Quote:
Example with fake numbers:
You make $50,001 in a year.
1-10000 is taxed at 10% - This means $1000 of tax.
10001 - 25000 is taxed at 12.5% - This means 1875 of tax.
25001 - 50000 is taxed at 15% - This means 3750 of tax.
50001 - 100000 is taxed at 20%. - this means $0.20 of tax.
Had you made one dollar less you would have paid $0.20 less tax, but taken home $0.80 less.
This is how the United States tax system works for standard earned income. Earning more money does not retroactively tax you. Again, this does not hold true for capital gains, they operate differently.
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I just heard this today. Is this truly how it works??? If so, why is this fact not commonly recognized?