Why do people not understand tax brackets?

[Miracle Mira]

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?

[Forgettable]

It's just one of those dumb persistent myths.

[Jotaux]

Because people just don't understand tax.

[zenkai]

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.

[Puri]

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.

[Miracle Mira]

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.

[Puri]

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.

[Xarkan]

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?

[Afrospinach]

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.

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.

[Puri]

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.

[Dacien]

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.

[Draco-Onis]

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.

[SoaD009]

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.

[Yunru]

Its simple. Its never teached at school for a reason.

They want you to be stupid.

[Zaktar]

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

[Zan15]

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!!!"

[Cruor]

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.

[smityx]

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.

[Fluttershy]

This ONLY happens to old people, seriously, the boomers at work are the most moronic people I've seen.

"if you work overtime, you actually make LESS money!"

how could anyone this stupid exist in the world? there might be exceptions but not for 99.9% of all wagecucks.

[unbound]

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.

Great job proving the OP's point.

It's still a progressive tax system like in the US. In 2018, the first 9,000EUR has no taxes, more than 9,000EUR up to 54,949EUR is taxed at 14%, and over that (up to 260,532) taxed at 42%.

So if you made 54,500EUR the year before, you'd pay 6,370EUR in taxes (leaving you with 48,130EUR). If you made 56,000EUR the year after, you'd pay 6,874.28EUR in taxes (leaving you with 49,125.72EUR). The point of the article is that the 1,500EUR raise will result in less than 1,000EUR after taxes...which is common in all progressive tax systems. The Economist is going after Germany because the tax rate difference between brackets jumps so harshly...so an easier punching bag, but to anyone who actually understands what is going on, The Economist's point is so weak as to be non-existent.