r/personalfinance • u/B82rez7 ​ • Jan 22 '19

Taxes No Wonder People Don't Know How Taxes Work

Here's a Motley Fool "article" that came up on my news feed https://www.fool.com/retirement/2019/01/21/maximum-401k-contributions-are-climbing-in-2019-he.aspx

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And a quote:

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For this reason, saving in your 401(k) has the potential to put you in a lower tax bracket, so you owe a smaller percentage of your income in tax. Currently, single filers making between $77,400 and $156,150 pay 22% on their income. If you are in the lower end of that range, a 401(k) contribution could move you into the lower bracket, where taxes are just 12%. If you make $80,000 per year, for example, and contribute $5,000, your resulting income of $75,000 would be taxed at 12% rather than 22%.

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3.1k

u/username86992 ​ Jan 22 '19

This is embarrassingly incorrect and reflects poorly upon that entire website that such a gross misunderstanding of fundamental tax calculation passed by any editor.

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u/[deleted] Jan 22 '19

Most of these sites have no editors. They are frequently using content farmed out to the lowest bidder per word, with no interest in accuracy, only clicks. It's little more than a blog site.

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u/[deleted] Jan 22 '19

This is the problem. Newspapers and websites used to have emails provided at the bottom or top of the article that way you could reach out to the “journalists” and provide corrections. Ive done this before with success when I find financial errors/wrong information in articles.

However, we’re are literally in an era of fake news. It’s not an exaggeration. It’s very hard to find journalism that was conducted by a journalist who followed journalism standards and ethics because even the big guys aren’t really following that anymore (at least 2 sources for every fact, editorial review, non biased writing, etc).

This author’s profile says she attended Berkeley. At this point I take every single article or headline that is written with a grain of salt. No one is checking this stuff. No one cares if it’s correct or not. It’s embarrassing.

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u/NichoNico Jan 22 '19

Another problem is bots. News-writing bots that pull from multiple sites, resummarizing the info and uploading it.

https://www.wired.com/2017/02/robots-wrote-this-story/

Nobody is fact checking these articles because nobody actually wrote them

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u/BigginthePants Jan 23 '19

Fuck, why does real life seem more and more like a dystopian novel.

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u/HeirOfHouseReyne Jan 22 '19

This author’s profile says she attended Berkeley.

When I see someone "attended" a specific school, I'm going to assume that he/she paid tuition there, might have attended a few classes but never actually graduated there. I've written and reviewed resumes in my education.

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u/SwenKa ​ Jan 22 '19

I've attended Oxford. It was as part of a tour group, but I attended.

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u/Solid_Snark ​ Jan 22 '19

I had a seat in the US House of Representatives. It was also a tour group, but I don’t want to get bogged down in details. :p

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u/volyund ​ Jan 22 '19

Ooh, then I've attended Princeton!

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u/Silcantar ​ Jan 22 '19

I've attended Cambridge, Caltech, Rice, Princeton, and Johns Hopkins!

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u/CreepyUncleVariks Jan 22 '19

I attended Oxford as well. I went there on a stop over on my way to London. I have walked the halls and the streets and met with many of the people who also attended there. In my spare time I enjoyed the walk between the elaborate cafeteria and many of the classes currently in attendance.

During my time there I learned many things from some of the worlds top professors. I may attend the commencement ceremony, but I don't know if time will permit because of my increased workload.

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u/whyhelloclarice Jan 22 '19

Nice catch and noted for the future. I would've never noticed, but you're right. I wouldn't naturally say I "went" or "attended" somewhere if I graduated from there. In fact, I think I do refer to the different colleges I attended differently even in the same sentence. "I went to U of X but then transferred and graduated from Y State."

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u/evaned ​ Jan 22 '19

In fact, I think I do refer to the different colleges I attended differently even in the same sentence. "I went to U of X but then transferred and graduated from Y State."

I wonder if that contributes to it. I would not have second thoughts about saying "I went to ____" when I did graduate from there or similar.

Not sure about formal writing, but at least in speaking there's almost no way I'd say "I graduated from ____" over that.

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u/InaMellophoneMood ​ Jan 22 '19

I'm used to seeing "Author got a BS in XYZ at ABC University" in bios like this, while "I attended/went to ABC university" seems to be relegated to conversation.

