5
"Taxes on higher incomes means it's actually better to have a lower-paying job!"
Getty
If you've ever filled out a tax form, you know that America (and most other countries) has what's called a progressive tax system. This means that rich people pay higher rates than poor people. Currently, if you make between $70,700 and $142,700, your income tax rate is 25 percent. Whereas if you make between $17,400 and $70,699, your income tax rate is just 15 percent.
One of your "smart" friends has probably pointed out the problem with this -- when you get close to the line between one tax bracket and another, an increase in salary may actually decrease how much you take home. Therefore there's no incentive to work hard and get that promotion, because you'll earn less money.
Getty
"... So I said, 'Fuck trading stocks, the carefree life of a janitor is for me!'"
We mean, it's simple math, right? If you're making $70,000, you're better off staying in your comfy 15 percent bracket than moving up in the world to a $71,000 salary and having a quarter of your income cruelly ripped from your hard-working hands. Hell, your friend even heard about a guy who asked for a pay cut so he'd stay in the lower bracket and take home more money! This is an outrage! Is it time to start throwing our tea bags into the Boston harbor again?
But Actually ...
In case you don't feel like poring through 72,536 pages of tax code, we'll make it simple: Your tax bracket isn't the number used for your whole income. If you're making $100,000, for example, the Grinches at the IRS are still only charging you 15 percent for the first $70,000, even though you're in that second tax bracket. It's only the money you make on top of that which gets taxed at the higher rate. This is done specifically to avoid the situation your dumbass friend insists is happening.
Getty
"Wow ... I'm going to kill my accountant."
So despite what a lot of tax protesters would like to argue, there really is no situation in which it's ever possible to increase your salary but lose net income. Even if your higher salary pushes you into a new tax bracket, you're only taxed more on the additional income. You're still taking home more cash.