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> I didn't understand that our tax brackets in the US are marginal (i.e. we don't pay 35% of our entire income if we are in that bracket), until a quarter way i

> I didn't understand that our tax brackets in the US are marginal (i.e. we don't pay 35% of our entire income if we are in that bracket), until a quarter way into my PhD program. Is this common? How do we educate people about this? How can we have a serious conversation on tax reform when people don't know what system we have now? Personally, I want an end to most deductions and credits (but honestly because there are so many that I'm not using and never will use). However, if wager that the only people who know about them are the people who use them. For example, the Masters exemption for Airbnb hosts makes no sense.

addicted 9y ago
Misunderstanding how marginal taxation works not only seems common in the US, but I suspect it's something that is encouraged, as a way to get poor people to support cuts in taxes on the highest brackets.
- chrishynes 9y ago
  It also causes folks in one tax bracket to keep their income down for fear of paying way more. I've had conversations with multiple people who were deadly afraid of earning another dollar because they thought their entire income would be taxed at that rate. They were only disabused of the notion after bringing up the IRS tax tables and calculating it all.
- Delmania 9y ago
  Also the United States tax code is amazingly complex.
  - newjersey 9y ago
    Yes and simplifying it involves in pissing off a lot of people. Closing loopholes makes people made. People who have money. People who will spend money to keep things the way they are. And (sometimes) we are those people. I don't know how we can ever actually simplify the tax code.
deathanatos 9y ago
I also didn't understand the marginal aspect of tax brackets myself until about the same point as OP. We only ever talk about tax brackets as a percentage, I feel, so that aspect just never comes up. It's an easy assumption to make. (And even if you feel like that assumption is nonsense, since it results in absurd situations like an income increase resulting in a net loss: I would say most Americans don't expect the laws or tax code their government makes to behave sensibly, so this just isn't a red flag.) > How can we have a serious conversation on tax reform when people don't know what system we have now? We have this issue in a number of areas, not just taxes; e.g., tech issues (encryption, net neutrality) in politics. (And I find this happens a lot, not just in politics. For example, I feel that I've run across a number of people who think that because C++ lacks garbage collection, that C++ code must therefore be littered with manually new/delete calls; thus, GC is "better", because folks don't realize that an alternative, RAII, exists.)

addicted 9y ago

Misunderstanding how marginal taxation works not only seems common in the US, but I suspect it's something that is encouraged, as a way to get poor people to support cuts in taxes on the highest brackets.

chrishynes 9y ago
It also causes folks in one tax bracket to keep their income down for fear of paying way more. I've had conversations with multiple people who were deadly afraid of earning another dollar because they thought their entire income would be taxed at that rate. They were only disabused of the notion after bringing up the IRS tax tables and calculating it all.
Delmania 9y ago
Also the United States tax code is amazingly complex.
- newjersey 9y ago
  Yes and simplifying it involves in pissing off a lot of people. Closing loopholes makes people made. People who have money. People who will spend money to keep things the way they are. And (sometimes) we are those people. I don't know how we can ever actually simplify the tax code.

deathanatos 9y ago

I also didn't understand the marginal aspect of tax brackets myself until about the same point as OP. We only ever talk about tax brackets as a percentage, I feel, so that aspect just never comes up. It's an easy assumption to make. (And even if you feel like that assumption is nonsense, since it results in absurd situations like an income increase resulting in a net loss: I would say most Americans don't expect the laws or tax code their government makes to behave sensibly, so this just isn't a red flag.) > How can we have a serious conversation on tax reform when people don't know what system we have now? We have this issue in a number of areas, not just taxes; e.g., tech issues (encryption, net neutrality) in politics. (And I find this happens a lot, not just in politics. For example, I feel that I've run across a number of people who think that because C++ lacks garbage collection, that C++ code must therefore be littered with manually new/delete calls; thus, GC is "better", because folks don't realize that an alternative, RAII, exists.)