I usually opt to work more during the holiday season because we get higher wages (holiday pay). I signed up for a lot of extra days and my co-workers keep telling me that because I’ll make more money, I’ll get taxed more. So I’ll be receiving less pay than I’d usually make without the overtime. Is that right? I feel stupid right now.
In: Mathematics
This is a common misunderstanding. Others have explained in dollars what the difference is, but just to give you an overview, people often misunderstand the difference between marginal tax rate and a flat tax rate. Flat tax would tax you the same percentage regardless of what the amount is. That’s what your coworkers think taxes do. They don’t. We have a marginal tax rate, where you’re taxed a certain percent for the first $50,000(or whatever the amount is, I don’t know off the top of my head), and then a different percent for amounts over $50,000. And then perhaps a different percent for all earnings above $400,000, things like that.
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