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  1. #1

    Why do people not understand tax brackets?

    They think they can't go over a certain amount of income or they'd be losing money because they have to pay more taxes.

    Why do they not understand that they are only paying tax on the money that is earned beyond the bracket limits and not paying that tax on all their income?

  2. #2
    The Forgettable Forgettable's Avatar
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    It's just one of those dumb persistent myths.

  3. #3
    Because people just don't understand tax.

  4. #4
    The Unstoppable Force zenkai's Avatar
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    Quote Originally Posted by Miracle Mira View Post
    They think they can't go over a certain amount of income or they'd be losing money because they have to pay more taxes.

    Why do they not understand that they are only paying tax on the money that is earned beyond the bracket limits and not paying that tax on all their income?
    Some people are just unwilling or unable to learn things, this is why we have anti-vaxers and flat-earthers.
    Quote Originally Posted by szechuan View Post
    Wrong, NIXON was Impeached but was not removed from Office.
    Stop Lying, you seem to have a poor understanding of American History.
    This is what I argue with daily...

  5. #5
    Quote Originally Posted by Miracle Mira View Post
    They think they can't go over a certain amount of income or they'd be losing money because they have to pay more taxes.

    Why do they not understand that they are only paying tax on the money that is earned beyond the bracket limits and not paying that tax on all their income?
    Why do people not understand that tax systems are not the same all over the world? "Cold progression" as it's called here in Germany does exactly that, you get higher wage but in the end have lesser income (https://www.economist.com/europe/201...ld-progression).
    While for sure it needs to be quite a freak case to earn less than before (although that is possible), it's not unusual that 80% and more of your additional income goes to taxes.

  6. #6
    Quote Originally Posted by Puri View Post
    Why do people not understand that tax systems are not the same all over the world? "Cold progression" as it's called here in Germany does exactly that, you get higher wage but in the end have lesser income (https://www.economist.com/europe/201...ld-progression).
    While for sure it needs to be quite a freak case to earn less than before (although that is possible), it's not unusual that 80% and more of your additional income goes to taxes.
    You're linking to a page that requires registration or subscription.

  7. #7
    Quote Originally Posted by Miracle Mira View Post
    You're linking to a page that requires registration or subscription.
    Hm? Not for me, but to copy the important part:
    Bracket creep, or what the Germans call “cold progression”, results when pay rises only compensate for inflation but still push their recipients into a higher tax bracket. The effect is that taxpayers can buy less with their net income. Given steeply progressive tax rates, even middle-income Germans face such opaque and automatic tax rises every year.

    Or another source that lists some countries:

    This may slowly be changing. Calls for tax relief have centered on tackling what is known as “Kalte Progression” or bracket creep – the fact that earning a higher wage can place you in a higher tax bracket.

    For detractors, this amounts to a secret tax increase. This phenomenon is especially disturbing if wages rise at the same rate as inflation, which has been the case in Germany for much of the past decade. In Germany, this benefit flows into the government’s coffers, amounting to €7.6 billion this year alone according to the Essen-based RWI economics institute.

    Most other developed countries automatically adjust for this – if consumer prices rise 2 percent in a given year, the tax brackets are adjusted upwards by the same amount. France, Britain, Spain, Belgium, Portugal, Finland, as well as many non-E.U. countries including the United States have such automatic inflation-adjusted tax brackets. Italy and Greece are among those on Germany’s side.
    Last edited by Puri; 2019-10-21 at 06:32 PM.

  8. #8
    Scarab Lord
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    Quote Originally Posted by Puri View Post
    Why do people not understand that tax systems are not the same all over the world? "Cold progression" as it's called here in Germany does exactly that, you get higher wage but in the end have lesser income (https://www.economist.com/europe/201...ld-progression).
    While for sure it needs to be quite a freak case to earn less than before (although that is possible), it's not unusual that 80% and more of your additional income goes to taxes.
    I am not sure you are speaking about the same thing

    Can you name an amount in income in euros where if you add one euro more in income in the current tax year you will have less left after taxes than you would if you did not earn that euro?

  9. #9
    Quote Originally Posted by Forgettable View Post
    It's just one of those dumb persistent myths.
    I like it when they go into details about how company y will not pay over x mount to avoid this lol.

