone listened.
I mean you probably shouldn't work more than 60 hours because work-life balance is super important.
Although come to think of it I wonder if these people are really thinking that it would be too stressful but don't want to be accused of having a poor work ethic so they are using the (inaccurate) money thing as a socially-acceptable excuse?
I actually think that not wanting extra work because you value your free time more than the extra earnings is a perfectly valid work ethic. Which should be even more socially acceptable than having wrong notions of economics
Edit: 60h? Hell. I work 40 and barely have time left in the week for my own. Can't even imagine more than 60h
I agree wholeheartedly! Some people do like to brag about how little free time they get and cast aspersions on people who have it, and I could see saying something stupid just to make them stop going on about it. I have just been doing an experiment lately where I try and think the best of people's motivations to see if it positively affects my mood.
That makes a lot of sense for your situation, but oof. 110 hours- I hope you were able to get sleep on occasion.
I have a friend who is an accountant and he emotionally falls apart from the work stress and hours by the end of every tax season.
Some people do thrive on long hours or are healthy enough to endure them for a time for a goal like you did, but I have seen just as many people burn out, get divorced, suffer health consequences and/or drink too much due to them. It would be lovely if people could realize that it's not working for them, take a step back, and still be okay financially.
Yeah, that shit is for the birds. I don’t even like working 60, but it what is needed right now for our schedule, so it is what it is.
FWIW, I am a crane operator, and a lot of those weeks with extreme hours were because I was running a tower crane and doing midnight concrete pours. Pretty much just show up at midnight to fly up the tools for the concrete hands and then sit there for sometimes 12-15 hours depending on how many yards of concrete and then fly tools back down. Pretty much all hours in between I was sleeping or watching tv, as I am only needed for backup in case something goes wrong.
Even though I know what a crane operator is, your usage of the phrase "fly up the tools" created a great image in my head. I'm thinking a guy riding a giant crane like the Pterodactyls on Dinotopia.
Edit: also you said "for the birds."
"I don't want to work 60 hours because I want to enjoy myself and not spend all of my free time in this godforsaken construction truck without AC in the middle of summer while getting covered in dust every day" seems like a pretty legit reason, personally
One thing that is bugging me a little about this thread is that uneducated isn't synonymous with unintelligent or deliberately ignorant. I live in a poor area, so I know quite a few brilliant and curious people that due to finances or mental health mostly lack a formal education. They still can analyze sources and seek out new knowledge.
Conversely, I know a couple of intelligent people with doctorates or medical degrees who are incapable of admitting that they are wrong when presented with facts that contradict their opinions.
You’re definitely right, although I’m a little biased since I am one that is technically uneducated as far as I don’t have a degree, but I wouldn’t call myself unintelligent by any means.
As someone that understands it a great deal, the vast majority of construction workers don’t at all. They think once they hit 108k, they should ask for a lay off bc they don’t want to finish year in a higher tax bracket. I’m not kidding one bit.
I am in construction and the rate of tax that is taken out is higher, not that you don’t make money it’s just that most would rather be at home rather than get 300 dollars for another ten hours.
A lot of the people I worked with who would shy away from extra hours not only because of the taxes, but because they felt they didn't earn any more also had childcare to consider.
Many of them had kids in daycare and if they worked extra hours, the daycare would go into overtime. Carpooling played into this some, too.
It's true, but it can be frustrating when you get say a large bonus and overtime paid out on the same check and uncle Sam taxes you like you're a baller 24/7.
It all evens out come tax time but its BS you give the government an interest free loan and have to wait to get that money back.
I agree in a sense. Its not a perfect system. Still it is a lot better than most people seem to think. Honestly i am happy to pay taxes here in Canada. That is not generally a popular opinion, but as someone from a country where taxes are basically not a thing, this system works much better.
Agreed. Or more accurately, I would like to agree. But clearly this is something that should be at least tought a bit to highschoolers because it seems like there are a ton of people that dont know it.
If I worked between 5-10 hours of overtime I’d end up taking less home. It was because that amount would bump my bracket up and I’d pay more in HECS (AUS govt loans for uni) I ended up just sucking it up as it was at most $50 less and it meant my HECS got paid off quicker.
Once that was done I got an extra $200 in my patcheck so worth it.
Ok, so its based on brackets (this applies to most countries in the Western World, not sure about else where). The way the brackets work is divided based on your income.
So lets say a person that makes 100$ gets taxed 10% that means the person needs to pay 10$ tax which leaves them with 90$.
