It’s comparatively unlikely, but there are circumstances where this type of thing can be true. Because income tax is not the only factor that matters. For example, you might get put on too high an income to qualify for some sort of tax rebate or welfare programme. Or you might start qualifying for an additional tax that isn’t applied marginally.
As one specific example, in Australia we have the Medicare Levy Surcharge, which you pay if your income is above a certain threshold and you’re above a certain age and don’t have private health insurance. If those conditions are met, it applies to all your income. It’s a small enough surcharge (ranging from 0% to 1.5%, with 1% and 1.25% steps in non-marginal brackets in between) that there are almost no practical circumstances that you’d actually end up worse off taking a raise, but it is at least theoretically possible.
Just in case anyone is curious about how it works…
Your entire income isn’t taxed at the same rate. Each chunk of your income is taxed differently. The first 11k is taxed at 10%, the next 35k is taxed at 12%, the next 50k is taxed at 22%, and it continues on at different intervals after that. This person believed that going from 44k to 45k would then change their tax bracket and their gross income would be taxed at 22%, thus reducing their net income. This is false. Only the amount over the threshold gets taxed at the higher rate. Always take a raise if it benefits you.
Let’s make it even more simple with some fake numbers to make it super easy.
$0-$10,000 - taxed at 10%
$10,000-$20,000 - taxed at 20%
$20,000-$30,000 - taxed at 30%
If you make 9 and get a raise to 11, seems like you would now pay 20% on all that! But no.
The first 10 is still taxed at 10%, only the extra $1,000 gets taxed at 20%.
If you go to 31, again, the first 10 is taxed at 10, the next 10 is taxed at 20, and only the extra $1,000 gets taxed at 30%.
$10,000-$20,000 - taxed at 20%
Goll durnit, I know 10,000-20,000=-10,000! How I supposed to pay 20% tax on -$10,000?? Do they pay ME money?? Clearly everythin you said is BULLshit!
(This is a joke just to be clear :P)
This person was clearly joking. Look at their username.
Youd be surprised at how many think a raise gives them less
Still too many who don’t know this, it’s best to explain to everyone. I’ve explained it to my mother several times, and she gets it, but then conveniently forgets about that when discussing politics.
It doesn’t help that welfare does actually work this way.
I don’t know the actual figures but my understanding is government assistance tends to work along the lines of “if you make less than $300, then the government gives you $100” so getting paid $350 is actually worse than being paid $290 for example, since going over the threshold cuts off the welfare completely.
If they receive subsidized benefits like food stamps or quantity for free health benefits, they could lose those though. There’s a reason they call it the benefit cliff. My family stayed under that line intentionally for years and when decided to take raises to get out of that cycle, things were worse for a long time.
10k will get you over that hurdle in most cases unless it barely sneaks you over the benefits line. If you shoot past it though, go for it. Thresholds though, I know. Just don’t want anyone not taking a raise due to a misread comment.
As a rule though: Stay updated on the max total assets you are allowed before benefits begin decreasing, and make sure you know what is weighted.
