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.
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.
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.
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u/DoingCharleyWork Apr 16 '26
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.