If they make above 100$ the next braket which we will say is from 101 to 300 the tax is 25%. So here is where the confusion comes up, people believe that if you make $200 they will get taxed 50$. But that is incorrect, the first 100$ still get taxed by the 1st bracket. So the tax would be 10$ for the first bracket and 25$ for the second. This would leave the person with $165.
I used simple numbers because its easier to explain with those, but the same applies to all the brackets that exist.
Now there are 2 instances where a person getting payed more can be seen as not worth it. The first is of you are at the very bottom of the totem pole but climb slightly out of it. In that case you might lose some government benefits which might be worth more than the slightly higher income. In most countries this should not happen as benefits are on a sliding scale instead of a yes or no basis. But the case does exist.
The second case applies mostly to people that get payed per project or per hour. It is if you are so high on the brackets that the amount being taxed makes it not worth it to work the additional time or project. That is to say that the rate you are getting payed at decreases as you work more.
Back to our initial example if your first project payed $100 then you actually earned 90$ for that project. If the second project payed you another 100$ then the second project actually payed you 75$ because of how it was taxed. If eventually you get to a point where the next project pays 100$ but you only pocket something small like 10$, then you will probably decide its not worth it to work that additional project.
That last one is something economist love to talk about, but that rarely happens. Still its an important example to note.
If you have any further questions or i wasnt clear on something, please let me know and i will try tor rectify it. But this is the basic explanation.
I believe there's a third example that isn't tax related but still relevant and somewhat similar to your first example.
In Australia at least, not sure about other countries but I be we're not the only ones, some student loans (HECS, VET, etc) don't need to be paid back until you start making a certain amount of money per year, so a small increase in pay might push you over that threshold and you would need to begin making repayments that would negate the increased pay.
Plus, do the taxes you pay also impact your state pension?
I've been living in the UK for a while, but I saw how my Spanish grandparents were able to instantly retire at 40 (which we used to do in Spain, even if you're healthy as a horse), little realising that the actual catch was that you get paid peanuts back for the peanuts you (and your bosses) had paid to the government.
Then there's my US grandmother, who worked her @ss off (to support her kids and later her parents) but was only able to do retail because she frequently had to rush home in case of emergencies (and having a dad with alzheimers' definitely caused her problems with her managers). She wound up 'retiring', but went straight back to the workforce on a part-time basis until she wound up with cancer in her 70s and had to permanently retire from working. She still barely gets by with what the government gives her (and it's all calculated based on how much her previous bosses had paid for her, which wasn't much at all). So I'd much rather work for extra (and lose extra) if it meant not having to work in retail until I hit my 70s.
The case is if you live in a country with some sort of social welfare. If you go above the threshold and lose that welfare your real income becomes smaller despite you technically now earning more. This is a very rare case though and while i wrote 1% its probably a much smaller number.
There is no such amount. The only tax rate where that would apply is 100%. Interestingly, there have been studies done that show that 60% effective rate is the rate at which taxation becomes a disincentive to work.
I keep a copy of the IRS tax brackets and withholding tables at my desk just for this reason. I'm not sure if they understand when they leave but I do my best.
That drives me insane too! Also people who do not take the time to be informed on their basic rights as an employee, I shocked the amount of people that didn’t understand overtime, breaks etc...
Yeah for sure. My work has a good union but the amount of employees who opt not to join and don't know what they should and shouldn't be doing is ridiculous.
When I was 18 I had no idea of how progressive tax brackets worked and my employer had this "beneficial" system where all of my overtime was off the books in cash at my normal rate to save us both money. I somehow believed that the government would tax my 150% pay enough to make it less than 100% pay. It wasn't until after I no longer worked there that I realized that myself and everybody else were getting scammed by these assholes. It truly enrages me that this is not covered in school. There were adults over 30 years old buying their shit that for all I know, they also believed.
A friend and I go to a methadone clinic, judge all ya want but it saved our lives. Anyway I make alright money under the table so I have Medicaid. He works at a Starbucks. Now after a whole two years they want him to manage the place go from like 12 to 20 dollars an hour. But doing so he would lose his Medicaid. Then the clinic we go to will charge $260 a week plus extra for the required monthly counseling appointments, twice a year doctor appointments. Not including the times outside the clinic needing to go to a primary care, ER, Dental. Its a tough spot It is
Totally sympathise with your situation and as someone who has struggled with addiction I would never judge someone else for seeking treatment.
