5 ms·

It doesn't change the median to mean discrepancy though. Australia has a smoother wealth divide and that's purely policy. I was shocked when i found out there'

It doesn't change the median to mean discrepancy though. Australia has a smoother wealth divide and that's purely policy. I was shocked when i found out there's no 0% tax bracket in the USA. All that paperwork to collect tax from those who are struggling. Meanwhile the federal tax caps out at 37% and doesn't even consider very high wage earners. The higher minimum wages in Australia are also clear cut.

ceejayoz 5y ago
OK, but you've highlighted the difference between US and AU median wealth; a lot of Australian wealth is tied up in this real estate. My relatives who own property (purchased cheap decades ago) can hop from enormously expensive house to enormously expensive house; the ones that don't can only dream of home ownership anywhere near a major city. There is functionally a 0% tax bracket in the US, because everyone gets a default tax deduction. In general, I agree with you - particularly in the realm of healthcare and college educations - but there's a lot of nuance in the details.
giantg2 5y ago
"The higher minimum wages in Australia are also clear cut." Do you have any links to studies around this? From what I've heard of the past couple years, most economists believe only a marginal increase to around $10/hr would be beneficial. I'm not arguing against that, but $10/hr doesn't seem like it would afford those workers the opportunity to build wealth, and increasing it further is supposedly not going to provide any additional benefit to that group.
dntrkv 5y ago
37% for federal, and another 13% in places like California, bringing it to 50% (vs 45% in Australia)
- seanmcdirmid 5y ago
  Do you understand how marginal tax rates work? Let's say you make $1,000,000 a year in California. Your effective tax rate is 11.78 percent because the top 12.3% rate is only applied to income you earned over $599k. (13.3% applies only on income above $1,000,000, which you are too poor to pay yet). Same with federal taxes, that $1,000,000 earner is going to pay an effective rate of 33.3%. Combined, you are paying 45% state and federal income tax.
  - dntrkv 5y ago
    ...Yes I understand how they work, thank you very much. In California, the highest possible tax rate on earnings, would be 50%. In Australia that tax on the highest earnings would be 45%. Nowhere did I claim that all your income is taxed at the same rate. I was replying to the quote "federal tax caps out at 37%" which ignores the significant 13% additional tax in CA.
    - seanmcdirmid 5y ago
      You would have to be making $5,000,000 a year before you are paying 50% in California (see https://smartasset.com/taxes/california-paycheck-calculator#W0pit2R4qS https://smartasset.com/taxes/california-paycheck-calculator#...).
      - dntrkv 5y ago
        Sure, but that doesn't change the point of my comment which is that the income tax rates in some US states will actually exceed Australia's in higher earners.
        seanmcdirmid 5y ago
        Ya, if that is your point. Australian taxes ramp up faster, so low earners will pay more tax in Australia than in California. E.g. Australia making $50K USD/year will pay 17% in taxes (according to https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=STC&anchor=STC#STC/report https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=ST..., don't forget to convert to AUD first), while a Californian will only pay 15%.
        ceejayoz 5y ago
        (If you ignore things like cost of healthcare and college.)
        seanmcdirmid 5y ago
seanmcdirmid 5y ago
> I was shocked when i found out there's no 0% tax bracket in the USA. That isn't exactly true: https://www.npr.org/sections/thetwo-way/2012/09/18/161333783/romneys-wrong-and-right-about-the-47-percent https://www.npr.org/sections/thetwo-way/2012/09/18/161333783... Yes, the bracket isn't zero percent, but after deductions and the child credit, it effectively becomes that. That doesn't include payroll taxes however, which are much more regressive (in the case of social security with an income cap even more so). Does Australia exempt low earners from payroll taxes as well as income taxes?
- RhysU 5y ago
  I often see that payroll taxes are regressive. But the benefits from payroll taxes are progressive... Replacing a top 1% income or standard of living with unemployment or social security doesn't happen in the US system. Are payroll taxes regressive relative to the benefits paid from payroll taxes? I genuinely don't know.
knubie 5y ago
The median to mean discrepancy is not particularly interesting though, given that median disposable income between the two countries is almost identical (in other words there are no winners with a "smoother wealth divide," only losers). Given the other comments about the real estate situation in Australia it seems problematic to compare median wealth instead of disposable income.
acchow 5y ago
The US gives deductions which can make your effective tax rate 0%.

