[vonmoltke]

Yes, the AMT is the one case where you could end up with less take-home. Its an exception to the normal functioning of the tax code, though, and it works by prohibiting most permissible deductions. Thus, while the statement about the AMT decreasing take-home with increased is factually correct, this does not happen through the bracket system. GP was clearly addressing the misconception that people move into tax brackets and must pay higher tax rates in all their income as a result.

Your welfare example has nothing to do with taxes. Welfare benefits are set by gross income level with some COL and other local adjustments. Your tax status is irrelevant.

[Nrsolis]

UGH.

People in the USA forget that we have TWO tax systems.

One is the regular tax system that everyone knows and loves to hate.

The other is the closest thing we have to a "flat tax" and it's called AMT. It has different rules and different rates.

When you do taxes, you compute your tax liability using BOTH systems and you pay the HIGHER amount. That's how it works.

I pay AMT and it sucks.

[cmccabe]

There are a ton of places in the tax code where making more money results in you keeping less of it. For example if you sell more than X dollars worth of goods on eBay, you have to start paying tax, which will cost you dear. So the jump from X to X+1 ends up costing you. I think X = $500, but maybe they changed it.

The IRS even reduces your taxes if you lose money in the stock market, if your business property depreciates, and so forth. I like to refer to those cases as "the government paying you to be a loser." Just another case where doing better means you do worse.

Let's not even try to pretend this is a fair or well-designed system. Even Warren Buffet, surely one of the greatest beneficiaries of the system, has spoken out against it.