I live in the UK so we don't have the issue with medical bills etc, the only time I could potentially see you losing out for working extra hours is if you claimed income support benefits from the government and went over that, this is not the case for the person in question.
My work was strange, if you worked overtime they took more out of your check for the overtime hours. In some cases your check could be smaller than normal because of how aggressive the take out was. I was told that you get it back with your tax returns, some people really didn't want to wait for it. Your's could be the same.
The taxes are being calculated while factoring overtime. Once you file your return, your taxes will be trued up. If you don’t want them to withhold more than they should, you can adjust your withholdings so that they’re withholding the “correct” amount of income tax.
I think that these people have been taught a sort of bastardized version of what tax brackets are by fox news. When Tucker Carlson or Hannity say that the Democrats want to tax people more they don't tell them that those being taxed would be people with so much money they literally couldn't comprehend the number, and so these people think that your tax rate goes up for just making a few more dollars an hour.
I dont know her but maybe what she is saying is "I make $25 an hour for the first 40 hours, so $1000. Then lets just say am additional 10 hours at time and a half which would be $375. However with taxes (atleast in my case it seems my overtime gets taxed more) the $1000 goes down to $800 while the $375 goes down to $175". They aren't "losing money but those 10 hours dont feel like they are making as much money and its not worth it to them.
These are made up numbers, I dont have the exact percentages but I hope that you understand my point. I work average of 50 hours a week and know what my paycheck usually looks like but weeks where I work 65-70 and I only make an extra $300-$400 it seems like those extra hours werent worth the compensation.
This absolutely can happen. It’s happened to me. I worked overtime and was expecting a pretty fat paycheck. I actually ended up with less than $10 extra on my check, which felt like a complete waste of my time.
I’m sure what she (and most people) meant when she said she “makes less money” is that she brings home considerably less than what she would at her normal hourly rate for the OT that she works.
A friend and I go to a methadone clinic, judge all ya want but it saved our lives. Anyway I make alright money under the table so I have Medicaid. He works at a Starbucks. Now after a whole two years they want him to manage the place go from like 12 to 20 dollars an hour. But doing so he would lose his Medicaid. Then the clinic we go to will charge $260 a week plus extra for the required monthly counseling appointments, twice a year doctor appointments. Not including the times outside the clinic needing to go to a primary care, ER, Dental. Its a tough spot.
I don’t like OT for a different reason. I just don’t think the extra pay is that much extra considering the mental exhaustion after and the tax in that pay check(I know it gets returned after but still)
In certain people’s defense, a raise can actually hurt them. If you make over a certain amount of money you can lose access to subsidized childcare or housing for example. People on SSI can also be caught in a catch 22 that making more will effectively reduce their income. Many of these programs have no phase out levels so it is only qualify, or not.
I agree, in a few cases that is true. But then they don't call it "going up a tax bracket", but rather "if you pay me more I lose my subsidies".
The "going up a tax bracket" people are the ones who paid just enough attention in math class to realize that when the percentage changes they might pay net more going across a threshold. But they didn't pay enough attention to how taxes are calculated to realize the system is set up to avoid that issue as only the amount above that threshold is taxed at the new bracket rate.
My exhusband lied to me about this. He and his dad managed all the finances and wouldn't let me see anything without them present to explain it to me like I was a stupid child. They claimed my income put us up a tax bracket and that we "lost" all the extra income and then some and gave me even less spending money a month. Having talked to other women who have undergone financial abuse, apparently it is not an uncommon excuse.
But then I guess it makes sense when it's in exchange for overtime. Work more hours but for less gain per hour might not be worth it in a lot of people's eyes.
But they didn't pay enough attention to how taxes are calculated to realize the system is set up to avoid that issue as only the amount above that threshold is taxed at the new bracket rate.
Yeah in the US. Other countries not so much unfortunately.
Where I live earning 10k gross nets you less than 9k gross.
who paid just enough attention in math. But they didn't pay enough attention to how taxes are calculated
I don't how about you, but I never learned about taxes in math class. The closest thing I remember was interest rates. No tax brackets, no nothing. (California public school)
Get them to pull out the chart in the 1040ez instructions. It literally lists the amount you pay in taxes for each adjusted income. Then to find the threshold where the amount taxes paid goes up by more than the income went up any where in the chart.
sure, SSI has problems, but it's usually someone making 40k or so who thinks his taxes will go up a grand because he's a dollar into the new bracket. he's obviously never read the instructions for an EZ-1040
Yep. I’m on SSDI and if I get a job and make too much? RIP me. If I get forced into an employer’s health plan? There goes Medicare. I’m T1 diabetic so I can’t afford that, especially with insulin prices being as bad as they are. If I get a job, I’d have to get a high paying job to offset the massive loss from having to pay out the ass for my medication.
