No one is paying a higher income tax rate than you

In recent years, it’s finally come to be openly discussed in popular media and widely understood by the average American that entering a new income tax bracket doesn’t mean your entire income will be taxed at the higher rate. Upon entering a new income tax bracket, you’re only going to be taxed the higher rate on the amount of money you make that crosses the threshold for that higher income tax bracket. If it’s only one dollar that crosses the line then the higher rate will only be applied to that single dollar. Your income up to that threshold is still taxed at the same lower rates as before. You are not taxed at your highest rate on your entire income.

This doesn’t merely apply to the top marginal income tax rate. It applies to all of the income tax brackets (top to bottom) and it has always applied to all of the income tax brackets (top to bottom) since we created income tax brackets. All income tax brackets are marginal so you never lose money by entering any higher tax bracket.

Let me expound upon a few things we should take away from learning this information. First, no one pays a higher income tax rate than you do on any amount of money that you make. Even the wealthiest person in America pays the exact same income tax rate(s) that you pay on the amount of his income that falls within your income tax bracket(s) regardless of how much more money than you he makes in total.

Using the most recently published (2022) tax brackets (and for the sake of brevity only using the rates for single filers and married couples filing jointly), let me illustrate this point a bit further. Like you, Elon Musk and Jeffrey Bezos are not taxed at all on their first $10,275. The taxes you pay on this amount of your income come back to you in your tax return when you take the minimum deduction. The same deduction is available to Musk and Bezos though they probably choose to use more lucrative tax write-offs. Like you, Bill Gates is taxed at only 12% on everything he makes between $10,276 and $41,775. Just like you (though not as many of you at this point), Warren Buffett is taxed at 22% on everything he makes between $41,776 and $89,075. Like you, Donald Trump is taxed at 24% on everything he makes between $89,076 and $170,050. Like you, Michael Bloomberg is taxed at 32% on everything he makes between $170,051 and $219,950. Like you, Hillary Clinton is taxed at 35% on everything she makes between $215,951 and $539,900. Like you (if you happen to be extremely wealthy), Oprah Winfrey is taxed at 37% only on what she makes over the amount of $539,900. Oprah is taxed at the exact same rates as everyone else for her income that falls within all the previous tax brackets on this list. They all are. No one on the list is taxed at the rate for their highest tax bracket on their entire income. No one on the list is taxed any more than you are for any income that falls within any of our seven individual tax brackets. That’s how our income tax bracket system works.

I often hear wealthy people complain about being taxed at a higher income tax rate than the rest of us but I don’t feel especially sorry for them because every American is taxed at the same rates in each of the lower income tax brackets regardless of entering a higher tax bracket. The most wealthy person in America could still afford to live in the average American’s home, drive the average American’s car and live the average American’s lifestyle even if the top three income tax brackets were taxed at 100% for a hundred years because they are still only taxed at the same income tax rates the rest of us pay for all of their income that falls within our tax brackets.

That’s why it didn’t bankrupt the wealthy when the top bracket was taxed at rates as high as 94% during World War II (rates that remained above 70% for decades after the war). No one privileged enough to be in the very top tax brackets (because they are making an excessive amount of money) is ever going to suffer in any literal sense because the top income tax rates go up ten or twenty percent for a few years or even a few decades.

Add to this realization the fact that most of the ultra-wealthy in our country make most of their profits from capital gains which are only taxed at 15% to 20% (and not subject to income tax). Add the massive number of loopholes and write-offs available to business owners and executives to reduce their overall income tax payments (to the point that some of our ultra-wealthy regularly get away with paying no income tax at all for half a dozen years at a time). Add illegal tax avoidance to the tune of trillions per year.

Billionaire political pundits have complained publicly that the working poor in America don’t pay income tax (because they don’t make enough money to exceed the threshold for taxable income) therefore they shouldn’t have the right to voice opinions about taxation on the wealthy. Meanwhile, these billionaire pundits pay no income tax on the same amount (on their first $10,275) so what are they complaining about? Equal and fair treatment under the law? The working poor would pay the same rates you pay if they made your additional income. Our income tax rates are impartial.

Finally, if you’re a bit older, I’d like you to think back to how many times you’ve heard (up until recent years) someone in pop culture exclaiming in a punchline or a retort, “I wouldn’t want to enter a new tax bracket!” The implication in that statement being they’d lose money by entering the higher income tax bracket. It was very common to hear this up until a few years ago when people started paying attention to Progressives like Bernie Sanders and Alexandria Ocasio-Cortez. I had heard such statements from actors and comedians, from politicians and political pundits and from scores of wealthy entrepreneurs. Either none of these rich and powerful people knew how our tax brackets work or they were trying to pull the wool over our eyes. The former seems more likely. Did all of these people, some of them in charge of billion dollar companies, operate their empires for decades without understanding even this most basic element of our tax structure? That’s a bit disturbing. Especially since many of these same people adamantly preached the virtues of Reagan era supply-side tax cuts that, “paid for themselves,” (in reality compounding our national debt) and other such rhetorical fantasies about income tax policy. They preached about economic policy as though they thought they knew what they were talking about. It turns out they didn’t even know how income tax brackets work.

No one enjoys paying taxes. No one on any side of the political spectrum wants taxes to remain high for anyone or for an extended period of time. But, in times of financial crisis, someone has to take on the patriotic duty of footing the bill to save our country. It should be those who’ve benefited the most from our country. It should be those who have the most resources to spare. It should be our wealthiest citizens and it should come from their excess.

Nobody is being deprived of their basic needs when taxes go up for the highest income tax brackets. No one is being punished or chopped down or humbled for sport. It’s just basic logistics. Your excess is what you sacrifice first when you are in trouble. You sacrifice your nesting yachts before you sacrifice your school lunches. When things get good again you cut taxes back down to nothing for everyone and we all live happily ever after.

This is all really basic stuff. Some of you need to stop pretending you’re hearing a foreign language whenever someone mentions raising taxes on the wealthy. It shouldn’t be surprising that we raise taxes on the excess income of our most wealthy and privileged citizens when our nation is struggling. The people with the most have to pitch in and help out so our country can recover. In the end, a healthy economy benefits everyone.

Does it kill jobs when you tax the rich? Well, no. Let me tell you a little something about job creation. A baby creates a job every time it craps its pants. Jobs are created by the needs and demands of regular people. The wealthy invest where the customers are willing to spend money. As long as we’ve got paying customers right here in America the rich will invest their money here. As long as we have a strong consumer base they will come. By the way, our consumer base happens to be our labor force so keep our wages reasonable.

Protect the working people of America, protect the middle-class, and there will always be enough jobs in America. Our economy should be set up in whatever way most benefits the greatest mass of people, the greatest bulk of our population, and the rest will take care of itself. Don’t worry so much about catering to the wealthy. Worry about our average hard working American families. Design our economy so that it works as best as possible for as many people as possible.



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store