this post was submitted on 20 Jun 2024
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[–] chemical_cutthroat 257 points 5 months ago (15 children)

Just in case anyone is curious about how it works...

Your entire income isn't taxed at the same rate. Each chunk of your income is taxed differently. The first 11k is taxed at 10%, the next 35k is taxed at 12%, the next 50k is taxed at 22%, and it continues on at different intervals after that. This person believed that going from 44k to 45k would then change their tax bracket and their gross income would be taxed at 22%, thus reducing their net income. This is false. Only the amount over the threshold gets taxed at the higher rate. Always take a raise if it benefits you.

[–] Iheartcheese 91 points 5 months ago (3 children)

This person was clearly joking. Look at their username.

[–] Frozengyro 94 points 5 months ago (5 children)

Still too many who don't know this, it's best to explain to everyone. I've explained it to my mother several times, and she gets it, but then conveniently forgets about that when discussing politics.

[–] TexasDrunk 20 points 5 months ago (1 children)

I was straight up told getting kicked into a new tax bracket would cost me money when I started working back in the 90s. By someone 3x my age. I believed it, being a wide eyed moron. I didn't figure out progressive tax rates for like a decade after.

[–] Frozengyro 17 points 5 months ago

Just shitty one person could cost so many people so much opportunity in life.

[–] Hikermick 19 points 5 months ago (1 children)

I've heard of people who use this as an excuse to turn down overtime

[–] Frozengyro 13 points 5 months ago (1 children)

I've tried to explain this to coworkers who claim to want overtime, but are afraid to due to this. They either don't understand, don't believe me, or don't really want to work OT.

[–] DrPop 9 points 5 months ago (6 children)

As long as they filled out their w-4s right they wouldn't even have to worry. I've talked to too many people who put zero down and wonder why they owe every year.

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[–] [email protected] 15 points 5 months ago (1 children)

I am surprised by the amount of professionally employed homeowning parental adults I have encountered that do not know this.

[–] Frozengyro 10 points 5 months ago

It's what happens when public education is poorly funded and doesn't explain the basics with what little they do have.

[–] drislands 6 points 5 months ago

It doesn't help that welfare does actually work this way.

I don't know the actual figures but my understanding is government assistance tends to work along the lines of "if you make less than $300, then the government gives you $100" so getting paid $350 is actually worse than being paid $290 for example, since going over the threshold cuts off the welfare completely.

[–] njm1314 4 points 5 months ago (1 children)

Hell there was even a West Wing episode where they got it wrong.

[–] Anamnesis 3 points 5 months ago

That actually doesn't surprise me because the West Wing was written by rubes.

[–] RedditWanderer 15 points 5 months ago

Youd be surprised at how many think a raise gives them less

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[–] shalafi 28 points 5 months ago (1 children)

Let's make it even more simple with some fake numbers to make it super easy.

$0-$10,000 - taxed at 10%

$10,000-$20,000 - taxed at 20%

$20,000-$30,000 - taxed at 30%

If you make 9 and get a raise to 11, seems like you would now pay 20% on all that! But no.

The first 10 is still taxed at 10%, only the extra $1,000 gets taxed at 20%.

If you go to 31, again, the first 10 is taxed at 10, the next 10 is taxed at 20, and only the extra $1,000 gets taxed at 30%.

[–] Heavybell 7 points 5 months ago

$10,000-$20,000 - taxed at 20%

Goll durnit, I know 10,000-20,000=-10,000! How I supposed to pay 20% tax on -$10,000?? Do they pay ME money?? Clearly everythin you said is BULLshit!

(This is a joke just to be clear :P)

[–] doingthestuff 26 points 5 months ago* (last edited 5 months ago) (1 children)

If they receive subsidized benefits like food stamps or quantity for free health benefits, they could lose those though. There's a reason they call it the benefit cliff. My family stayed under that line intentionally for years and when decided to take raises to get out of that cycle, things were worse for a long time.

[–] Xanis 5 points 5 months ago* (last edited 5 months ago) (1 children)

10k will get you over that hurdle in most cases unless it barely sneaks you over the benefits line. If you shoot past it though, go for it. Thresholds though, I know. Just don't want anyone not taking a raise due to a misread comment.

As a rule though: Stay updated on the max total assets you are allowed before benefits begin decreasing, and make sure you know what is weighted.

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[–] cosmicrookie 6 points 5 months ago

Also, considering the people who need this advice may also need to be reminded that this varies from country to country.

[–] Squizzy 5 points 5 months ago (2 children)

Where the hell are taxes this low? I pay 42% income tax, excl social insurances and charges.

[–] [email protected] 7 points 5 months ago (1 children)

USA Federal (with rounding, or a previous year).

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[–] NewNewAccount 3 points 5 months ago (2 children)
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[–] [email protected] 31 points 5 months ago (8 children)

This legit happened to a college of mine, at his first job (as engineer), it took me well into his second year of employment (the time when he got the second yearly income tax stats) to get him to understand what I've been explaining to him since he was offered a raise a few months after he started.

