[yebyen]

He's still paying a significantly higher tax rate on that dollar than if he didn't earn it this year.

If he is not hurting for cash and he could defer it until next year (or year after that) with no penalty at all and (arguably) negligible risk, thus paying the lower personal income tax rate on that dollar, why not do it?

I don't see what part is misunderstood. If you're being paid by your employer, obviously you want to take the raise regardless of higher taxes. If you are your own employer, both entities are paying taxes and each dollar of taxes paid is coming out of your own pocket.

[rmc]

Sure, but 50c is better than €0.

[yc1010]

The money doesn't appear out of thin air. It takes time and stress to earn each euro. Especially if you work for yourself or in a startup, you are probably working for someone else so you do not comprehend the perspective of someone who is trying to make his own way in the world.

The tax system here puts a huge disincentive to work hard and earn a lot, at least there is an option if you have your own company to defer and stretch your wages over longer period BUT that comes with all sorts of risk since IT IS NOT YOUR MONEY but company money and corporation tax.

[yebyen]

That's very short-sighted. If you are incorporated for yourself then:

> each dollar of taxes paid (by either entity) is coming out of your own pocket

You can keep it in pocket A, the corporation, and pay taxes once (on profits only, I guess), or move it to pocket B and pay taxes a second time also, at a much higher rate (and on overall income, again a larger basis than it would be to count up personal profits.) If you can replace some personal expenses with corporate expenses, end-around pocket B completely, now your business has also made less profit, so pays less corporate tax. I am not a tax accountant (or even remotely skilled in taxes) and this is not tax advice, but it makes pretty good sene to me. Certainly some part less than all of what I suggest would be considered illegal tax dodging or corporate malfeasance.

Sounds like a good incentive for CEOs/majority owners of small businesses to live frugally and to refrain from looting their corporate coffers excessively. Sure, a bird in the hand is worth two in the bush, but it also seems very clear to make the case that two whole birds in the bush are worth more than 0.94 birds in the hand.

You are thinking like an employee.