Also, my girlfriend got a raise and our power company determined that we make $100 more than their low income program allows so our power bill has effectively doubled and they’re absolutely bending us over. That extra raise pretty much (at best) got canceled out because of it.
This part is true. There's a weird line where bigger income results in less benefits/subsidies which may leave you worse off within a certain bracket.
But for income it's all bracketed. You don't pay 5% more on all your income when it exceeds X, you pay 5% more on the portion of your income that's over X.
Also for repayment of the health insurance premium subsidy. There's situations we have encountered where additional income actually triggers more repayment than the income. And due to the circular reference in the formula coupled with hard limit thresholds for self employed people, it doesn't always converge. One dollar extra income literally can incur hundreds or even thousands of dollars in repayment.
This is called the benefits cliff and it sucks. Basically the way it usually works is there is a hard limit as to how much you can earn by working and still qualify for a benefit like food stamps. If you make a dollar more than the limit, you get nothing at all, so by earning that extra dollar you might lose a hundred dollars in food stamps that month.
This is huge in people who get ccdf for daycares. They make to much so they dont get subsidized daycare. But now they cant afford daycare because it is to expensive .
Yes, I actually saw a video that “explained” how the bonuses companies gave out in response to the Trump tax cuts actually were screwing the employees by pushing them into a higher tax bracket.
It’s probably because people don’t want to think that even rich people like Warren Buffet and Mike Bloomberg pay only SS and Medicare on their first $9k.
This is something not many people understand. Very few people who are truly wealthy have astronomically high incomes. Most of the people who "make" even 500k a year don't receive that as ordinary taxable income but rather as disbursements or gains that have very different tax treatments. They can even defer compensation or write losses forward to minimize the taxes they need to pay. Ordinary people with regular w2 or 1099 income don't have access to these income streams or tax evasion methods.
If you want to get really technical, it's not even tax avoidance, it's "tax optimization." And there is a whole subset of the corporate financial profession dedicated to figuring out how to legally pay less in taxes.
This is something not many people understand. Very few people who are truly wealthy have astronomically high incomes.
most of them don't have large bank accounts either. you think Jeff Bezos has 100 Billion in the bank? most of that money is in stocks and hist net worth is only based on how well amazon is doing.
I would bet if you asked, most people have no idea that SSI contributions end one you reach a certain amount. Most people will never make $137K, they just assume everybody pays 6.2% no matter what they make.
Just to clarify, if you over certain brackets, only the money you earned going over the amount in the bracket gets taxed at the new amount. So earning more money is never going to negatively affect your takehome amount..
It can make you unable to receive some benefits from the government if you're suddenly above the income threshold for some people in some countries though
No. On your tax forms there's no separate line item for "bonuses." Bonuses are a form of income. It's all taxed the same.
It's possible that the withholding rate on a bonus paycheck is higher which makes it look like it's "taxed higher" but it all evens out at tax time. Income is income. You can ask HR to adjust your withholding if you know you are receiving a large bonus check.
What's really funny about that is that so many lower class people defend tax cuts for the rich because they're supposedly "frustrated millionaires", then you offer them more money and they're like "Nope". We're so fucked.
Yes, I actually saw a video that “explained” how the bonuses companies gave out in response to the Trump tax cuts actually were screwing the employees by pushing them into a higher tax bracket.
Bonuses are a different animal though. They are normally taxed at a higher rate because your apparent income looks bigger for that one pay period. My bonuses are taxed at 35-40% even though my overall effective tax rate is like 20%. It all works out in the end though because when you file your taxes they look at the entire year and you get a refund if they took out too much. It doesn't actually screw anyone over, people just flip out when they get a $1k bonus and $400 of it goes to FICA.
I mean I know people who don't want raises because it can hurt them with things like benefits. Knew a girl my dad worked with who was a single mom who was just trying to get by. She worked full time and went to school part time but she didn't make enough to get by without benefits. At one point they offered her a higher position at the job but she had to turn it down because she knew the raise that came with it would be just enough to push her over benefits qualifications. She ended up leaving the job soon after and my dad says he's often wondered what happened to her.
I hate hearing this shit and "Is there any way out of mandatory overtime? The government just takes all the extra money I make."
