Differential Tax Breakdown

[digitaldiscipline]

I found a very handy tool which explains the effective tax rate and breaks out the differential rate in a clear and concise manner, since people think "I'm in a higher tax bracket now, so I'll make less money, this sucks" if they get a rais that bumps them from one level to another.

... and are absolutely, completely WRONG. The higher rate only applies to the dollars earned in the applicable tax bracket.

http://www.moneychimp.com/features/tax_brackets.htm

Comments

[lil-m-moses.livejournal.com]

Interesting. Unlike the author of that post, I hope they do do nothing and revert to the 1993-2000 rates, 'cause guess when we actually had a balanced budget?!

[etcet.livejournal.com]

I seem to have won an argument and explained differential federal tax rates... on twitter. I'm not sure if this warrants pride, or some kind of intervention.

But, yeah, I am OK with paying a few bucks more to un-fuck the country, and I'm in no danger whatsoever of hitting a quarter mil in annual income anytime soon.

[y2kdragon.livejournal.com]

I am too. But I am not okay with being held hostage by incoming politicians who either don't get it, or just want to spread more FUD.

Get it right, people, or 2012 will be the year that Independents take over Congress.

[etcet.livejournal.com]

I'd be fine with that, since they wouldn't be beholden to either major party's agenda or leadership. I still contend that belonging to either major political party should be forbidden, and that every candidate ought to campaign on their own platform, label-free, to let the people decide based on that, not some larger rubric, and then whoever gets elected can vote however they and their constituents fucking well please, not how their party dictates.

Plus, it would get a lot of the big money out of the nomination process, or at least spread it around a hell of a lot more.

[mighty-man.livejournal.com]

Funny, I didn't think anyone would be happy that their year end bonus or raise pushed them into a higher tax bracket and made their year end bonus or raise smaller than it could have been. Frankly, if I won the lottery, I'd rather not be taxed federally at 35%. It's much nicer when you actually get what you're awarded than a quarter or third less (more when you factor in state tax).

You also *COMPLETELY* fail to take into account those who file and pay their taxes quarterly and suffer losses later in the year and are required to pay them back. Many business owners fall into this category (especially those whose business is seasonal).

Among my clientele, I would like to point out that it's not so much that "I'm in a higher tax bracket now" as "Shit, I just got pushed above the limit for me to get government benefits (Food Stamps, Medicare, whatever)". One customer comes to mind -- last year he got a $400 (?) tax credit. Last month, AZCCS instituted copays on medications for those that the state deemed could "handle it." The customer in question went from having zero copay to $4 copay on each of his meds. He gets over 20 rxs/month. His $400 rebate will cost him $80/month or $960 for the year. That doesn't include any additional medications he will get or any copays that will be instituted by the medical providers' offices.

So yeah, he got pushed into a higher income level and does ultimately get less. It's not just taxes.

[etcet.livejournal.com]

You know what my year end bonus was last year? A gift certificate to a grocery store and a coffee cup. Folks who get one that triggers a new tax bracket to kick in are doing much better on that score than I. A bonus is a bonus, and you still take home more money getting one, regardless of differential tax rate, than if you don't.

You're right about the quarterly filers; that's not something that ever crosses my mind as the way to do things.

The benefits qualification tiers are, iirc, independent of the federal tax brackets (however, it's possible that I'm wrong about that). But, yes, there are complicating factors when social services and the like are included in the equation, which is why I didn't include them. Many people think tax structure is complicated enough (even though it isn't *that* bad) without adding additional layers to the discussion before they're up to speed.