I’ve heard it countless times from well-meaning friends: “Don’t take that promotion—you’ll end up in a higher tax bracket and actually make less money!” This misguided tax advice is not just wrong—it’s potentially costing you thousands of dollars in lost income.
Steve Chen, founder of CALLTOLEAP, recently addressed this common misconception with a straightforward explanation everyone must hear. As someone who has navigated career advancement while worrying about tax implications, I found his breakdown refreshingly clear.
I have to say, if you don’t follow Steve Chen, you’ll want to start following him. He is refreshingly clear and straightforward with actionable steps that most people can figure out.
The Tax Bracket Myth
Many people fundamentally misunderstand taxes, thinking that when they move into a higher tax bracket, all of their income is taxed at that higher rate. This simply isn’t how our tax system works.
Chen explains this using a $75,000 salary example. In reality, our tax system uses marginal tax rates, meaning different portions of your income are taxed at different rates:
- The first $11,600 is only taxed at 10%
- Income from about $11,600 to $47,000 is taxed at 12%
- Income from about $47,000 to $100,000 is taxed at 22%
This graduated system means that someone earning $75,000 pays approximately $11,000 in taxes, not the $16,500 they would pay if their entire income were taxed at 22%, as many mistakenly believe.
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The Real Math Behind Your Raise
Let’s say you’re offered a promotion that increases your salary from $75,000 to $85,000. Some might worry that this bump puts more of your income in the 22% bracket. While that’s technically true, you’re still coming out significantly ahead.
With the additional $10,000, you’ll pay about $2,200 more in taxes (at the 22% rate), leaving you with an extra $7,800 in take-home pay. You will never lose money by making more money in our current tax system.
“Don’t listen to your friend. Get that raise and promotion.”
This advice from Chen resonates with me because I’ve seen too many colleagues hesitate to pursue advancement based on this tax myth. The truth is that each dollar you earn above a tax bracket threshold is the only dollar taxed at the higher rate, not your entire income.
Why This Matters For Your Financial Future
Beyond the immediate benefit of more money in your pocket, there are several reasons why pursuing higher income despite tax concerns makes financial sense:
- Higher income means more potential for savings and investments
- Increased retirement contributions can actually lower your taxable income
- Career advancement often comes with better benefits beyond just salary
- Your earning potential typically builds on your current salary
Each of these factors compounds over time, making it even more valuable than it might initially appear to pursue a higher income.
As someone who once declined an opportunity partly due to tax concerns, I can tell firsthand that understanding how tax brackets work is liberating. It removes an artificial barrier to career growth that too many impose on themselves.
Take Action Now
The next time someone tells you to avoid making more money because of taxes, you can confidently explain how marginal tax rates actually work. Better yet, pursue that promotion, negotiate for that raise, or take on that higher-paying position without the unfounded fear of losing money to taxes.
Financial literacy isn’t always taught in schools—as Chen, a former teacher himself, points out—but it’s essential for making sound decisions about your career and finances. Don’t let tax myths hold you back from your earning potential.
Your future self will thank you for ignoring that well-intentioned but misguided advice and pursuing every opportunity to increase your income. After all, more money—even after taxes—is still more money.