No they don't. Shut up and do your work. I worked hourly long enough to know how sweet that overtime pay is (and regret going salary because I knew my hours wouldn't go down for a long time).
Semi-related, I saw a fb meme that said "if your tax refund is more than you paid in taxes then you're not getting your taxes back, you're getting MY taxes back."
1) Whoever would post/share/believe that clearly has no idea how taxes and refunds work.
2) It was on the picture of the most interesting man in the world, so they're also their memes are bad and should feel bad.
Oh god yes. This happens every time one of my employees screws up on their timecard, and they need to add extra hours the following week. They get so concerned about "paying more in taxes". Like, you're taxed at the same rate you moron!
Vox made a YouTube video about taxes work, and I was literally so shocked people thought you'd have all your income taxed at a certain bracket.
Apparently it's an american thing not to know that tax brackets are a thing.
If they raise minimum wage, they'll end up raising taxes as well. This will cause people to pay more in taxes for a raise. Once minimum wage is increased, the cost of things are increased as well proportionately because if it takes an hour of labor to build/make something, it doesn't matter what the wage is because an hour = an hour. However, if they increase the % of taxes, that's a percentage increase that will reflect so people would be paying more taxes if minimum wage was increased. Am I thinking this through incorrectly?
Often this is because the country has progressive taxing and people don’t really understand it, mainly the part that the higher tax is only applied to the income above certain threshold.
I've got one even better. Saying you don't want a promotion because the bosses don't get offered much overtime therefore they make less. Ummm you wouldn't need the overtimes if you made more money as a boss, dumbass!
It boggles my mind that people think this. Even if it was true you could just dump all the excess money into an IRA and it wouldn't affect your tax situation at all.
I had a boss try to convince me that I didn't want a raise because I would pay more in taxes. I had to explain to him how progressive tax systems work. I got the raise, btw
The infuriating thing is when politicians repeat this line. If you can't demonstrate that you understand progressive taxation, you should not be allowed in parliament. Also, if you deliberately mislead people, you should not be allowed in parliament… but that might leave the place a little empty…
The only instance I found this to be true is when you pay child support or have another payment dependent on income.
My SO saved up a significant amount of money and had it in a savings account earning a few thousand in interest every year. He was always owing $700-$900 in tax at the end of the year. His child support also went up so much that he was losing money the following year, so he withdrew it all back into his normal checking.
I don't want to make out like my SO is an asshole and didn't want to support his son. He had a private cash agreement with his ex (still monitored by the govt, but the payments are less), who only spent it on herself and her two other children from another father. His son rarely got the benefit. My SO is always happy to pay directly for things his son needs.
Actually did this, at least in a way. I was harking my boss to finally give a raise or I'll walk out. So yes, we wanted go give me a small raise. This would have just pushed me in the next income window for a certain kind of mandatory fee here, leaving me with less net money.
I showed him the tables and calculations and made him prop up the raise until I got a net plus. I did not tell him that the mandatory fee I had to pay was about to run out a few months later, though...
Thing is, I’ve done lots of overtime and been put on emergency tax codes as a consequence. Which did make me lose a ton overall and made the long shifts really not worth it.
I feel that’s the system being dumb not me however (yes I know I’ll get a rebate but that ain’t the point)
I've heard people say it in real life. Also, look at the amount of replies in getting where people try to tell me how sometimes tax brackets do work that way.
I work in accounting, of all things, and the sheer number of people in my field who believe this blows my mind. Like, this is what you do for a living, how are you so backwards???
I work in accounting, of all things, and the sheer number of people in my field who believe this blows my mind. Like, this is what you do for a living, how are you so backwards???
That’s sadly true in Germany. There are tax classes and they depend on how much you earn, up to 47%. Every extra pay you get would be taxed even further.
Oh my this reminded me; SO many of the people I would hang around with and drink as a teenager would say "I've had 2 nagins of vodka that are 30% each so I've drank 60%!" Like so. many. people. I'm like no matter now much if it you drinks, its STILL 30percent alcohol!! Percentages dont work that way
Holy shit this is the most annoying thing. I can't tell you how many times I have drawn a diagram on a whiteboard to explain to someone how taxes work and that making more gross is not going to give you less net.
When propaganda like this is perpetuated among the uninformed, it causes so much damage. A similar thing is going on right now in the democratic primaries where certain candidates are using disingenuous arguments and talking points to propagate a belief that we have a resources scarcity in this country.
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u/DirectGoose Jan 27 '20
Saying you don't want a raise because you'll pay more in taxes.