Seeing as it’s Halloween, I’m going to get spooky here for a minute and talk about my old job
For anyone who’s new, I worked in a unionized job counting cash for 5 years ending this past May (like this but smaller, dirtier and with 100% less exercise). While I have no scientific proof, my experience has shown that unionized jobs tend to attract people who are lazy, unmotivated and/or unproductive. In my case, 95% of the employees were uneducated and said things like:
“The federal government is stealing from les Québecois”
“Why would I teach my son English?”
“Why would I enroll my child in free Arabic classes?”
“Don’t speak English near me”
“This is MY stapler”
“We need to keep subsidized tuition because $2000/year is too high”
Wow. I’m glad I got that off of my chest.
The most often hear comment though was something along these lines:
“I can’t work overtime, I’ll have to pay more taxes”
“I can’t get a second job because I’ll pay more in taxes than I’ll earn”
“You better work less Vanessa or else the government will take everything you earn”
“If you earn more than $400 a week, the government takes it”
“I’m not applying for that better paying job because I’ll earn less once I pay taxes”
THAT IS NOT HOW TAXES WORK!
(I asked my boss one day if I could hold a demonstration on how progressive tax rates work and she told me that it was a waste of time. However, if I had gotten through to even one person, he would have worked overtime and increased production. But I digress)
Taxes are a percentage of income earned. Until your tax rate is 100%, you will always, always be earning more money than had you not done overtime/taken another job.
Example (in Quebec):
- A cash clerk is paid $15/hr and works 40h per week. Yearly salary = $31 200 and gross tax owing is $5 361
- A 2nd cash clerk is paid $15/hr and works 53h per week. Yearly salary (with overtime) = $46,410 and gross tax owing is $10 169
- A 3rd cash clerk is paid $15/hr and works 40h per week. She has a second job where she earns $12/hr and works 20h per week. Yearly salary = $43 680 and gross tax owing is $9 121
- Clerk 1 walks away with $25 839 at the end of the year
- Clerk 2 gets $36 242
- Clerk 3 gets $34 559
So why the confusion? Well, aside from the obvious that most people aren’t taught and don’t seek out financial knowledge, I blame the source deductions.
You see, each pay period, the clerks will see their federal and provincial taxes deducted from their paycheques. Payroll doesn’t calculate source deductions based on what you will earn, they based them on what they usually pay you. (unless you demand that source deductions are increased). In each of these scenarios, the company will deduct the same amount from each clerk’s paycheque because, in their books, each clerk is usually paid $31 200 and owes 17% tax. What you do once your 40h is over is not payroll’s problem.
So, April rolls around and each clerk files their tax returns. Clerk 2 will owe $4 808 and clerk 3 will owe $3 760. If they are smart they’ll keep quiet because everything is normal and fair. But alas, these people are uneducated about taxes and instead complain to everyone who listens that they had to pay thousands in taxes and the government is penalizing them for working overtime and having a second job. What they have forgotten, of course, is that they earned an extra $15 210 and $12 480 over Clerk 1. However, it will be Clerk 1 who sits there smugly and advises them to only work 40h a week.
And so the cycle continues.
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*chokes with laughter*
Take the money for yourself. That’s my best advice
Best line of the whole post >>>> “This is MY stapler”
That’s MY stapler!!
RT @vanessapage: Myth! Working overtime isn’t worth it because the govt takes more than I earn http://t.co/x7efCWn3
Yikes! I am always so amazing at how little people understand the basics of taxes. My employer treats it differently, so maybe that’s the system your old co-workers needed! Personally, I would prefer the system you describe above – time value of money! My employer taxes bonuses and overtime as if that cheque was the one you earned all year, so they withhold more. I just received my profit share bonus last night and I paid 5% gross more in deductions than on my previous cheque. (Does that make sense? Total deductions were ~25% last payroll and this time they are 30%.) In the spring, I will get a tax refund (ceterus paribus).
Also, I thoroughly enjoy that you heard “this is my stapler.” hehehe. I worked with minimum wage lifers one summer and it was, umm, eye opening regarding people’s perspectives on things!
Anne @ Unique Gifter recently posted..Family Traditions
Yes, I thought this was where the main confusion lied with this because it does appear like the government unfairly increases your taxes. If you worked 80h instead of 40h one week then payroll will often calculate your income as double or more than double that week and bump you up into a much higher tax bracket even if you only did that one time in a year. In that scenario you’d get a lot of that back when you file your taxes, but it looks bad on the pay cheque.
