Mythbuster: taxes brackets and politicsSubmitted by Prosperity Advisory Group on August 15th, 2019
by Joel Morrison, CFP®, CFS®
Just kidding. In no realm of the imagination would I write something on politics, something I am not educated on. However, we hear politicians talk all the time about raising or lowering taxes. Unfortunately, many Americans, including some of those politicians, do not understand a basic fact about how taxes work.
MYTH – I am in the 22% tax bracket, therefore all of my income, from the first dollar to the last dollar, is taxed at 22%.
This is not how taxes work! Let’s take a married couple with a taxable income of $80,000 (just barely into the 22% tax bracket). According to 2019 tax brackets, the first $19,400 of their income is taxed at 10%, then the $19,401 through $78,950 is taxed at 12%, and finally the $78,951 through $80,000 is taxed at 22%. That works out to $9,316.66 in taxes. If the entire $80,000 was taxed at 22%, the tax bill would be $17,600, almost double!
I have come across tax preparers who believed the MYTH, so now you have no excuse!