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Money & WorkMental model

A pay rise cannot leave you with less in your pocket.

The marginal tax rate applies only to the next euro you earn, not to your whole income. A bracket system taxes each slice of income at its own rate. The average rate you actually pay therefore always sits below the marginal rate.

Useful: Anyone saying "working more is pointless, I'd move into a higher bracket" is confusing marginal with average.

Source: de.wikipedia.org

DenkfehlerLohnSteuern

Difficulty:

Question on this card

What does the marginal tax rate apply to?

  1. Your entire income
  2. Only the additional amount earned
  3. Your wealth
  4. Social contributions
Show the answer

Correct: Only the additional amount earned

Only the top slice of income is taxed at the marginal rate.

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