I wish I could upvote this a thousand times. I don't know where this idea of getting "bumped up a tax bracket" comes from. I occasionally hear it from smart and otherwise informed people.
It's easy to dismiss as a wonkish point, but I actually think it's important. Some people think it's unfair for millionaires to be "taxed at a higher rate" when they've "earned their money." I wonder if they would still feel that way if they understood the millionaire is paying the same rate as everybody else for the first $75k, for example.
Of course, the truth is the millionaire is probably paying a lower tax rate due to clever accounting and large portion of earnings being subject to capital gains tax instead of income tax. But that's a different topic.
Anyway, not trying to make this political. :) I just wish more people understood how tax brackets actually work.
>Some people think it's unfair for millionaires to be "taxed at a higher rate" when they've "earned their money." I wonder if they would still feel that way if they understood the millionaire is paying the same rate as everybody else for the first $75k, for example.
In the UK at least once you go into the 45% super high earner bracket (150k I think) - you'll start to lose your tax free allowance which means you do actually pay more tax on the sub threshold income. Obviously it's still designed to ensure no one ever goes over 100% marginal tax rate (where you'd actually lose money by earning more).
> In the UK at least once you go into the 45% super high earner bracket (150k I think)
The personal allowance decreases by £1 for every £2 you earn over £100k. Combined with the existing income tax this is equivilent to having a marginal rate of 60% on earnings between 100 and 120k.
It's easy to dismiss as a wonkish point, but I actually think it's important. Some people think it's unfair for millionaires to be "taxed at a higher rate" when they've "earned their money." I wonder if they would still feel that way if they understood the millionaire is paying the same rate as everybody else for the first $75k, for example.
Of course, the truth is the millionaire is probably paying a lower tax rate due to clever accounting and large portion of earnings being subject to capital gains tax instead of income tax. But that's a different topic.
Anyway, not trying to make this political. :) I just wish more people understood how tax brackets actually work.