This problem is disturbingly widespread. It's not just Republicans/right-wingers/Tea Party people; there's a lot of Democrats/progressives/other left-leaning folks who apparently don't "grok" the concept either.

With that in mind--and at the risk of sounding patronizing--here's a very basic demonstration of the problem and the reality:

Here's a modified version of the current Federal Income Tax Brackets (I've rounded off the numbers to make it easier to follow):

Taxable Income / Tax Rate

$0 - $10,000 / 10%

$10,000 - $30,000 / 15%

$30,000 - $80,000 / 25%

$80,000 - $200,000 / 28%

$200,000 - $400,000 / 33%

More than $400,000 / 35%

So, let's suppose that someone made $80,000 (taxable) last year, but makes $80,001 (taxable) this year.

(Note: I'm not even getting into deductions and all the other stuff; I'm just talking about the end-of-the-line taxable income for simplicity's sake)

The folks I'm talking about THINK that they paid 25% in taxes last year ($20,000), and they THINK that this year, because they made $1 more (pushing them into the 28% tax bracket) that they're going to owe 28% on everything ($22,400).

That is, they think that they owe an extra $2,400 in taxes even though they only made $1 more in income, and therefore are going to lose $2,399.

However, they're wrong about both what they owed last year AND what they'll owe this year.

Last year, they owed:

10% on the first $10,000 = $1,000

15% on the next $20,000 = $3,000

25% on the next $50,000 = $12,500

= a grand total of $16,500

...as opposed to the $20,000 that they thought they owed.

This year, they'll owe:

10% on the first $10,000 = $1,000

15% on the next $20,000 = $3,000

25% on the next $50,000 = $12,500

28% on the next $1 = $0.28

= a grand total of $16,500.28

...or just $0.28 more than last year, not $2,400 more, and certainly not the $22,400 they thought they owed.

The same holds true at every level: You're only paying the higher rate on any income ABOVE the threshold in question, not on EVERYTHING.

Hope this helps some folks when talking to others, and hope I didn't come off as a dick in doing so...

Addition: Thanks to Addison in the comments for making this additional, very important point:

