4 ms·

> I've met adults-with-children who still think things like "I can't accept that raise, it'll put me into a higher tax bracket." If talking purely about taxes

> I've met adults-with-children who still think things like "I can't accept that raise, it'll put me into a higher tax bracket." If talking purely about taxes and income without anything else in the context, you are correct. However, sometimes the logic you describe makes sense when it comes to government benefits. Totally made-up example: imagine the government gives some sort of a benefit/assistance to people in certain circumstances (e.g., heavily subsidized childcare), but only if they are below a specific tax bracket, and if you cross that threshold, the benefit eligibility is gone entirely. So even though you technically still made more post-tax income if you crossed into that bracket, you might have lost more overall than you gained due to not getting that benefit/assistance (the one that requires you to be below a certain tax bracket) anymore.

kibibu 3y ago
In Australia, government student loans (HECS/HELP) don't need to be repaid until you earn over a certain amount, but then it's a flat 4% of income. Also access to lower priced medicine has an income cap (your made up example is called a Health Care Card in Aus), so it's very possible for people at various thresholds to get a raise and have a dip in income or a bump on expenses.
- filoleg 3y ago
  In the US, if you are qualified, you can get on an income-driven repayment plan. Under that plan, your federal student loan repayment is also capped at income percentage. If you keep making payments, the rest of the loan gets discharged after 20-25 years (depending on circumstances)[0]. 0. https://www.consumerfinance.gov/paying-for-college/student-loan-forgiveness/ https://www.consumerfinance.gov/paying-for-college/student-l...
Terr_ 3y ago
I agree that the misconception may originate from practical factors (either directly-experienced or through garbled retelling), however I also believe it has spread and exists among a lot of people who don't have a good personal excuse for it. For example, a former-worker, a software engineer in the Seattle area making way above welfare-levels. Perhaps he had always let his scientist-wife handle the finances before, I dunno.
- filoleg 3y ago
  > I agree that the misconception may originate from practical factors (either directly-experienced or through garbled retelling), however I also believe it has spread and exists among a lot of people who don't have a good personal excuse for it. Oh, absolutely. There are tons and tons of adults who don’t understand the concept of marginal tax rates and how those actually work, so they truly believe that getting into the next tax bracket makes the entire pre-tax income gets taxed at that rate.

kibibu 3y ago

In Australia, government student loans (HECS/HELP) don't need to be repaid until you earn over a certain amount, but then it's a flat 4% of income. Also access to lower priced medicine has an income cap (your made up example is called a Health Care Card in Aus), so it's very possible for people at various thresholds to get a raise and have a dip in income or a bump on expenses.

filoleg 3y ago
In the US, if you are qualified, you can get on an income-driven repayment plan. Under that plan, your federal student loan repayment is also capped at income percentage. If you keep making payments, the rest of the loan gets discharged after 20-25 years (depending on circumstances)[0]. 0. https://www.consumerfinance.gov/paying-for-college/student-loan-forgiveness/ https://www.consumerfinance.gov/paying-for-college/student-l...

Terr_ 3y ago

I agree that the misconception may originate from practical factors (either directly-experienced or through garbled retelling), however I also believe it has spread and exists among a lot of people who don't have a good personal excuse for it. For example, a former-worker, a software engineer in the Seattle area making way above welfare-levels. Perhaps he had always let his scientist-wife handle the finances before, I dunno.

filoleg 3y ago
> I agree that the misconception may originate from practical factors (either directly-experienced or through garbled retelling), however I also believe it has spread and exists among a lot of people who don't have a good personal excuse for it. Oh, absolutely. There are tons and tons of adults who don’t understand the concept of marginal tax rates and how those actually work, so they truly believe that getting into the next tax bracket makes the entire pre-tax income gets taxed at that rate.