7 ms·

The top marginal rate of 45% in the UK starts at £125,140. Compare that to the US, where the top marginal rate of 37% starts at $578,125. - Edited to correct i

The top marginal rate of 45% in the UK starts at £125,140. Compare that to the US, where the top marginal rate of 37% starts at $578,125. - Edited to correct incorrect US top rate.

Shaanie 3y ago
Top marginal rate in Sweden, 50%~ starts at $59k and our VAT is 25%. So eh, UK doesn't seem so bad.
- ilikerashers 3y ago
  Can we have your childcare, your healthcare and your housing market please in exchange? Childcare alone in Zone 4 London is £2000 per month.
  - rojeee 3y ago
    Yup, it's mad! I pay £2,500 a month for nursery for my son in zone 2. So... to send your kid to nursery you need £40k of spare gross income before paying the mortgage, and everything else. I'm fed up and moving up north!
    - ilikerashers 3y ago
      That’s crap. Means a parent can’t work really.
      - lesuorac 3y ago
        And thats why women generally make less. Losing 5-11 (or more) years of experience really puts you behind a man that didn't (stereotypes w/e) stop working to raise a kid(s) until they could go to school.
    - leoedin 3y ago
      There are cheaper options though - my nursery in zone 3 North London is "only" £1500 a month.
  - leoedin 3y ago
    For one child? My nursery in zone 3 is £1500 a month.
    - ilikerashers 3y ago
      Where is this nursery? Even my brother in Newcastle is paying £75 per day. Or is this for over 3's with both parents on <100k.
      - leoedin 3y ago
        North London, near Turnpike Lane. I think all the nurseries I enquired at in the area charge somewhere between £1200 and £1700 a month full time. Our previous nursery in Brixton was £1625 a week for a full time place. It probably helps that those are cheaper parts of the city.
- fsckboy 3y ago
  >our VAT is 25% VAT is the biggest scam, it's just an income tax under another name. What is a company's income? revenue - costs What is a company's value-add? revenue - costs massive eye-roll. I once asked a real(tm) economist what the difference was and he looked up and thought for a minute and said "payroll tax". Payroll tax is what the US calls social security tax (for retirement, unemployment and the like)
  - lesuorac 3y ago
    Isn't VAT the best way to ensure tax is collected? Somebody can just not pay Sales tax and so the government doesn't collect it. But with VAT the seller is incentive to report so they can recover the VAT they paid. i.e. McDonalds buys 10 burgers and pays 1$ in VAT to their supplier. then McDonalds sells those 10 (now cooked) burgers and can recover 1$ in VAT from the government while the consumers ultimately pay >1$ in VAT for the 10 burgers.
    - fsckboy 3y ago
      when your employer pays your wages, they have an incentive to report that to the govt as a cost so they don't pay tax on it. That gives the govt the information they need to come after you for not paying your income tax on it. So, same thing, income tax and VAT there is more enforceability because he structure of payments and information flow can make a difference to ease of enforcement... but the amount of tax is based on what activity is being taxed. Sales taxes are considered "regressive" because poor people spend a greater %age of their income, so in some sense it can be seen as an "undoing" of progressive income tax. That's not strictly true, however, because the working class complaint about rich people is how much rich people consume while living greedy lavish lives: which shows that rich people would be paying a lot more of the overall %age of sales tax than poor people (not really strictly distinguishing VAT from sales tax here) So, anyway, I'm not defending sales taxes here (meaning tax on final sale to consume-ers with no taxes backward up the supply chain). VAT taxes do make more sense in terms of economic efficiency: 10% sales tax on a printer selling for $200 is $20, where the printer cost $300 to make (remember, they're going to sell you expensive ink), and with a VAT tax the tax would be $0 (or would it even be a $30 refund?)... ...point is, VAT tax works out to a high sales-tax-on-high-profit-margin-goods and a low sales-tax-on-low-profit-margin-goods, which is helpful because govt doesn't want to distort the market for low margin goods with high taxes. However, back to my original point, it simply means that income taxes make more economic sense than consumption taxes, and VAT is an income tax, not a consumption tax.
vkou 3y ago
In the US, someone earning $155,000 USD (Equivalent to 125k GBP) will also be paying 6.2% in social security taxes, 1.45% in medicare taxes, and then another 6.2% in social security taxes (employer's portion)[1], and 1.45% in medicare taxes (employer's portion). Added to the rest of their marginal tax rate, they'd be seeing a rate of 22 + 15.3 = 37.3%. Of course, they won't actually get health insurance for it, which will cost a family ~$20,000/year. That's about 6-13% of your paycheck that could have been going into your wallet. Also, don't forget your state income taxes, which will scrape another 0-7-12%. All-in-all, Americans pay ~26% of their GDP in taxes. People in the UK pay... ~27% (Edit - it's actually closer to 33%) of their GDP in taxes. [2] 'Americans pay less taxes' is largely a meme with no basis in reality. [1] Just because that gets subtracted from a different line item on your W-2 doesn't mean that you shouldn't count it. [2] This is the only meaningful apples to apples comparison of overall tax burdens. And it makes the US look really bad, because that 26% won't even get you healthcare. Or cheap university tuition. It does get you 11 carrier fleet strike groups, and 5,500 nuclear weapons, though.
