It’s comparatively unlikely, but there are circumstances where this type of thing can be true. Because income tax is not the only factor that matters. For example, you might get put on too high an income to qualify for some sort of tax rebate or welfare programme. Or you might start qualifying for an additional tax that isn’t applied marginally.
As one specific example, in Australia we have the Medicare Levy Surcharge, which you pay if your income is above a certain threshold and you’re above a certain age and don’t have private health insurance. If those conditions are met, it applies to all your income. It’s a small enough surcharge (ranging from 0% to 1.5%, with 1% and 1.25% steps in non-marginal brackets in between) that there are almost no practical circumstances that you’d actually end up worse off taking a raise, but it is at least theoretically possible.
Yup. It’s called the “welfare (or benefits) cliff”. It tends to happen at the lower end and the. Again at the upper middle end. There are quite a few tax breaks in the US you can’t take once you pass an AGI of $160-175K. Depending on if you were taking them, a raise could technically result in less net income.
Just a side note, here I’m talking about the Medicare Levy Surcharge, which is actually an entirely separate thing from the Medicare Levy. That is a 2% levy that you can’t get rid of by having private insurance. (But can get reduced by having very low income, or can be exempt from if you’re not eligible for Medicare in the first place, e.g. if you’re not a citizen.)
Similarly in the UK going over £80k in income prevents you from claiming child benefit, and going over £100k makes you ineligible for a host of other benefits. A salary bump from 99k to 100k would be very expensive for you if had young children.
Stupidly though, a married couple each earning £99k would be able to use all benefits, but a couple where one earns £101k and the other £20k would lose out.
but a couple where one earns £101k and the other £20k would lose out
Oh damn, that sucks. In Australia most (at least) of these types of things have a separate threshold for couples where it’s based on the total income of the couple, not the higher partner’s income, preventing that kind of situation.
I believe we have it for tax allowance, where say if your partner doesn’t work, you can add their tax free allowance to yours. I think that’s it though.
It’s comparatively unlikely, but there are circumstances where this type of thing can be true. Because income tax is not the only factor that matters. For example, you might get put on too high an income to qualify for some sort of tax rebate or welfare programme. Or you might start qualifying for an additional tax that isn’t applied marginally.
As one specific example, in Australia we have the Medicare Levy Surcharge, which you pay if your income is above a certain threshold and you’re above a certain age and don’t have private health insurance. If those conditions are met, it applies to all your income. It’s a small enough surcharge (ranging from 0% to 1.5%, with 1% and 1.25% steps in non-marginal brackets in between) that there are almost no practical circumstances that you’d actually end up worse off taking a raise, but it is at least theoretically possible.
Yup. It’s called the “welfare (or benefits) cliff”. It tends to happen at the lower end and the. Again at the upper middle end. There are quite a few tax breaks in the US you can’t take once you pass an AGI of $160-175K. Depending on if you were taking them, a raise could technically result in less net income.
Don’t forget at that level you’re also approaching the SSI cap (168k for 2024), which more than offsets losing those other breaks.
Yeah fucking Medicare levy.
It means I have private health and I hate the idea we are privatising our health system.
Just a side note, here I’m talking about the Medicare Levy Surcharge, which is actually an entirely separate thing from the Medicare Levy. That is a 2% levy that you can’t get rid of by having private insurance. (But can get reduced by having very low income, or can be exempt from if you’re not eligible for Medicare in the first place, e.g. if you’re not a citizen.)
Similarly in the UK going over £80k in income prevents you from claiming child benefit, and going over £100k makes you ineligible for a host of other benefits. A salary bump from 99k to 100k would be very expensive for you if had young children.
Stupidly though, a married couple each earning £99k would be able to use all benefits, but a couple where one earns £101k and the other £20k would lose out.
Oh damn, that sucks. In Australia most (at least) of these types of things have a separate threshold for couples where it’s based on the total income of the couple, not the higher partner’s income, preventing that kind of situation.
I believe we have it for tax allowance, where say if your partner doesn’t work, you can add their tax free allowance to yours. I think that’s it though.