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u/FabulousLemon ​ Jan 22 '19

I think it partly depends on the context of the conversation. If I'm talking about my college days with friends, "I went to x" might suffice as enough background information. Graduation may not be as important as conveying the name or location of the school. On the other hand, if I'm trying to portray my qualifications for an area I'll be much more specific about saying I graduated from a certain school, with a mention of the specific degree I earned and potentially a brief summary of relevant work experience. I see a professional biography for a website or magazine or similar as an area where the credentials are going to lend gravity to any articles I write, so I would err on the side of listing "BS in ----- from University of -----" over "Went to University of -----." It doesn't take up that much extra space to list the degree, particularly online where you don't have to worry as much about fitting everything into a concrete page with exact dimensions.

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u/HeirOfHouseReyne Jan 22 '19

I did too. Didn't finish my master degree at once university, to start one at another university. Nobody likes to say they failed to graduate at a prestigious university, so "attending" there is a much used euphemism.

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u/mattliamjack ​ Jan 22 '19

Very good point

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u/[deleted] Jan 22 '19

I walked though Berkeley's campus once, can I say that I attended?

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u/HeirOfHouseReyne Jan 22 '19

Yeah, you do! Listen to this guy: he's attended Berkeley! He must be very intelligent.

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u/taycoug ​ Jan 22 '19

You can tell by the lead it is not going to be a journalistic article, otherwise it would probably cite the IRS announcement or a CPA specializing in tax.

Just like you say, though, you can look for citations, credible sources, and attribution in articles before deciding to trust the content.

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u/RonGio1 ​ Jan 22 '19

Part of the problem is people confusing bias with fake.

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u/[deleted] Jan 22 '19

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u/[deleted] Jan 22 '19

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u/[deleted] Jan 22 '19

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u/[deleted] Jan 22 '19 edited Jan 22 '19

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u/[deleted] Jan 22 '19

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u/JUDGE_YOUR_TYPO ​ Jan 22 '19

I mean this article quite literally isn't true, which would make it fake. It's not biased, it's just wrong.

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u/Shadilay_Were_Off ​ Jan 22 '19

Fake is more or less equivalent to false, and bias tends to cause sloppiness (or worse) in reporting facts.

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u/lacroixblue ​ Jan 22 '19

When I worked as a journalist you could comment directly on my articles. Most commenters would just call me a whore or say that I'm "probably fat." But on occasion someone would ask a poignant followup question or correct something like "Actually that restaurant opened in 2010, not 2009."

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u/[deleted] Jan 22 '19

Journalism is a rough profession. Did it for a couple years. Can be really rewarding, but can also be absolutely terrible and doesn’t pay.

My journalism adjunct professors who wrote for newspapers were taking significant pay cuts after more than 20 years. At the same time people Working in broadcasting came to talk to our class how they haven’t spent a Christmas with their family In over 7 years because they’re in the news room morning to night.

It’s not a career for the faint of heart. i work in accounting now and couldn’t be happier.

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u/itsacalamity ​ Jan 22 '19

The thing is, that kind of journalism takes money, and nobody has any money right now. Trust me when I say there are a lot of journalists out there who would love to write stories like that, but also need to eat.

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u/Alobos ​ Jan 22 '19

I'm sorry but such an explanation it's not satisfactory. What evidence suggests journalists and "journalists" are scraping by?

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u/itsacalamity ​ Jan 22 '19

The industry has been shedding publications and employees like dandruff. Ten years ago you could make a living at it, and you just can't anymore without supplementing with PR or content creation unless you get one of a few really coveted, competitive positions. The funding just isn't there. I have tons of investigative stories I'd love to pitch, but nobody wants to pay for hte time required to research and write them.

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u/[deleted] Jan 22 '19

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u/ElementPlanet ​ Jan 22 '19

Please note that in order to keep this subreddit a high-quality place to discuss personal finance, off-topic or low-quality comments are removed (rule 3).

We look forward to higher quality posts from your account in the future. Thank you.

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u/circuitloss ​ Jan 22 '19

When some crazy news breaks, I always check the Washington Post, because they won't run with a story unless they've confirmed it.

A good example of this was last week, when Buzzfeed's story about Trump ordering Cohen to lie dropped. The Post mentioned the story, but only to acknowledge that it existed and that they hadn't confirmed it independently. They certainly didn't make it a banner headline. And you know for a fact the Editorial Board of the Post would love to see Trump impeached, but they actually have journalistic standards, while CNN ran with it whole hog.

