The income tax brackets do not work as we thought

Surely you thought of that on occasion meet someone that I said , I have a raise , but now received less than before, or you climb the salary but do not think you’re interested in to charge less . This is because income tax is a progressive tax proportional to income .

But this really is not the case , the Spanish tax system is designed so that , when we raise the gross salary , net salary rise also , and not as people think they lower the salary if you exceed a certain salary band . How does income tax then ?

How do income tax brackets ?

Yes it is true that there are some certain sections of the income tax, in which , exceeding a certain amount , the greater the percentage we have to pay for this tax. The table of sections of income tax for 2011 you can see in the following image :

As you can see , there is a first part which is exempt from income tax, which are those revenues that do not reach 5,050 euros. Does this mean that if we charge 5,051 , we will pay 24% of that amount in taxes ? If this were so, no one would want to sent up the salary . In reality , taxpayers pay nothing in taxes to those first 5,050 euros and 24% will apply to that additional euro , the remaining salary bands work the same way.

This has its nuances , as there always is the applicable table shown . It depends on many other things that tax relief ( first home , donations , pensions … ) and the number of children a person has, the amount payable will vary depending on all these aspects.

A practical example

John has a gross salary of 30,000 euros , and the salary will rise to 33,000 euros gross . John does not know if it really will compensate , as his salary shall exceed a higher salary band , and they are considering their decision. John did not have children.

If John paid taxes as people think , in principle pay rise will not compensate , because a $ 3,000 increase in income that would surpass a wage band , and therefore had to pay more in taxes. In this case , it would have a net salary of 21,600 per year ( 30,000 – (30,000 * 0.28) ) , to have a net salary of 20,790 euros (33,000 – (33,000 * 0.37) ) , so that the rise does not compensate .

But as we said , this is not so . Actually the net salary of John would be higher , and obviously will compensate the change. In this sense , his previous salary will pay $ 0 for their first 5,050 euros , 24% for their following 12,310 (ie , 2954.4 euros) , and 28% for their next 12,640 euros (ie , 3539 , 2 euros). In all, John pay as income tax euros 6493.4 , or what is the same, a 21.64 % of their gross salary , keeping 23506.6 net salary per year .

Crawling up the salary up to 33,000 , and by the same calculations as above, John paid 7391.2 Euros, or what is the same a 22.39% , leaving him with a net annual salary of 25608.8 , and in this sense the rise of salary will compensate significantly .

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