I had an economics teacher in high school who warned us that we’re better off at the higher end of a lower tax bracket than the lower end of a higher one, because a higher bracket being a higher percentage of taxation meant you’d lose so much more money that you’d be holding less in the end until you pass the threshold within that bracket where you get back ahead of the tax. An economics teacher.
If the tax isn’t incrementing continuously but in discrete steps, this sounds kinda plausible to me…
Also I know of certain hard limits in my country that will force you to suddenly pay some additional kind of taxes or loose certain privileges once you cross them.
This means that earning a single Euro more could lead to loosing hundreds or thousands in effect…
if it were to make you lose certain benefits that is another story. but just based on tax itself, the higher tax brackets are only applied to the money that you earn beyond the threshold amount. for example, if you have 2 brackets, 10% up to 40k and 20% beyond that, and you earn 60k, you would end up paying 4k tax on the initial 40k and then another 4k on the 20k beyond that. there’s no scenario in which you would end up earning less due to getting into a higher bracket
Ok, seems your tax system is different than ours (which applies a earnings-dependent percentage to the whole earnings, minus some free amounts which are again often depending on the sum of earnings - yeah, our tax system sucks…).
So it actually was a stupid thing to say.
Damn, you are actually right. Just did a deep dive into Wikipedia and it turns out that I misinterpreted the curves showing the tax percentage depending on the income completely wrong during my whole life. It doesn’t show the tax percentage to be applied to your earnings, but you have to integrate over the curve from 0 to your income…
I had an economics teacher in high school who warned us that we’re better off at the higher end of a lower tax bracket than the lower end of a higher one, because a higher bracket being a higher percentage of taxation meant you’d lose so much more money that you’d be holding less in the end until you pass the threshold within that bracket where you get back ahead of the tax. An economics teacher.
this is true, at least for my income tax
If the tax isn’t incrementing continuously but in discrete steps, this sounds kinda plausible to me… Also I know of certain hard limits in my country that will force you to suddenly pay some additional kind of taxes or loose certain privileges once you cross them.
This means that earning a single Euro more could lead to loosing hundreds or thousands in effect…
if it were to make you lose certain benefits that is another story. but just based on tax itself, the higher tax brackets are only applied to the money that you earn beyond the threshold amount. for example, if you have 2 brackets, 10% up to 40k and 20% beyond that, and you earn 60k, you would end up paying 4k tax on the initial 40k and then another 4k on the 20k beyond that. there’s no scenario in which you would end up earning less due to getting into a higher bracket
Ok, seems your tax system is different than ours (which applies a earnings-dependent percentage to the whole earnings, minus some free amounts which are again often depending on the sum of earnings - yeah, our tax system sucks…).
So it actually was a stupid thing to say.
that’s very unusual! based on your instance I thought you lived in Germany, which definitely has a progressive tax system as I just described
Damn, you are actually right. Just did a deep dive into Wikipedia and it turns out that I misinterpreted the curves showing the tax percentage depending on the income completely wrong during my whole life. It doesn’t show the tax percentage to be applied to your earnings, but you have to integrate over the curve from 0 to your income…
TIL…