What type of tax increase do you want to see?

[ShockTalk]

Assuming no other changes, on the surface, Kung Wu is correct, Maggie. You only pay the higher tax rate on the money that is over the old, lesser bracket.

The problem lies with credits and such that phase out as one earning more. If one loses one of those credits, they could see quite a change in the amount of taxes they pay.

[Kung Wu]

My wife and I actually got small raises a few years back and took home less money due to a change in income bracket. How's that for awesome!

I have to challenge this. Tax brackets don't work like that.

Then why have I heard of others having the same issue?

People don't take the time to work out the math and continue propogating the fallacy. Here are three make believe brackets:

Earn up to $10,000, pay 10%.

Earn up to $25,000 pay additional 15%.

Earn up to $50,000 pay additional 20%.

If you earn, say, $45,000, you would pay 10% on the first $10,000. Then you would pay 15% on the next $15,000. And finally you pay 20% on the next 20,000 of your income.

There is no number you can plug into the equation that will give you LESS income than a smaller number you plug into the formula.

If people earn less after making more, it's not due to brackets. It's due to other deductions or something.

[Kung Wu]

Here is a short article that explains it in more detail without getting too involved:

http://sweatingthebigstuff.com/explaining-the-tax-brackets/

[Maggie]

Assuming no other changes, on the surface, Kung Wu is correct, Maggie. You only pay the higher tax rate on the money that is over the old, lesser bracket.

The problem lies with credits and such that phase out as one earning more. If one loses one of those credits, they could see quite a change in the amount of taxes they pay.

Correct. I should have been more specific. I apologize to Kung Wu.

[Kung Wu]

Assuming no other changes, on the surface, Kung Wu is correct, Maggie. You only pay the higher tax rate on the money that is over the old, lesser bracket.

The problem lies with credits and such that phase out as one earning more. If one loses one of those credits, they could see quite a change in the amount of taxes they pay.

Correct. I should have been more specific. I apologize to Kung Wu.

Apology accepted. :)