2 ms·

Tax laws are confusing, alot of people think that since they made more they are in a new tax bracket and every dollar they made is subject to the new higher tax

Tax laws are confusing, alot of people think that since they made more they are in a new tax bracket and every dollar they made is subject to the new higher tax bracket rate. This is incorrect, every dollar made at and above that high tax bracket is subject to that higher tax rate, every dollar made below is subject to the previous tax bracket.(and this is after 401k and other tax writeoffs).

b112 5y ago
Clarity here, this is how it is, where you live I presume. Other places do have more horrid, retroactive taxation. But that said, tax rates are typically based upon cutoffs. So the more you make, the more tax you pay. So this means that if you get a raise to meet inflation, you could see your raise more heavily taxed, if it is above the next tax bracket. Eventually, with enough inflation, and no changes to tax regs, you could see the very poor, taxed like the well to do, a few years before. There are also some tax benefits, which have income cutoffs, and also programs which have income cutoffs. With inflation at historic lows for 25 years, there is little institutional knowledge about how fast >10% inflation can erase buying power, and at the same time big raises mean nothing..
- subsubzero 5y ago
  totally sorry, yes you are right, I forgot to mention I live in the US and that is how tax laws here are set up. And as a caveat I am assuming all income is salary. Being highly paid in salary you are subject to very high taxation where someone who receives most of their income in stock and sells after holding for a year would have dramatically less taxes on the same amount of money received. Its why these CEO's making $1 a year(and having stock grants in the 100's of millions) are a slap in the face to the working engineer who incurs substantially higher taxes as a percentage than the CEO making 100x his salary.

b112 5y ago

Clarity here, this is how it is, where you live I presume. Other places do have more horrid, retroactive taxation. But that said, tax rates are typically based upon cutoffs. So the more you make, the more tax you pay. So this means that if you get a raise to meet inflation, you could see your raise more heavily taxed, if it is above the next tax bracket. Eventually, with enough inflation, and no changes to tax regs, you could see the very poor, taxed like the well to do, a few years before. There are also some tax benefits, which have income cutoffs, and also programs which have income cutoffs. With inflation at historic lows for 25 years, there is little institutional knowledge about how fast >10% inflation can erase buying power, and at the same time big raises mean nothing..

subsubzero 5y ago
totally sorry, yes you are right, I forgot to mention I live in the US and that is how tax laws here are set up. And as a caveat I am assuming all income is salary. Being highly paid in salary you are subject to very high taxation where someone who receives most of their income in stock and sells after holding for a year would have dramatically less taxes on the same amount of money received. Its why these CEO's making $1 a year(and having stock grants in the 100's of millions) are a slap in the face to the working engineer who incurs substantially higher taxes as a percentage than the CEO making 100x his salary.