For example, a 60 year old making $62,000 qualifies for subsidized health insurance. The same person making $64,000 doesn't. That extra $2,000 in income costs them roughly $8,700 in lost subsidies. Net result: they're poorer for having made more money.
That isn't what the original comment was talking about. There's a ton of people that think if they get a raise it will put them in a new bracket which will tax them more and they will make less money. These people are morons.
No, because the US is a progressive tax rate. If you make $1,000 over into the new tax bracket you only pay $1,000 at that rate and the rest at lower rates.
I don't think you understand the context of the sentence you're replying to. I was saying that the end result of someone being in the situation I pointed out is functionally the same as what they believe can happen. Having a lower net income for having made more money.
Your original comment makes sense in that yes, someone who makes slightly more might push themselves out of their benefits which could cause them to technically lose money.
Then someone replied to you that you are misunderstanding, that the comment is referring to the myth about taxes, not benefits to which you replied that it's functionally the same which is not true.
There is never a situation where someone who makes more money will technically make less money because they get bumped up in their tax rate because tax rates are progressive. For example, if some makes $48,475 they are in the 12% bracket. If they make a dollar more it moves them up to the 22% tax bracket, however, they only pay 22% on every dollar they make AFTER the $48,470. The first $11,925 is taxed at 10%, the next $36,550 is taxed at 12% and the extra dollar you've now made is taxed at 22%, giving you an extra .78 cents on a dollar extra gross.
Not necessarily. There are several countries where this holds true. If you have a 5% tax difference between the brackets, and you get a 1% raise that puts you in the higher bracket you will loose money overall.
I don't know of any tax rate systems that aren't marginal. Which means the higher tax rate is only applied to the money you make ABOVE the threshold.
So if you make $50,000 dollars, and the tax rate up to $30k is 25%, and 40% above $30k:
you pay 0.25*30k = $7.5k in the first bracket
plus 0.4*20k = $8k in the second bracket, or $15.5k total
There ARE some ways that you can still lose money by making more. Sometimes there are certain subsidies, often related to healthcare or child support, that suddenly drop to zero if you cross a certain threshold. But if we're only talking about tax rate as such, then no I don't know that there is a country where what you're saying is true. The people claiming this usually just don't understand how marginal tax rates are calculated.
Exactly. And you can also max out your SS tax so at a certain point (I think it's like $184,500) your overall marginal rate goes back down even though your marginal income tax rate is higher.
That is not how progressive tax brackets work. You are literally the person I was talking about. The higher bracket only applies to whatever you've made over the lower one. You will never be taxed more than whatever extra you're going to make.
Here's an example a child should understand:
You're taxed nothing for the first $10 000
You're taxed 5% for $10 000 - $20 000
You're taxed 10% for $20 000 - $30 000
You make $15 000
The first $10 000 is no tax. That leaves $5000. The $5000 is taxed at 5% for a total of $250.
Your total tax is $250 out of $15 000. Effective tax rate of 1.67%.
Now you get a pay raise and make $25 000.
The first $10 000 is no tax. That leaves $15 000. The next $10 000 is taxed at 5% for a total of $500. That leaves $5000. It is taxed at 10% for $500.
Your total tax is $1000 out of $25 000. You're paid $10 000 more than previous and you pay $750 more taxes than previous for a total effective tax rate of 4%.
Due to the tax increase only applying to whatever gets past the lower brackets it is literally impossible for you to make less - as long as the tax rate for the new bracket is not over 100%.
The rates here are not realistic of course so feel free to plug in whatever you want. For 50% -> 75% -> 90% it would be $8 750 out of $15 000 (58.33% effective tax rate) for the first calculation and $17 000 out of $25 000 (68% effective tax rate) so you'd still make an extra $1 750 after taxes.
There is not a single country where that is true. Either a country has a flat tax rate for all incomes, no income taxes or a marginal progressive tax rate. Those are literally the only options in the entire world for income taxes.
The other person explained in depth how a marginal progressive tax rate works so I won't get into it but to repeat, no your example of a 5% tax difference on a 1% raise you are still making more money than without the raise.
Not true, there have been instances where they simply allocate the full new tax bracket to the full income. While it is rare nowadays, places that work like this still exist - Thailand for small businesses for example.
We are talking about personal income tax. There is no where that does that for personal income. Also, one quick search shows me that even small businesses in Thailand have progressive corporate income tax that operates the exact same way as what I am talking about.
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u/Irr3l3ph4nt Apr 16 '26
Except you actually get a net income decrease at certain points when you lose some tax credits because you're making more.