I moved from Australia to the USA (be careful who you swipe on dating apps) and went from paying 50% tax to 15% tax for basically the same job with basically the same quality of life. Tax in America is outrageously low which is no doubt why it cant balance its budget (though I approve of cutting government spending aswell).
What is your bill when an ambulance brings you in? When you have a legal problem at your workplace? What will be your pension? How is the mass transit system? What do you pay for child care, how is your school, how safe is your neighborhood, how do the number of murders in your area compare?
Counterpoint: I’m in the US and my effective income tax rate is in the mid-40s, with my marginal rate over 50%. And I’m not in one of the few states with the highest state income taxes.
The highest federal bracket is 37%, the highest state bracket in the US is California at 13.3%, Medicare at 2.9% if you're self employed, NIIT caps out at 3.8% - so even earning well into seven plus figures, with punitive NIIT, only puts you at a max of 47% marginal. Social security taxes stop long before the brackets kick in.
NYC has combined local and state top marginal rates of 14.776%, to go up to 48.476%.
I call BS on marginal rates exceeding 50%
Edit: even the new 2024 California payroll tax cap lift and mental health tax on seven figure incomes put it at 49.1%. Marginal rates that high don't exist in the US. Even then that requires paying payroll taxes and NIIT on the same income, which I'm pretty sure is impossible.
Thanks for the correction- I did some math and my marginal rate is something like 46%, which, while it’s indeed not over 50%, still is pretty discouraging when weighing whether it’s worth putting in enough effort to get another raise.
A single W-2 earner making $1 million has a 33.49% effective federal tax rate (OASDI, Medicare, Income) taking only the standard deductible and doing nothing else to lower their taxable income (no tax advantaged accounts, not spending enough in categories that allow itemization, etc.). A single non-W-2 earner (has to pay the employer part of payroll taxes) has an effective rate of 34.84%.
If they're married the rates are 29.62% (W-2) and 30.97% (non-W-2), under the same assumption that they do not do anything to qualify for either reduced taxable income or any kind of rebate or credit.
Most people don't make $1 million, and those that do have ways to reduce their tax burden quite a bit without much trouble.
EDIT: Small modifications to the numbers above, they were off by about 0.4% to 0.5%.
Social security is 6.2% and is capped (you only pay social security taxes on a max income of $168,600). So if your income is 168,600 you pay $10,453 in social security taxes.
And if your income is $1,000,000 you still only pay $10,453 in social security tax.
$176,100 this year, and you should also include Medicare which is 1.45% and has the same cap. That does mean a base 7.65% federal tax rate for most W-2 earners. But when you work out the math on the effective tax rates for income tax (not payroll) it takes a lot to hit 25% as your effective federal income tax rate.
Around $350,000 gets you to a 24.8% effective federal income tax rate if you're single and only take the standard deductible, $700k if married. That puts you in the top 3% and 1%, respectively, of incomes in the US these days.
But that gets reduced when you include things like tax advantaged retirement accounts, various tax credits, dependents, paying for health insurance, possibly being able to itemize (more likely at those incomes than the US median income). So really you have to be making something like $400k-500 as a single person to hit 25%, and $800k+ for a married person.
In US, employer pays their share of social security + medicare taxes, which is about 7.6%. If you are self-employed, you need to pay both the employee and the employer side (about 15.2% taxes, mandatory).
When we briefly had a balanced budget (kinda, if you squint just the right way) we had 1990s tax levels and a major economic boom.
We’ve since had two major rounds of tax cuts by republicans, so a balanced budget isn’t feasible even in booms and when we’re not deficit spending on two stupid wars. And now we’ve got all the interest on the debt from those tax cuts and wars to worry about.
If only anyone could have predicted this. Oh wait, everyone who knew anything about taxation policy did.