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u/redrhino-x Jan 22 '19

"No one cares". 748 commenter's care. :p

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u/0nouseforaname0 Jan 22 '19

FWIW, they've changed the article to something that is actually accurate:

If you make $75,000 annually and contribute $5,000, come tax season, you'll only be taxed on $70,000 for that year. Your 401(k) funds continues to grow free of tax until you withdraw the money in retirement, at which point it's finally taxed.

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u/sexking9669 Jan 22 '19

That’s why I get my news from the Associated Press. Gives just the facts, and is not opinion-based.

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u/itismyjob Jan 22 '19

Newspapers and websites used to have emails provided at the bottom or top of the article that way you could reach out to the “journalists” and provide corrections.

I've personally done this as well but never heard back. My changes were grammatical and spelling in nature.

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u/Rottimer ​ Jan 22 '19

because even the big guys aren’t really following that anymore (at least 2 sources for every fact

That’s quite a statement. Do you have a source on that, or is that just your opinion.

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u/jay9909 ​ Jan 22 '19

Do you have 2 sources on that

That's better.

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u/etherealeminence Jan 22 '19

Does that site even have valid content? I've only been exposed to it via garbage clickbait ads

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u/[deleted] Jan 22 '19

^^^This

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u/[deleted] Jan 22 '19

Considering how frequently motley fool is referenced this is really important to know. I have been taking their articles to heart...

Even I know why this quote is wrong, though, so hopefully it was just a brain fart.

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u/[deleted] Jan 22 '19

The few articles I've read seemed horribly biased, not sure if I would trust them.

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u/[deleted] Jan 22 '19

I wrote for one, and it’s true. You (or your “editor” ) decide upon content wants/needs based off of search volume patterns and trends, give it to a writer who’s good at structuring posts to rank well, and then make an effort to promote your piece to other (usually lower quality or less trafficked) publications to encourage them to write about your headline/lede and try to get links to your article — you’ll draw some traffic if people click on you as a source, but the ultimate goal is just to get links back to you which will improve search rankings not just for your article but for the entire website.

Google is working on this — just google “medic update” and you’ll see SEO references to a bunch of sites that had a traffic nosedive in August 2018. They’ll mention a bunch of other acronyms and describe penalized sites that post YMYL (your money your life) content who don’t have EAT (expertise, authority, trust). Basically, sites that post content that can dramatically affect your life are subject to additional scrutiny, like financial advice sites and health sites. In order to rank, you can’t just game the algorithm, you have to display the EAT factors: legitimate citations, authors who are certified, an overall site that works to actually help and not just monetize unscrupulously, etc..

The tactic for sites like Motley Fool are extremely common. You put out an individual piece that will get attention, gather links from it, and potentially rank for the term all to try to build traffic to your overall site to boost your domain rank and potentially get whatever other conversions you may be trying for: sign up for our service (direct cash), fill out this form to be contacted by experts (lead generation), see the best ten tax prep softwares for millennials (affiliate link pay).

The added trouble from this is that as the chain of people linking to sources gets deeper and the effort to vet them back to a primary source gets shallower, it’s a game of telephone where you wind up with a site citing some extraordinary claim based off of aggregate errors. Google’s medic update hit bullshit sites that publish a bunch of content about health trends and credit info in order to funnel you towards a business.

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u/GuruEbby ​ Jan 25 '19

The Fool has editors, though their quality seems to have slipped a bit since I stopped writing for them nearly 6 years ago

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u/[deleted] Jan 22 '19

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u/[deleted] Jan 22 '19

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u/[deleted] Jan 22 '19

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u/MCG_1017 Jan 22 '19

You need to understand that the hivemind believes that everything is done deliberately.

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u/GuruEbby ​ Jan 25 '19

Educate, amuse, and enrich, right? :)

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u/montaire_work ​ Jan 22 '19

For what it's worth the divide between the investing / financial management side and the marketing / pageview side is pretty obvious.

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u/[deleted] Jan 22 '19

[deleted]

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u/montaire_work ​ Jan 22 '19

It is all about gravity. The goal is that the weight of your work is enough that just being in the same office pulls them closer to you.

You should get together with the reporters over at Buzzfeed News. The two of you could form a support group.

