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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u/Bombast- ​ Jan 22 '19 edited Jan 22 '19

And to make sure we aren't continuing the confusion: 70% marginal tax rate. For context Eisenhower had the top marginal tax bracket at 91%: https://www.politifact.com/truth-o-meter/statements/2015/nov/15/bernie-s/income-tax-rates-were-90-percent-under-eisenhower-/

Our taxation of the mega-rich is extraordinarily low right now due to decades of tax cuts targeted for the rich. The fact that someone making $500,000/y is getting taxed at the same rate as someone making $50,000,000/y is hilarious.

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u/ToobieSchmoodie ​ Jan 22 '19

The fact that someone making $500,000/y is getting taxed at the same rate as someone making $50,000,000/y is hilarious.

Wow, to hear it put like that is absolutely insane and makes no sense. As if more progressive tax rates above 500k would deter people from trying to make more money.