4 ms·
The USA tried to balance this with crazy tax rules and brackets, where you will get rewarded if you massively out-earn your partner. My buddy was actually lame
by kylestlb 8y ago
The USA tried to balance this with crazy tax rules and brackets, where you will get rewarded if you massively out-earn your partner. My buddy was actually lamenting the fact that his wife got a nice raise at the public library because it would actually mean less take-home money after tax day.
- toomuchtodo 8y agoIncreasing pretax retirement contributions would’ve fixed that (would’ve dropped their tax bracket while putting more away for retirement).
- kylestlb 8y agoThey also have a house and some other tax complexities. You are probably right, but that kind of illustrates the ridiculous nuance with US tax law.
- toomuchtodo 8y agoThe US tax code has a lot of interests competing against each other (revenue vs benefits for different constituencies); I agree it should be simplified, but that takes substantial effort and political will. Changing your 401k contribution is 15 minutes. Choose the hill to die on carefully.
- vostok 8y ago> My buddy was actually lamenting the fact that his wife got a nice raise at the public library because it would actually mean less take-home money after tax day. There are relatively few scenarios where this would occur. It would have to be something like a sharp phase out of a deduction or credit or some sort of benefit. I don't think the usual graduated phase outs would do it for any material change. Are you sure that this is not just a misunderstanding of how marginal tax rates work?
- CompelTechnic 8y agoI am not GP, but I know that there are massive cliffs in Obamacare credits for people that use them. When you exceed 400% of the federal poverty line you can lose >$10,000 of credits because of a single marginal dollar of income. Other situations with cliffs
- vostok 8y agoYup that's one of the few situations I was thinking of.
- gascan 8y agoNot trying to be condescending, but your buddy might not understand how marginal tax rates work. taxB > taxA $salary * (1 - taxA) = take-homeA $salary * (1 - taxA) + $raise * (1 - taxB) = take-homeB take-homeB > take-homeA In short, if his wife earns more, only the new, additional income is taxed at a higher rate.