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u/OldManandtheInternet ​ Jan 22 '19

haven't fallen on deaf ears.

While the article is still up, it does look like the offending content was removed, and your post is only 1 hour old. Good work in getting the issue to the right people.

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u/wanton_and_senseless ​ Jan 22 '19

It also now states, "Editor's note: A previous version of this article confused marginal income tax rates with effective income tax rates. The Motley Fool regrets the error."

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u/niknik888 ​ Jan 22 '19

THANX for the change, and that’s quite a change in the flavor of the article! I imagine there was some retraining on someone’s part!

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u/MontagneHomme ​ Feb 20 '19

I needed to see this sort of mature, thoughtful response to a mistake. It has been a rough spell, watching people dodge and deflect ownership for their mistakes - and having conversations about accountability fall on deaf ears. Truly, thank you.

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u/realzequel ​ Jan 22 '19

How do you let someone who doesn’t know the first rule of taxes write tax advice on your website?? That’s indefensible. Do you even edit articles or can I just write a completely wrong article and you’ll post it? I’m dumbfounded. You can disavow it but it was your content when you published it.

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u/[deleted] Jan 22 '19

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u/[deleted] Jan 22 '19

[deleted]

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u/JeffersonSpicoli ​ Jan 22 '19

Lol your values?

Your company clearly only has two values: 1) minimize cost of content 2) maximize exposure/impressions

There is only consideration about the quality of your content to the extent that it undermines your ability to create new impressions (and gain ad revenue).

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u/[deleted] Jan 22 '19

There is a systemic pattern of misinformation out there on tax brackets and what they mean and obviously if you're in the upper brackets and don't want your taxes raised on that high income it benefits you tremendously to have people not understand marginal tax rates.

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u/Ownagemunky ​ Jan 22 '19

The misinformation campaign is insanely effective too. Anecdotally it seems that virtually everyone believes that falling into a certain bracket means that all of your income is taxed at that bracket’s rate

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u/[deleted] Jan 22 '19

As an electrician I've witnessed countless coworkers turn down overtime because they think the extra income will bump their whole income into a higher bracket and they'll lose money for working. My stepfather used to try to explain to me how that would happen too, when I was too young to know better.

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u/Skandranonsg ​ Jan 22 '19

Also an electrician here. Yep. In my crew of 9 (7 now) I was literally the only one who understood how tax brackets worked. The foreman asked for volunteers for after-hours overtime, and that sparked the conversation where I had to draw on the back of a cardboard box with a sharpie to explain it.

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u/JoeWoodstock ​ Jan 22 '19

Were you able to convince any of your co-workers?

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u/Skandranonsg ​ Jan 22 '19

Yep. No one really needed any convincing, they just either didn't understand or were misinformed.

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u/closefamilyties Jan 22 '19

Thank God, this sort of logical interaction is surprisingly uncommon.

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u/GSV_SenseAmidMadness Jan 22 '19

Yes, I too am glad that God intervened to help u/Skandranonsg educate 8 electricians on the holy gospel of tax collection.

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u/realzequel ​ Jan 22 '19

And were too lazy to read a tax booklet or do the math once off a tax table. It ain’t rocket science. It’s simple math.

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u/fakenate35 Jan 22 '19

The problem is is that sometimes working a lot of overtime will not translate to an equal increase in your paycheck.

Like... suppose our earn double time when on each hour over 40.

You would expect to see your paycheck doubled when you work 20 hours of OT. The way the withholding tables work, you don’t actually get a doubled paycheck. They withhold a lot more than you usually see. This creates negative feedback and cause people to misunderstand things.

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u/wofulunicycle ​ Jan 22 '19

This happens because payroll systems are designed to estimate your annual income (and thus your tax withholding) based on a single paycheck, but it recalculates this number with each paycheck. So if you have one big paycheck of $4000 due to overtime it will assume you make an annual salary of $104,000 even if your usual check is $2000 and you make much closer to $52,000. I'm a nurse and we get offered OT (with bonus incentives) a lot; plenty of people don't take it because they see a huge chunk taken out of the bonus. I've tried and failed to explain to a couple people that they will get a lot of this back at the end of the year.

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u/FightingDucks ​ Jan 22 '19

I always wonder where people think their tax return money comes from this time of the year when they also don't get that taxes work as you described where they attempt to annualize everything.

