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there's a big difference between claiming > 100% tax rate and > 100% MARGINAL tax rate for a specific circumstance. Many jurisdictions have specific deduction
by allannienhuis 8y ago
there's a big difference between claiming > 100% tax rate and > 100% MARGINAL tax rate for a specific circumstance. Many jurisdictions have specific deduction boundaries where the next $ earned would bump someone into a very high marginal tax rated on that next dollar. In reality the net tax change for that person in your example isn't a significant material change - a couple hundred pounds on their yearly tax bill.
- isostatic 8y agoEarn some money from your savings, say £100, and you get taxed nearly £300. That's more than 100% tax. You've also got the state where you have 7 kids (say you had 4 from a previous marriage and your partner had 3), and earn in the £50k-£60k range, where you attract a "High Income Child Benefit Tax Charge" which, combined with income and NI, works out to be 102% marginal rate, over a range of £10k. As the OP said: "A wise colleague told me that until effective income tax rates reach 100 percent, a dollar of income is worth more than a dollar of deduction" There are cases in the UK where that's demonstratably false. A dollar of income is actually worse than nothing. At the marriage threshold a pound of income is worth £-230. A pound of deduction is worth 33p.