There are a ton of people that don’t understand the basics of taxes because they equate the tax withholding by paycheck with overall taxes collected throughout the year.
In lower paying jobs, one high paycheck will skyrocket your withholding because it estimates based on an assumption that you will continue to have that increase. For example, a yearly bonus can result in that particular paycheck not being any higher than your normal paycheck, and people equate that to the whole amount being taxed even though at the end of the year only a small increase to taxes due is the end result.
I remember when making slightly over minimum wage having a bonus not increase that paycheck because the withholding kept it from going to me right away. The bonus was instead paid back to be as part of my tax refund, since that looks at the whole year.
A lot of people can’t do finances past the current month when they live paycheck to paycheck, and keep that mentality even after they make more money. I have had people at my decently paid job think that an increase in pay will cost them in taxes within the last three years, and one of those people used to work on the state tax department website.
But the idea itself should feel incorrect. A raise is more money, not less. There’s lots of people who make slightly more. Why would they accept working for less money overall? It makes no sense.
Secondly, why would they believe their boss when it comes to money? Do they not count their change at a store or examine the receipt at a restaurant? This is the level of naivete that’s required.
There are a ton of people that don’t understand the basics of taxes because they equate the tax withholding by paycheck with overall taxes collected throughout the year.
In lower paying jobs, one high paycheck will skyrocket your withholding because it estimates based on an assumption that you will continue to have that increase. For example, a yearly bonus can result in that particular paycheck not being any higher than your normal paycheck, and people equate that to the whole amount being taxed even though at the end of the year only a small increase to taxes due is the end result.
I remember when making slightly over minimum wage having a bonus not increase that paycheck because the withholding kept it from going to me right away. The bonus was instead paid back to be as part of my tax refund, since that looks at the whole year.
A lot of people can’t do finances past the current month when they live paycheck to paycheck, and keep that mentality even after they make more money. I have had people at my decently paid job think that an increase in pay will cost them in taxes within the last three years, and one of those people used to work on the state tax department website.
But the idea itself should feel incorrect. A raise is more money, not less. There’s lots of people who make slightly more. Why would they accept working for less money overall? It makes no sense.
Secondly, why would they believe their boss when it comes to money? Do they not count their change at a store or examine the receipt at a restaurant? This is the level of naivete that’s required.
A lot of people don’t use critical thinking.