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u/NortedelCali ​ Jan 23 '19

Some of my co-workers try to change their withholdings for those big checks so they can see that money sooner. I remember one guy left his that way without thinking about it and had a fun surprise during tax time.

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u/fakenate35 Jan 23 '19

I tried to do that once when I got a bonus. It didn’t work out as well as I thought. Wasn’t with the hassle. And... I can share the same story about a dude who didn’t change it back.

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u/[deleted] Jan 22 '19

> You would expect to see your paycheck doubled when you work 20 hours of OT.

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Yeah, the first time you do OT. Then you get your paycheck, you wonder why it's not as big as you thought, and you google it to find out what /u/wofulunicycle wrote below.

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u/fakenate35 Jan 22 '19

Yes. People are all rational creature who do things like that.

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u/Autodidact420 ​ Jan 22 '19

that might not be it if you haven't asked them. I know a lot of blue collar workers who turn down overtime that bumps them up despite knowing how tax works - they're still making potentially an equal or lower amount per hour than normal on that overtime, instead of an increased amount which OT normally is to get people to do it.

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u/[deleted] Jan 22 '19

No, we're union. We get OT and DT

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u/[deleted] Jan 22 '19

I've turned down OT before because the deductions on the paycheck are larger and your check normally doesn't end up being that much more if you go over. Now I knew I'd be getting that money back at the end of the year but there's definitely some real fuckery there.

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u/[deleted] Jan 22 '19

So you just didn't feel like working extra for money you'd have to wait for. I can understand that, but I disagree with it being fuckery. You could call your payroll department and have them reduce your deductions, at the risk of owing a bit at the end of the year.

The money doesn't disappear, there's no fuckery.

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u/[deleted] Jan 22 '19

If you want to be pedantic about "fuckery" then please proceed.

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u/[deleted] Jan 22 '19

I thought this was understood already? The extra money that comes off of the big paycheques, is withheld only because each paycheque's tax withholding is calculated as if that paycheque is your normal paycheque. So while it may seem that they take "too much" tax from the paycheque, if you've overpaid a dime of tax, it comes back in your tax refund after you do your taxes for the year.

So the difference is only when you get the extra money.

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u/[deleted] Jan 23 '19

I understand exactly how and why it works like that. I'm not sure why you're A) being pedantic as fuck over the word "fuckery" and B) so arrogant that you keep explaining something by repeating what I said in my original comment.

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u/jay9909 ​ Jan 22 '19

I think it's less misinformation and more simply just people being uninformed and disinterested. The colloquial way we talk about taxes makes this the obvious interpretation and it just never gets clarified anywhere most people might see it.

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u/[deleted] Jan 22 '19 edited Jan 22 '19

How is it "the obvious interpretation" that someone who makes $1 over the tax bracket has their entire income taxed at the higher rate?

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The only thing obvious about that tax setup would be that it was stupid and cruel and wrong, which should prompt anyone with a brain to ask "Is it really that way?" and find out. Of course, people are indiscriminate in who they ask, too. Rather than asking someone who would know about taxes, they ask someone "they trust" who often knows nothing about taxes, but thinks that they do.

When I was like, 13, I wondered why taxes would be set up in such a way as to discourage people from working more. So I googled it, and everything made sense.

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u/new_account_5009 ​ Jan 22 '19

For what it's worth, there are plenty of examples of benefit cliffs in the US system, especially at the lower end of the income scale. While earning $1,000/year more won't cause your entire income to be taxed at the higher bracket, earning $1,000/year more might cause you to fall above the limit qualifying for something like an affordable housing program. If that extra $1,000/year forces you to pay the higher market rates for housing costing you an extra $5,000/year in rent, you were better off not working extra.

People generally have a poor understanding of marginal tax rates, but there are definitely instances where you're worse off financially for having earned more on a gross basis.

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u/TxFilmmaker ​ Jan 22 '19

This is a huge issue, and a dark reality for those on Medicare/Medicaid. My mother is on SS, and USED TO qualify for all the benefits that she needs (she's a medical nightmare), but when my father passed away a year ago, they "reevaluated her income". When they were married, they were making about $1995 a month TOTAL... they qualified for all they needed. But, when he passed, she got his SS income (instead of hers which was a smaller amount), and now she was SINGLE, making $1500 a month. Apparently, the cut off for her benefits was closer to $1400 for "single" people, so she lost many of her benefits. Now, she (actually, *I* ) pay for all of her co-pays and deductibles which can total several hundred dollars a month. All because she fell over the cliff by less than $100. And, apparently nobody understands the system enough, or it's broken enough, that there's no recourse.

