General Discussion
In reply to the discussion: How an additional $1,000 in income can cost you $6,420 more in premiums in CA [View all]Honeycombe8
(37,648 posts)There is a final tax rate (that results from the varying underlying tax rates) applied to the adjusted gross income.
If you make a small amount of money that puts you over one rate bracket into the next, yes, son, that FINAL rate applies to the AGI. (Since all the rates have varying underlying rates, it makes no difference whatsoever. It is the FINAL resulting rate that matters.) Then your deductions and credits are applied, resulting in the real rate the taxpayer ends up paying.
That real rate is what Buffet claims is unfair about the tax system and why he pays a lower real rate than this secretary. The initial rate he is supposed to pay is higher. But his real rate is lower because of his deductions and credits.
It matters not one lick that the IRS uses a formula of varyiing rates to arrive at the initial rate.
It is true that if someone, like myself, makes a SMALL bonus that puts one over one rate into the next bracket, s/he may well end up with less takehome pay.
It boggles the mind how some people fail to understand the basics of financial matters, including taxes.