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It's even worse than this if you're self employed, because you have to pay an additional 6.2% for the employer's portion of social security. Ouch. Edit: I jus

It's even worse than this if you're self employed, because you have to pay an additional 6.2% for the employer's portion of social security. Ouch. Edit: I just moved to CA in 2009, and am now working full time for my own bootstrapped startup. I also happened to get married in 2009, which is an additional tax burden. The taxes are painful. All in all, I feel like there is certainly a negative incentive to work for oneself, especially while bootstrapping and struggling to pull in enough money to pay the bills. We're motivated and are really enjoying it, but I would much rather see tax incentives for founding startups.

uuilly 16y ago
Don't forget the 10% sales tax.
- CWuestefeld 16y ago
  This is the thing that galls me the most, believe it or not. My employer typically makes less than 10% margin on the products it sells. That means that for all the work that we do, the state government is taking more money from the transaction than we ourselves make -- and what have they done to earn it? Now add on top of that the corporate income tax and other ways they're bled. With all this in perspective, it's really hard to see why anyone would want to start a business.
  - gnaritas 16y ago
    > he state government is taking more money from the transaction than we ourselves make -- and what have they done to earn it? Seriously? Without a stable government enforcing property rights and the rule of law you wouldn't be able to conduct business reliably. Government provides the field business is played on, they have every right to a cut to pay for providing that field. Peace isn't free.
    - jquery 16y ago
      Does peace and a fair playing field require 30-40% of every productive person's income, or is that the result of special interests crowding out the core functions of government?
      - gnaritas 16y ago
        A little of both I'd say, but what you consider special interests other people consider interests. In a democracy there's always going to be disagreement about what's necessary and all good compromises leave everyone feeling a little unhappy.
        jquery 16y ago
        Well, I will agree with you there--government generally leaves people feeling unhappy, which I why I prefer decentralizing it, letting people move out of the jurisdiction of a government that makes them miserable. That's the beauty of federalism and our Constitution. :)
      - _delirium 16y ago
        I'd say it takes a good part of that. Some is direct: military, police, court, and prison spending accounts for a huge proportion of total government budgets, more than half. And some is indirect: there is only some level of inequality people will tolerate before there's rioting and seizure of property, so things like social safety nets indirectly serve to guarantee property rights by mollifying discontent.
        gnaritas 16y ago
        That's a point a lot of people miss; redistribution of wealth to maintain acceptable levels of inequality are what maintain the peace. It doesn't matter if redistribution of wealth is right or wrong, only that it's a practical necessity to maintain a stable society.
    - brc 16y ago
      I think the Federal government does most of those things. He's talking about state tax, I believe. It's fair that everyone should pay taxes. It's ridiculous when the productive sectors of the economy get taxed heavily to subsidise non-productive sectors. Too many governments are approaching 50% of GDP - meaning half the country is working just to support the other half. This is madness anyway you cut it.
  - jacoblyles 16y ago
    >and what have they done to earn it? Mostly they have made expensive labor contracts with public sector unions who in turn control the elections. And by the way, despite the high tax burden California is still close to bankruptcy. They need more. Costs a lot to keep those unions fed. The politically correct thing to believe is that California's budget woes are caused by those evil right-wingers who have prevented the state from collecting even more taxes. Heh.
gsmaverick 16y ago
Or instead of an incentive they should just drop taxes across the board for everyone.
petercooper 16y ago
This is one thing I like about the UK tax code. I pay a lower rate of National Insurance (similar to your Social Security) as a self-employed person. 8% vs 11% for employees.
bd_at_rivenhill 16y ago
Hmm, in a relative sense, you're doing it wrong. You should be comparing yourself to the compensation of an employee after adding the employer's portion of the social security and medicare taxes back in. This calculation represents the true cost of the employee's labor to the employer, who is indifferent between whether the money is paid to the employee or to the government. This is why it makes no sense to me to say "the employer's portion" because the employee really bears the burden.
- _delirium 16y ago
  On the last point: does that actually happen, though? That's what idealized economic theory would predict, but large corporations' internal structure is quite far from idealized economic theory. My guess would be that if you were able to set up some experiment where one employee cost $100k while somehow having $0 payroll taxes, while another employee cost $90k plus $10k in payroll taxes, the employer would, more often than not, hire the $90k employee. This happens already, I believe, as regards families. Employees with families cost more in health-insurance benefits than single employees, if the employer offers to subsidize a percentage of health insurance (as most do). But employers don't pay single employees of equal qualifications commensurately more, despite what economics would predict.
  - bd_at_rivenhill 16y ago
    It's not clear what would happen in aggregate, but if social security and medicare taxes were abolished tomorrow, I would certainly demand that the equivalent amount be added to my gross compensation, and I would certainly agree to this demand if I were an employer.
  - kscaldef 16y ago
    I don't believe companies can legally discriminate based on family status, either in hiring or pay. However, they can, and do, make people with families pay substantially higher premiums for health care. At my company, a employee w/ family pays 7 times as much out of their paycheck for health insurance than a single employee does.
fexl 16y ago
I'm in the same boat as you, though not in California. I'm at the point where earning more money is not worth the extra time. I prefer to invest that time on enhancing efficiency. That lets me earn the same money with less effort, and the extra time improves my physical and mental health. That way government workers might take 50% of my money, but they don't take 50% of my productive time on earth. If they push much harder then of course I will have to move, but so far I'm very happy here.

uuilly 16y ago

Don't forget the 10% sales tax.

