Myths/moving into a higher tax bracket can mean you take home less
|Myth: You can end up taking home less when you earn more if you move into a higher tax bracket.|
There seems to be a common belief that if you're making near the top end of a given tax bracket and you "bump up" into the next bracket, you can end up taking home less because of the higher tax rate.
This in turn, may partly explain the popularity of the belief that progressive taxation punishes success.
(No documented cases found yet.)
This cannot happen, because bracketed tax rates are never on the whole of your income, but only on the portion inside the bracket.
Tax brackets are a marginal tax; if your income is increased to the point where you enter a new tax bracket, you will always be taking home what you were taking home before -- a percentage of your earnings -- plus a smaller percentage of your earnings inside the higher bracket.
See marginal tax in Issuepedia for a more detailed explanation.