I tried, I really did, with charts, examples, my own income tax statement, ... but no.

I never found out which part was bothering him, like theoretically, how tf ...

[–] [email protected] 8 points 5 months ago

Unfortunately he’s probably drinking raw milk these days. IYKYK.

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[–] Got_Bent 28 points 5 months ago* (last edited 5 months ago) (1 children)

I'm a tax accountant.

You'll never make less due to income tax for making more money.

You can start to get certain credits phased out and can become subject to things like the Medicare surcharge.

But it's still unlikely that making more will ever get you less.

In a similar track though, I refused raises for a couple years because my kid was in college. If I got a raise, I would be kicked into the next income tier of financial aid eligibility, and that could've been catastrophic. Those lines don't seem to phase as much as they seem to be hard cutoffs - at least as far as my kid's specific school was concerned. All of her financial aid (grants, not loans) came directly from the school, not the government.

I also was able to enjoy a little bit of education expense credit on my tax return because if it, but that part was nominal.

The biggest hit has been going from head of household with a dependent tax credit to single with fuck all credits. Fortunately, I can itemize my way into a deduction midway between single and head of household, so I got that going for me, which is nice.

Edit: Wow, that was a gibberish filled gummy induced wall of text. Nothing particularly factually incorrect, but man what a slew of non sequitur.

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[–] [email protected] 24 points 5 months ago (3 children)

It's comparatively unlikely, but there are circumstances where this type of thing can be true. Because income tax is not the only factor that matters. For example, you might get put on too high an income to qualify for some sort of tax rebate or welfare programme. Or you might start qualifying for an additional tax that isn't applied marginally.

As one specific example, in Australia we have the Medicare Levy Surcharge, which you pay if your income is above a certain threshold and you're above a certain age and don't have private health insurance. If those conditions are met, it applies to all your income. It's a small enough surcharge (ranging from 0% to 1.5%, with 1% and 1.25% steps in non-marginal brackets in between) that there are almost no practical circumstances that you'd actually end up worse off taking a raise, but it is at least theoretically possible.

[–] jpeps 7 points 5 months ago (2 children)

Similarly in the UK going over £80k in income prevents you from claiming child benefit, and going over £100k makes you ineligible for a host of other benefits. A salary bump from 99k to 100k would be very expensive for you if had young children.

Stupidly though, a married couple each earning £99k would be able to use all benefits, but a couple where one earns £101k and the other £20k would lose out.

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[–] [email protected] 7 points 5 months ago (1 children)

Yup. It’s called the “welfare (or benefits) cliff”. It tends to happen at the lower end and the. Again at the upper middle end. There are quite a few tax breaks in the US you can’t take once you pass an AGI of $160-175K. Depending on if you were taking them, a raise could technically result in less net income.

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[–] [email protected] 6 points 5 months ago (1 children)

Yeah fucking Medicare levy.

It means I have private health and I hate the idea we are privatising our health system.

[–] [email protected] 6 points 5 months ago

Just a side note, here I'm talking about the Medicare Levy Surcharge, which is actually an entirely separate thing from the Medicare Levy. That is a 2% levy that you can't get rid of by having private insurance. (But can get reduced by having very low income, or can be exempt from if you're not eligible for Medicare in the first place, e.g. if you're not a citizen.)

[–] thefrankring 9 points 5 months ago

You guys are getting paid?

Amateurs.

[–] [email protected] 7 points 5 months ago

Hate getting bumped up into the 125% tax bracket

[–] themeatbridge 6 points 5 months ago (4 children)

First, this is stupid, and I don't think anyone actually believes this. I mean, somebody believes it because it's a big world with a lot of people, but I see this used often as an example of ignorance, and I've never met an individual who turned down a raise over taxes. It seems like quicksand, something a lot of people know about and talk about, but exceedingly rare.

Second, there are subsidies and government programs with a gap between the upper limit of making enough to qualify for the program and the lower limit of making enough where you take a net loss. Medicaid alone is worth thousands of dollars, and getting a raise that puts you out of the Medicaid bracket could cost more than the value of the raise. There are sliding scales and other gap-closing legislative efforts, but it seems to me that this is a more likely cause of someone turning down a raise.

[–] IMongoose 8 points 5 months ago

This must be a big blue collar conspiracy, I've heard this tax bracket thing from several of them. I can see it being a right wing talking point because taxes=bad but idk, I only get those talking points from my parents.

[–] HogsTooth 7 points 5 months ago

My mom did this in the early 2000s

[–] shalafi 4 points 5 months ago

Had a coworker refuse overtime for exactly this reason. 25-years ago I was too ignorant to argue it properly, but I knew she was somehow wrong.

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[–] [email protected] 4 points 5 months ago (2 children)

I took a 50% pay cut and my partner took a job that paid 10% less than her previous job but we moved somewhere that we got a 500k house on 1+ acre of land instead of our 800k townhouse, no land with one parking spot.

Sometimes less is more.

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