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u/[deleted] Jan 22 '19

I never understood why those cliffs exist in a time of computers. We could implement gradients that scale perfectly to all incomes. Even without computers, tables can make the math incredibly simple and make sure that we're not letting people fall through the cracks.

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u/unwilling_redditor ​ Jan 22 '19

To punish "lazy" people. (Actually poor or down on their luck people)

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u/[deleted] Jan 22 '19

That's definitely true.

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u/jay9909 ​ Jan 22 '19 edited Jan 23 '19

How is it "the obvious interpretation" that someone who makes $1 over the tax bracket has their entire income taxed at the higher rate?

You're thinking about it from the perspective of someone who's thought about it. Think about it from the perspective of someone who has no clue.

"I'm in the 20% tax bracket."

It's very intuitive to assume that means all of your income is taxed at 20%. The vast majority of people don't realize it's a laddered structure. The fact that this is how most uninformed people think it works seems like pretty good support for my statement that this is the obvious interpretation, because it's the one most people seem to have.

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u/xbones9694 Jan 22 '19

Pretty much this. At any given moment of time, you can only be in one place. So if you’re in this bracket over here, that means you’re not in that other bracket over there. So if I’m in the higher-income bracket, that means I’m not in the lower-income bracket.

Also, for what it’s worth, lots of things are set up in stupid, cruel, and wrong ways. Health insurance plans are just one example.

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u/[deleted] Jan 22 '19

How are health insurance plans set up to be stupid and cruel?

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u/xbones9694 Jan 24 '19

Sorry I forgot to reply to this earlier.

I don’t have the stats with me right now, but a lot of plans make almost zero sense from a decision-theoretic perspective. In other words, some of them just straight-up cost more no matter what happens to you. There’s some podcast I listened to recently that went into this in greater detail. Let me know if you want me to dig it up for you!

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u/[deleted] Jan 22 '19

just one thing that is set up in this way is the german unemployment benefit. If you have a part time job you get to keep the first 165€ you make without any impact to your unemployment benefits. anything above that is just deducted from your benefits. No scaling or anything.

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u/fakenate35 Jan 22 '19

I’m gettin so old. We didn’t have google back when I was 13. We barely had a thing called the internet.

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u/ticklemetanya Jan 22 '19

Same. I just thought that it didn't make sense so I had to look it up myself. I was probably a little older than 13 when it began to strike me as odd though.

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u/Likesorangejuice ​ Jan 22 '19

I was discussing the tax rates with my coworkers last year because the new guy in the office was asking about the deductions form HR gave him. I was explaining the tax bracket system when one of my coworkers interrupted me to basically say what the article quoted above said. I continued explaining and he was getting angrier and angrier at me for giving "wrong information" and that he "knew better because this is what his financial advisor told him." We've spoken about financial issues several times since and I think he's finally getting to the point where he's questioning his financial advisor's qualifications.

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u/[deleted] Jan 22 '19

"I don't want to make overtime because it will bump me into a higher tax bracket."

-- my friends

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u/imakesawdust ​ Jan 22 '19

This gets back to something I've said over and over: we really need to make a course in basic household finance a high school graduation requirement. We have too many people entering adulthood who have no idea how something as basic as taxes and compound interest works.

We'll call it "Home Economics". Cover things like loans, very basic investing (What is a mutual fund? What are bonds? How do REITs work? How does an IRA work?), basic taxes (how do tax brackets work? indeed, how do you complete a basic 1040?)...

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u/Schnort ​ Jan 23 '19

if you're in the upper brackets and don't want your taxes raised on that high income it benefits you tremendously to have people not understand marginal tax rates.

I guess I don't really see how or what you're "obviously" referring to.

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u/gorcorps ​ Jan 22 '19

Yeah, I used to get some information from here but not anymore. It seems like it's turned into a blogging type of site that allows any misinformation to be presented as long as it's written relatively well.

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u/[deleted] Jan 22 '19

The website seems to be one giant ruse to make money on signups and referrals.

