Comments on: Myth: "I don't want a raise! It will move me into a higher tax bracket and my take home pay will be less!"

By: Showtime

Showtime — Wed, 03 Nov 2010 21:22:11 +0000

Preet,

Thx for the post. However, as others have implied, aren’t there other factors to consider? I haven’t thought about all scenarios but what about investments for example. Let’s say someone had lot of cash (eg $100-200k)in non-rsp and non-tfsa investments (interest, cap gains, div). Wouldn’t being at a higher marginal tax rate increase the tax rate of the investments too? So if someone got a raise that barely put them in the next tax bracket, it would seem to me that they would have less overall income than before. Is my logic correct?

By: Jordan

Jordan — Tue, 22 Jun 2010 21:20:08 +0000

You fail to factor in things like the Medical Services Plan (British Columbians), which can bring down your income by increasing the cost paid out for health care. I can see your argument for taxes alone, but sometimes a raise isn’t actually a raise when everything else is considered.

By: Preet

Preet — Sun, 20 Jun 2010 15:08:32 +0000

Chris – let’s break it down. A take home pay of $1380 every two weeks (assuming no other deductions like an office coffee contribution, group benefits payment, etc) means your wife was making approximately $42,750 (using Ontario as an example). A $5,000 raise to $47,750 would give her an after tax take home pay of approximately $1510 every two weeks.

Look it up yourself: http://www.ey.com/CA/en/Services/Tax/Tax-Calculators-2010-Personal-Tax

(you’ll need to do some calculations on your own, but it’s not rocket science)

I would re-ask compensation to explain, and if they give you the same answer ask for a detailed comparison and by all means cut and paste my response and send it to them. There is definitely something else going on there…

By: financial spreadbetting

financial spreadbetting — Sun, 20 Jun 2010 10:12:11 +0000

Yes i agree and it is peoples’ lack of understanding of the tax system that can hold them back. I’d be happy with a raise!

By: Chris

Chris — Fri, 18 Jun 2010 17:18:40 +0000

Well, I would disagree. My wife was recently promoted and received a $5000 raise. Her take home prior to the raise was 1380 every two weeks. Now, after the raise, it is 1118. To me, this seems like less rather than more. She asked compensation and they replied that it was due to her being bumped.

By: Claude Merchant

Claude Merchant — Mon, 31 Aug 2009 23:23:21 +0000

Excellent post! No matter how many times I explain the concept of marginal tax rates, people just don’t get it. I guess I have to show them next time