    Quote Originally Posted by Puri View Post
    Hm? Not for me, but to copy the important part:
    Bracket creep, or what the Germans call “cold progression”, results when pay rises only compensate for inflation but still push their recipients into a higher tax bracket. The effect is that taxpayers can buy less with their net income. Given steeply progressive tax rates, even middle-income Germans face such opaque and automatic tax rises every year.
    This is not the same thing at all.

    People are saying they will nominally have less cash in hand because they hit a higher tax bracket. This is not possible on progressive tax rates unless you don't understand how they work or they start imposing greater than 100% tax on additional income.
    The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts.

  10. #10
    Quote Originally Posted by Xarkan View Post
    I am not sure you are speaking about the same thing

    Can you name an amount in income in euros where if you add one euro more in income in the current tax year you will have less left after taxes than you would if you did not earn that euro?
    No, earning more money before taxes will always result in earning more money after taxes. But yet as I said it is possible in some freak cases you indeed get less money because other fees are tied to your tax bracket, but have no progressive curve but a minimal or absolute value.

  11. #11
    Quote Originally Posted by Miracle Mira View Post
    They think they can't go over a certain amount of income or they'd be losing money because they have to pay more taxes.

    Why do they not understand that they are only paying tax on the money that is earned beyond the bracket limits and not paying that tax on all their income?
    I work with very skilled and educated electricians, and they still believe this. I had a foreman who was in his fifties bragging about taking his overtime on two checks so he'd "pay less in taxes". I tried to explain gross income to him but he immediately became combative, so I let it drop.
    Horror and terror lurk behind the walls provided so wisely by our ancestors. We tear them down at our peril.

  12. #12
    Quote Originally Posted by Miracle Mira View Post
    They think they can't go over a certain amount of income or they'd be losing money because they have to pay more taxes.

    Why do they not understand that they are only paying tax on the money that is earned beyond the bracket limits and not paying that tax on all their income?
    To be fair politicians and the media keep spreading that misinformation because it gets them votes.

  13. #13
    My biggest pet peeve is when people think that their bonuses are taxed at different rates than their regular salary. Bonuses are withheld at different rates, but salary and bonuses are taxed the same.

  14. #14
    Over 9000! Yunru's Avatar
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    Its simple. Its never teached at school for a reason.

    They want you to be stupid.

  15. #15
    Because there are people who want to obfuscate the truth so they can convince ignorant folks to work against their own interests.

  16. #16
    Quote Originally Posted by Miracle Mira View Post
    They think they can't go over a certain amount of income or they'd be losing money because they have to pay more taxes.

    Why do they not understand that they are only paying tax on the money that is earned beyond the bracket limits and not paying that tax on all their income?
    Because then an entire party (republicans) can't scare their supporters with chants of "90% taxes for everyone!!!"
    Whether SHE IS INDICTED OR EVEN GUILTY IT DOESNT MATTER. HER GUILT IS A MOOT POINT!!! - Fox News 2016
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  17. #17
    Quote Originally Posted by Yunru View Post
    Its simple. Its never teached at school for a reason.

    They want you to be stupid.
    Am I the only one that can see the irony here?

    Hint: Teached.

  18. #18
    Quote Originally Posted by Yunru View Post
    Its simple. Its never teached at school for a reason.

    They want you to be stupid.
    It should be. There should be an entire semester senior year that is personal finance specific. Taxes, loans, balance a checkbook (heh aged myself), insurance, etc... Stuff people should know once they decide to leave moms basement and start life and not have to learn through trial and error.

  19. #19
    Banned matheney2k's Avatar
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    Why do people not understand taxes in America?

    It's one of the most convoluted and overly complicated subjects in the country, famous for being so. And no official schooling or education path even bothers to mention how to understand taxes, let alone actually teach even the basics.

    It seems like a really silly question tbh. Tax lawyers don't even understand it all and it's their job/life.

  20. #20
    As long as two things are true for me, I don't care one bit about the specifics of a tax model: If I work for longer and/or do higher quality of work (read: earn more per unit of time), I see currency piling up on my accounts faster, there are things I care a LOT more about.

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