Graduated Income Tax Scale -

QUESTION: Hi,
My questin is if I make $70,100, according to what I found on the net this
would put me in the .26 federal tax bracket. Do I get taxed .22 on the first
70,000 then .26 on the 100? If so why does everyone say that it is better to
be in the high end of the tax bracket than the low end
thanks for any clarification
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david ingram replies:
It is a common fallacy that people think that they should not make more
money because it puts them in a higher tax bracket.
Since I do not know where you live, I will use the Province of BC as an
example and then only that - I am not even bothering with the exact tax
rate, just approximates because there are 90 or tax rates in North America
id you count Mexico and the Canadian Territories and assume that the seven
states with no state tax are about the same.
Federally, the tax for 2005 was about
15% on the first $35,500
22$ on the next $35,500
26% on the next $45,000 and
29% on any amount over $115,739
Note that this just went up 1/2% as of July 1 while our GST fell 1%
Then there is a Provincial Tax
In BC it is
6.05% on the first $33,000
9.15% on the next $33,000
11.70 % on the next $10,000
13.70% on the next $16,000 and
14.70% on everything over $92,000
There is no tax at all on about the first $9,000 because of personal
credits.
This difference between Federal and Provincial rates means that in effect
there are about 10 different levels of tax.
However, in no case do you pay more tax on the first $30,000 because you
made $30,000 more unless you are over 65 when we start clawing back some
social service benefits if your income exceeds specific limits
So the answer or reply to your question is that it is ALWAYS better to earn
more money.  It does not affect the tax on the amount of money you have
already earned.
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