Your 1) above, indicating that a "lot" of programmers can funnel work through "private consulting companies" and get "15% effective tax rate" can be highly misl

Your 1) above, indicating that a "lot" of programmers can funnel work through "private consulting companies" and get "15% effective tax rate" can be highly misleading to those (inside or outside the US) unfamiliar with how the tax code works here. In fact, if you are costing the same to your patron as either a consultant or employee (meaning, say, they outlay $100k for some number of hours of your labor, but indifferent as to how) it's far from clear that you can legally make for a much better tax situation by running it through a consulting company. A. Normally an employer and employee each pay about 7.5% (total 15%) in payroll deductions; these are split ER/EE in a normal situation. In a self-employed situation, you pay both parts yourself. No real advantage. B. Your private consulting company must be a pass-through entity (disregarded for taxation) otherwise it must pay taxes at its level. If it is not a pass-through, you can pay yourself favorable dividend rates from the profits, but you'll have to have paid income tax on those profits first at the corporate level. Oops. C. Either way, once that money gets through your consulting company to you as earned income -- either direct or passed-through to you, or paid to you as salary through the company -- you'll be paying ordinary tax rates. D. The rejoinder here by the unexperienced or the lax of compliance is "hey, but you can just deduct everything you ever spend as an expense of the company, and so you really can cut down on the reported income!" The problem here is that most things you can deduct legally as a consulting company you could also deduct as an individual. Mileage for travel, necessary expenses, etc. You can't (legally) deduct your shoes, your Netflix, your bar tab, your kids' tuition, etc. (That said -- there ARE situations where you would do much better with Schedule C business income, but they tend to be where complications other than "I write software for an hourly rate" come into play, like other losses to offset, equipment expenses, interest expenses, flexibility in setting up and administering tax-advantaged benefits accounts, etc.) E. The Internal Revenue Code is complicated for many reasons, but it's not just mindless. A good way to think about it is this: The likelihood that there exists a perfectly legal, lucrative, opt-in alternative means of structuring an otherwise economically identical arrangement for IRS purposes; such likelihood is inversely proportional to the number of taxpayers (not $ of tax collectible) who could take advantage of it. More cynically put: the tax regime is fairly watertight for those who sell their labor for money, and all of the leaks and loopholes are at much higher levels, tending to deal with those whose money begets money.