CWuestefeld 16y ago
This is the thing that galls me the most, believe it or not. My employer typically makes less than 10% margin on the products it sells. That means that for all the work that we do, the state government is taking more money from the transaction than we ourselves make -- and what have they done to earn it? Now add on top of that the corporate income tax and other ways they're bled. With all this in perspective, it's really hard to see why anyone would want to start a business.
- gnaritas 16y ago
  > he state government is taking more money from the transaction than we ourselves make -- and what have they done to earn it? Seriously? Without a stable government enforcing property rights and the rule of law you wouldn't be able to conduct business reliably. Government provides the field business is played on, they have every right to a cut to pay for providing that field. Peace isn't free.
  - jquery 16y ago
    Does peace and a fair playing field require 30-40% of every productive person's income, or is that the result of special interests crowding out the core functions of government?
    - gnaritas 16y ago
      A little of both I'd say, but what you consider special interests other people consider interests. In a democracy there's always going to be disagreement about what's necessary and all good compromises leave everyone feeling a little unhappy.
      - jquery 16y ago
        Well, I will agree with you there--government generally leaves people feeling unhappy, which I why I prefer decentralizing it, letting people move out of the jurisdiction of a government that makes them miserable. That's the beauty of federalism and our Constitution. :)
    - _delirium 16y ago
      I'd say it takes a good part of that. Some is direct: military, police, court, and prison spending accounts for a huge proportion of total government budgets, more than half. And some is indirect: there is only some level of inequality people will tolerate before there's rioting and seizure of property, so things like social safety nets indirectly serve to guarantee property rights by mollifying discontent.
      - gnaritas 16y ago
        That's a point a lot of people miss; redistribution of wealth to maintain acceptable levels of inequality are what maintain the peace. It doesn't matter if redistribution of wealth is right or wrong, only that it's a practical necessity to maintain a stable society.
  - brc 16y ago
    I think the Federal government does most of those things. He's talking about state tax, I believe. It's fair that everyone should pay taxes. It's ridiculous when the productive sectors of the economy get taxed heavily to subsidise non-productive sectors. Too many governments are approaching 50% of GDP - meaning half the country is working just to support the other half. This is madness anyway you cut it.
- jacoblyles 16y ago
  >and what have they done to earn it? Mostly they have made expensive labor contracts with public sector unions who in turn control the elections. And by the way, despite the high tax burden California is still close to bankruptcy. They need more. Costs a lot to keep those unions fed. The politically correct thing to believe is that California's budget woes are caused by those evil right-wingers who have prevented the state from collecting even more taxes. Heh.

gsmaverick 16y ago

Or instead of an incentive they should just drop taxes across the board for everyone.

petercooper 16y ago

This is one thing I like about the UK tax code. I pay a lower rate of National Insurance (similar to your Social Security) as a self-employed person. 8% vs 11% for employees.

bd_at_rivenhill 16y ago

Hmm, in a relative sense, you're doing it wrong. You should be comparing yourself to the compensation of an employee after adding the employer's portion of the social security and medicare taxes back in. This calculation represents the true cost of the employee's labor to the employer, who is indifferent between whether the money is paid to the employee or to the government. This is why it makes no sense to me to say "the employer's portion" because the employee really bears the burden.

_delirium 16y ago
On the last point: does that actually happen, though? That's what idealized economic theory would predict, but large corporations' internal structure is quite far from idealized economic theory. My guess would be that if you were able to set up some experiment where one employee cost $100k while somehow having $0 payroll taxes, while another employee cost $90k plus $10k in payroll taxes, the employer would, more often than not, hire the $90k employee. This happens already, I believe, as regards families. Employees with families cost more in health-insurance benefits than single employees, if the employer offers to subsidize a percentage of health insurance (as most do). But employers don't pay single employees of equal qualifications commensurately more, despite what economics would predict.
- bd_at_rivenhill 16y ago
  It's not clear what would happen in aggregate, but if social security and medicare taxes were abolished tomorrow, I would certainly demand that the equivalent amount be added to my gross compensation, and I would certainly agree to this demand if I were an employer.
- kscaldef 16y ago
  I don't believe companies can legally discriminate based on family status, either in hiring or pay. However, they can, and do, make people with families pay substantially higher premiums for health care. At my company, a employee w/ family pays 7 times as much out of their paycheck for health insurance than a single employee does.

fexl 16y ago

I'm in the same boat as you, though not in California. I'm at the point where earning more money is not worth the extra time. I prefer to invest that time on enhancing efficiency. That lets me earn the same money with less effort, and the extra time improves my physical and mental health. That way government workers might take 50% of my money, but they don't take 50% of my productive time on earth. If they push much harder then of course I will have to move, but so far I'm very happy here.