ceejayoz 5y ago

OK, but you've highlighted the difference between US and AU median wealth; a lot of Australian wealth is tied up in this real estate. My relatives who own property (purchased cheap decades ago) can hop from enormously expensive house to enormously expensive house; the ones that don't can only dream of home ownership anywhere near a major city. There is functionally a 0% tax bracket in the US, because everyone gets a default tax deduction. In general, I agree with you - particularly in the realm of healthcare and college educations - but there's a lot of nuance in the details.

giantg2 5y ago

"The higher minimum wages in Australia are also clear cut." Do you have any links to studies around this? From what I've heard of the past couple years, most economists believe only a marginal increase to around $10/hr would be beneficial. I'm not arguing against that, but $10/hr doesn't seem like it would afford those workers the opportunity to build wealth, and increasing it further is supposedly not going to provide any additional benefit to that group.

dntrkv 5y ago

37% for federal, and another 13% in places like California, bringing it to 50% (vs 45% in Australia)

seanmcdirmid 5y ago
Do you understand how marginal tax rates work? Let's say you make $1,000,000 a year in California. Your effective tax rate is 11.78 percent because the top 12.3% rate is only applied to income you earned over $599k. (13.3% applies only on income above $1,000,000, which you are too poor to pay yet). Same with federal taxes, that $1,000,000 earner is going to pay an effective rate of 33.3%. Combined, you are paying 45% state and federal income tax.
- dntrkv 5y ago
  ...Yes I understand how they work, thank you very much. In California, the highest possible tax rate on earnings, would be 50%. In Australia that tax on the highest earnings would be 45%. Nowhere did I claim that all your income is taxed at the same rate. I was replying to the quote "federal tax caps out at 37%" which ignores the significant 13% additional tax in CA.
  - seanmcdirmid 5y ago
    You would have to be making $5,000,000 a year before you are paying 50% in California (see https://smartasset.com/taxes/california-paycheck-calculator#W0pit2R4qS https://smartasset.com/taxes/california-paycheck-calculator#...).
    - dntrkv 5y ago
      Sure, but that doesn't change the point of my comment which is that the income tax rates in some US states will actually exceed Australia's in higher earners.
      - seanmcdirmid 5y ago
        Ya, if that is your point. Australian taxes ramp up faster, so low earners will pay more tax in Australia than in California. E.g. Australia making $50K USD/year will pay 17% in taxes (according to https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=STC&anchor=STC#STC/report https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=ST..., don't forget to convert to AUD first), while a Californian will only pay 15%.
        ceejayoz 5y ago
        (If you ignore things like cost of healthcare and college.)
        seanmcdirmid 5y ago

seanmcdirmid 5y ago

> I was shocked when i found out there's no 0% tax bracket in the USA. That isn't exactly true: https://www.npr.org/sections/thetwo-way/2012/09/18/161333783/romneys-wrong-and-right-about-the-47-percent https://www.npr.org/sections/thetwo-way/2012/09/18/161333783... Yes, the bracket isn't zero percent, but after deductions and the child credit, it effectively becomes that. That doesn't include payroll taxes however, which are much more regressive (in the case of social security with an income cap even more so). Does Australia exempt low earners from payroll taxes as well as income taxes?

RhysU 5y ago
I often see that payroll taxes are regressive. But the benefits from payroll taxes are progressive... Replacing a top 1% income or standard of living with unemployment or social security doesn't happen in the US system. Are payroll taxes regressive relative to the benefits paid from payroll taxes? I genuinely don't know.

knubie 5y ago

The median to mean discrepancy is not particularly interesting though, given that median disposable income between the two countries is almost identical (in other words there are no winners with a "smoother wealth divide," only losers). Given the other comments about the real estate situation in Australia it seems problematic to compare median wealth instead of disposable income.

acchow 5y ago

The US gives deductions which can make your effective tax rate 0%.