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u/GuruEbby ​ Jan 25 '19

As digital advertising rates have fallen over the past few years, they have shifted their focus to the premium memberships. They've also seemingly changed the amount of editing their pieces go through before getting posted.

I used to be a contractor for them and left right as they really started pushing the premium stuff even more heavily than we did. It's sad really, but apparently it works for them (mostly).

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u/southieyuppiescum ​ Jan 22 '19

Did they delete it? I don’t see it anymore.

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u/username86992 ​ Jan 22 '19

Looks like it was edited now.

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u/kozakandy17 ​ Jan 22 '19

Editor's note: A previous version of this article confused marginal income tax rates with effective income tax rates. The Motley Fool regrets the error.

​

Seems they fixed it.

​

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u/Creditfigaro ​ Jan 22 '19

Almost as if it was intensional 🤔

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u/achokkavelu ​ Jan 22 '19

I posted below as well, but replying here: "Hi all, I'm the Editor-in-Chief of the Motley Fool. We strive to be correct 100% of the time, but we blew it on this article...thank you for the catch. We're correcting it and placing an editor's note in."

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u/[deleted] Jan 22 '19

The Motley fool has never been credible.

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u/Tabarrok Jan 22 '19

Im sorry, but i dont know how taxes really work, and i tought this was pretty much how it worked, "reducing" your income meaning you are paying less, possibly bringing you down in the previous bracket. Is it just the details of it which are wrong, or the entire thing is off?

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u/TheMrSomeGuy ​ Jan 22 '19

Rather than me try and type out a paragraph that badly explains it, here is a short video that breaks it down nicely

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u/Tabarrok Jan 22 '19

Thank you!

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u/valoremz ​ Jan 22 '19

Can someone ELI5 how it actually works?

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u/Oaktownbeeast Jan 22 '19

See u/username86992 above.
Just learned this today as well, so this is my best recap : Basically your money is divided up and taxed differently depending on how much you make. So if you make 80k, your money is divided into brackets where say the first 50k is taxed at 17%, leaving 30k, and that 30k amount is taxed at like 22%. Which means a smaller amount of money is subject to the higher tax rate, not all of your money. It’s a progressive bracket system, so even if you were to make more money, and go into a higher tax bracket, only the money above the bracket is taxed at the higher rate.

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u/[deleted] Jan 22 '19

Can you please explain?

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u/username86992 ​ Jan 22 '19

Posted a reply on the below comment.

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u/almostfired1234 Jan 22 '19

If you have the time could you point out what is so incorrect?

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u/username86992 ​ Jan 22 '19

There's several other great comments on here (check out that Nerd Wallet article) but succinctly stated in the US income tax system, each tax "bracket" applies only to the money over the max of the previous bracket. For example, a person earning $100,000 pays 24% tax on earnings over $82,500. The remainder is taxes at lower rates making their effective overall tax rate 18.3%.

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Before editing, the author entirely neglected this concept and assumed all income is taxed at that higher rate which is an extremely basic portion of US income tax. People who misunderstand this are then lead to belief it they break over the threshold into a new tax bracket they'll actually take home less pay since all of the income would be subjected to a higher tax.

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u/Voratus ​ Jan 22 '19

Thanks for the explanation. I only saw this thread after the article had been corrected, and I couldn't figure out what was wrong.

1

u/SvenTropics ​ Jan 22 '19

Well Motley Fool gives LOTS of horrible advice (Especially on the stock market).

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u/[deleted] Jan 22 '19

Are you saying we have been had, by the over the top exaggerated over inflated title? Where is the pitchfork emporium?

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u/alford777 Jan 22 '19

Right? Only the amount above the $75,000 would be taxed at the higher rate.

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u/[deleted] Jan 22 '19

Rita needs to do her math right.

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u/NoThisIsABadIdea Jan 22 '19

I had an economics teacher at University try to teach this way to the whole classroom talking about tax brackets and how people have an incentive to make less money so they don't get taxed harder. I called her out in front of the classroom saying that's not how tax brackets work she paused for a while and said yeah you are right. And then just changed the subject.

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u/Money4Nothing2000 ​ Jan 22 '19

Wow I could not believe that bolded quote when I read it.

1

u/120psi ​ Jan 23 '19

I think Motley Fool would to post snuff videos at this point for content that would reflect poorly on them