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The Daily Capital
PERSONAL FINANCE · Lesson 65

Marginal vs effective tax rate: the bracket math almost everyone gets wrong

Daily Desk · Editorial5 min read
Nobody has ever lost money by earning more and getting bumped into a higher bracket. The higher rate only touches the dollars inside that bracket — not the ones underneath it.

Someone at work turns down overtime because it would 'push them into the next bracket.' It is the most common money myth in America, and it is arithmetically impossible. The US uses a progressive bracket system, which means each rate applies only to the dollars that fall inside its own range.

Educational, not financial advice.