Last year in the United States, for example, no matter how large your salary was, a single person's income tax rate for the first $10,000 of salary you earned was 10%.
The portion of your salary above that $10,000 is taxed at a higher rate, and as you cross salary amount thresholds (called tax brackets) the tax rate keeps getting increasing for the amount above that threshold.
By the time you get up above the $540,000, the portion of your salary above that $540,000 is taxed at the maximum 37% rate.
So if you purchase a big ticket item that is deducted from your salary before they figure out how much taxes you owe, high earners can save quite a bit.
In the US, this is accurate for other clean energy incentives, but EVs get a $7500 tax credit rather than a tax deduction so the benefit doesn’t depend on tax rate.
The credit is not available for incomes over $150k (single) or $300k (married filing jointly), but the credit is also non-refundable, which means it can only reduce your tax to zero. If your total tax is < $7500, you don’t get the rest back as a refund. This means that, for example, married couples earning less than ~$95k don’t get the full credit.
It's a consequence of progressive tax rates.
Last year in the United States, for example, no matter how large your salary was, a single person's income tax rate for the first $10,000 of salary you earned was 10%.
The portion of your salary above that $10,000 is taxed at a higher rate, and as you cross salary amount thresholds (called tax brackets) the tax rate keeps getting increasing for the amount above that threshold.
By the time you get up above the $540,000, the portion of your salary above that $540,000 is taxed at the maximum 37% rate.
So if you purchase a big ticket item that is deducted from your salary before they figure out how much taxes you owe, high earners can save quite a bit.