USA Weekend Fails 'Math For Grownups'
[CORRECTED: see below.]
Laura Laing is the author of a book called "Math For Grownups." Gregory Connolly is an ostensibly grown-up journalist, tasked by USA Weekend to summarize some "tips" from Laing's book. In his summary, Connolly gets one thing very wrong:
That raise actually might not be as good as it looks. The extra money is nice, but it could very well bump you into the next tax bracket, possibly leaving you with less money than you had before the raise. Better benefits, such as medical, can save you money while keeping you in the same tax bracket.
Gads. We need a remedial lesson in what "marginal tax rates" are. Here are the good people at the Center for Economic and Policy Research, their hair similarly aflame over this:
The tax system brackets give marginal rates. This means that if the raise bumps you into a higher bracket then you pay more taxes only on the income in the higher bracket. Suppose that the tax bracket for income under $200k is 25 percent, and for income over $200k is 33 percent. If you get a raise that pushes your income from $195,000 to $205,000 then you only pay the higher 33 percent tax rate on the $5,000 that is above the $200k threshold not your whole income. Therefore, there is no (as in none, nada, not any) way that getting more money, and being pushed into a higher tax bracket will leave you with less money after taxes.
Don't the writers and editors at USA Today [sic] know this?
Evidently not. Give Laing credit, however -- she shows up in the USA Weekend's comment streams immediately after a commenter makes the same observation, and says:
This issue is covered correctly in Math for Grownups. But I'm so glad that you pointed out this very common misunderstanding. The example from the book considers whether or not non-taxable perks and more paid time off might be a better deal than the raise itself. Folks may assume that a raise is the best option--however, there are many ways to negotiate with employers so that more money is kept in your pocket!
And that's correct. Nevertheless, the failure to understand the nature of marginal tax rates is something that occurs far too often in lay journalism, to the extent that you do, from time to time, encounter stories about people artificially restraining their own income out of terror that they'll end up on the losing end of a tax rate deal. This, in turn, helps to fuel a lot of misplaced sympathy for top income earners. And it all basically comes from lazy journalism! (Or, at the very least, journalism that assumes that an objectively incorrect point of view is just as valid as the objectively correct one.) It should not be difficult to explain marginal rates to ordinary humans. Nor should it be difficult to push back on people who propagate this myth.
Now, if Gregory Connolly's superiors at USA Weekend have used this argument to talk him out of pursuing a raise, he'd better start rethinking things.
[CORRECTION: This item has been corrected to reflect the fact that USA Weekend is distinct from USA Today. As noted by CJR's Greg Marx, it is "a Parade-style weekly spin-off of USA Today." I regret any confusion this may have caused.]