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Ceterus paribus! OMG I love that you’re such an econ geek like me. Oh my!
I always laugh so hard when I hear people say stuff like that. It’s hard to believe they actually think they are losing money by working more and getting paid more – especially if they are getting paid time and a half or double time.
SavingMentor recently posted..$108 – My Cost For High Speed Internet, TV, 2 Cell Phones, Home Phone, Long Distance, And Movies
Oh Lord… I remember time and a half. The good old days/best part of that job…
That’s crazy! I mean I know not everyone is educated, but the is really simple math people!
Myth! Working – http://t.co/d3RSASYQ
Here’s a scary story: Some people believe that working more pays less after taxes are factored it…: http://t.co/ehEPknYn
Overtime here doesn’t get taxed any differently. But having a second job WILL slam you with a higher rate.
eemusings recently posted..Things I’ve been pondering…
Really? Even if you’re earning the same amount from your second job as you would from overtime?
I don’t know if it makes me feel better or worse that taxes seem to be misunderstood in all countries.
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All I have to say is THANK YOU. All summer as you most likely know I worked between 50-75 hours a week and EVERYDAY I would have someone say well you’re stupid cause you are paying more in tax’s, or you’re making less in the end. And I was like out of a 800 pay check I got 650 which is more than your measly 400 (roughly). But anywho, I’m going to print this out and stable it to the post-it-board at work maybe they’ll learn something!
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Hahaha! No problem. I hope that they learn something or at least leave you alone!
The sad reality is that people want everything free. And forgot what paying taxes does for society.
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Myth! Working – http://t.co/yRr9qp9g @vanessapage
I’m just going to throw this out there for the sake of argument. Will person #3 be paying almost 4 grand in taxes come April, or will they be paying less than person #2 because the second company they work for will be taxing their pay cheques as if their company was the person’s only source of income?
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[...] @ Vanessa’s Money writes Myth! Working overtime isn’t worth it because the government takes more than I earn – For five years I worked for a group of people who argued that working more than 35h a week [...]
[...] @ Vanessa’s Money writes Myth! Working overtime isn’t worth it because the government takes more than I earn – For five years I worked for a group of people who argued that working more than 35h a week [...]
[...] Money writes Myth! Working Overtime isn’t Worth it - For five years I worked for a group of people who argued that working more than 35h a week meant [...]
[...] @ Vanessa’s Money writes Myth! Working overtime isn’t worth it because the government takes more than I earn – For five years I worked for a group of people who argued that working more than 35h a week [...]
[...] @ Vanessa’s Money writes Myth! Working overtime isn’t worth it because the government takes more than I earn - For five years I worked for a group of people who argued that working more than 35h a week meant [...]
Your co-workers sound like they could be mine. Only, I work at a restaurant in the states. I serve half the time and cook half the time.
A lot of serves say I’m not making as much because I get more taxes taken from my hourly rate so I’m losing money. But they can’t do the math and figure out it’s the same. I just get a paycheck and there paycheck is void because their hourly wage isn’t enough to cover the taxes taken out.
At the end of the year I don’t owe any taxes. But since most of them get big government tax credits, they still get a big return. Math/money just isn’t some people’s strong suit.
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[...] @ Vanessa’s Money writes Myth! Working overtime isn’t worth it because the government takes more than I earn – For five years I worked for a group of people who argued that working more than 35h a week [...]
[...] from Vanessa’s Money presents Myth! Working overtime isn’t worth it because the government takes more than I earn, and says, “For five years I worked for a group of people who argued that working more than [...]
[...] @ Vanessa’s Money writes Myth! Working overtime isn’t worth it because the government takes more than I earn – For five years I worked for a group of people who argued that working more than 35h a week [...]
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[...] @ Vanessa’s Money writes Myth! Working overtime isn’t worth it because the government takes more than I earn – For five years I worked for a group of people who argued that working more than 35h a week [...]
I don’t understand why the 2nd cash clerk is only making $41,600 with OT. If he is making $15/hr and works 53h/wk, then doesn’t that mean he makes $46,410/year (assuming his OT pay is time and a half (so $22.50/OT hr)? ($15/hr x 40hrs x 52 wks) + ($22.50 x 13OT x 52 wks) = $46,410 (before taxes). Can someone please clarify? Thanks in advance.
Aha! A mathematical error — it should, of course be $46 410 and I will fix it shortly