More than half of Americans earning more than $100,000 a year say they're living paycheck to paycheck, according to a report from PYMNTS and LendingClub. This may be a result of a sneaky behavioral phenomenon called lifestyle creep, which is when a person's spending habits expand as their income rises. The rise in the cost of living complicates matters, as incomes have not kept up with inflation. Watch the video above to learn more about why Americans struggle to keep money in their pockets.
No it can’t, with tax brackets you are not taxed at the top rate for your whole income. Say you make 90k and the tax brackets go 0-15k:0%, 15k-30k:10%, 30k-40k:15%, 40k-50k:20%, 50k-100k:25% 100k+:30%. On the first 15k you make you pay $0 in tax on the next 15k you pay $1.5k, on the next 10k you pay $1.5k, on the next 10k you pay $2k, and on the last 40k you pay $10k. Total tax of $15k(~17% of 90k). Now say you get a raise and are making $110k. On the first 50k you are still only paying $5k, on the next 50k you are now paying $12.5k, and on the last 10k you are paying $3k. Total tax bill $20.5k(~19% of 110k). If you were taxed at the top rate for your total income then the first tax liability would have been $22.5k(25% of 90k) and the second would have been $33k(30% of 110k). That’s part of the difference between actual tax rate and effective tax rate, the other part being things like tax incentives, write-offs, and deductions.
No it can’t, with tax brackets you are not taxed at the top rate for your whole income. Say you make 90k and the tax brackets go 0-15k:0%, 15k-30k:10%, 30k-40k:15%, 40k-50k:20%, 50k-100k:25% 100k+:30%. On the first 15k you make you pay $0 in tax on the next 15k you pay $1.5k, on the next 10k you pay $1.5k, on the next 10k you pay $2k, and on the last 40k you pay $10k. Total tax of $15k(~17% of 90k). Now say you get a raise and are making $110k. On the first 50k you are still only paying $5k, on the next 50k you are now paying $12.5k, and on the last 10k you are paying $3k. Total tax bill $20.5k(~19% of 110k). If you were taxed at the top rate for your total income then the first tax liability would have been $22.5k(25% of 90k) and the second would have been $33k(30% of 110k). That’s part of the difference between actual tax rate and effective tax rate, the other part being things like tax incentives, write-offs, and deductions.