- dragonwriter 3y ago
  > In the US, someone earning $155,000 USD (Equivalent to 125 GBP) will also be paying 6.2% in social security taxes, 1.45% in medicare taxes, and then another 6.2% in social security taxes (employer’s portion), and 1.45% in medicare taxes (employer’s portion). In the UK, there is also National Insurance tax on top of income tax, which works similarly (but is a bit more complicated.) The employer share is 13.8%, which is a hair below the combined employee + employer share US federal payroll tax. And there is also a 20% VAT impacting the cost of pretty much anything you might use your after-tax income to buy. > All-in-all, Americans pay ~26% of their GDP in taxes. Close: 26.6% (2021, provisional), 25.8% (2020) [0] > People in the UK pay… ~27% of their GDP in taxes. Not so close: 33.5% (2021, provisional), 32.1% (2020) [0] > ‘Americans pay less taxes’ is largely a meme with no basis in reality. No, the UK has a much higher tax burden; the US is significantly below OECD average, the UK a bit above. [0] https://www.oecd.org/tax/tax-policy/revenue-statistics-highlights-brochure.pdf https://www.oecd.org/tax/tax-policy/revenue-statistics-highl...
  - 3y ago
c7THEC2DDFVV2V 3y ago
this isn't correct. At that rate of 125,140 you have already lost your tax free allowance of 12,500.
dukeyukey 3y ago
Although you gotta add state taxes too, especially property taxes, which don't exist anywhere near as much as they do in the US.
nly 3y ago
Actually it's 47% since there's 2% national insurance
zamnos 3y ago
California's state income tax is 12.3% starting at $677,276, so the top rate is 49.3%, and actually surpasses 50% once other taxes are taken into account, and then you have to factor in healthcare costs on top of that. Which as you get older and later into your career (which is when you'd make that much money anyway) can't be ignored either.
- imagainstit 3y ago
  But that's the top marginal rate filing single. A California tax payer earning $677,272 pays 49.3 percent on each additional dollar but 43.9% is the effective rate on whole income. This is a very high single earner income. A married couple with this income pays only 37.5% and doesn't max out until going over 1,359 million, at which point they pay the 43,9 effective. You have to be a truly massive earner to hit 50% effective in CA.
- fshbbdssbbgdd 3y ago
  High-income wage earners on the US typically get health insurance from their job, which is a tax-exempt benefit that isn’t included in income statistics. After retirement age, Medicare will pay for most medical expenses, although it’s still smart to save some extra money for whatever Medicare doesn’t cover. Amortized over a career, reasonable savings for post-retirement health care might amount to 1% or so for someone in that income range.
  - ztrww 3y ago
    > High-income wage earners on the US typically get health insurance from their job This increase the total cost of labor which effectively is the same. Of course on the higher end paying a lump sum is way more optimal than an extra 10% tax to fund healthcare. If your income is low.. we’ll it’s a highly regressive system without government support. And with government subsidies it becomes effectively the same just extra hoops.
- trgdr 3y ago
  The healthcare thing is really a moot point. Everyone who can afford private medical care in the UK goes private for anything they can. The NHS is good (and I _do_ mean just 'good' -- the quality of US healthcare is very uneven across the country, but the best care possible, by a substantial margin, is undeniably in the US) for emergency medicine and surgery, but the general consensus is that it just-barely-kind-of-works-sometimes for everything else.
azornathogron 3y ago
Speaking as a pedant: The top marginal rate is actually 60% and happens when you cross the threshold where you're nominally in the 40% band but you're also losing your personal allowance. The effect is, for every £2 extra income you lose £1 personal allowance (exposing an extra £1 to taxation) and pay 40p tax on that. That's 20% in addition to the 40% you're paying anyway, hence 60% marginal rate. Once you hit the income level where all your personal allowance has been fully cancelled out, then your marginal rate drops back down. And then the next threshold after that puts you in the 45% band.
- ac2u 3y ago
  yeah if you're on that rate and not dumping every penny you can into your pension allowance each year (and using up any unused allowance for previous three years), you're crazy.
  - c7THEC2DDFVV2V 3y ago
    whats crazy is forcing people to save for something they have no guarantee of seeing. Giving the pension age keeps increasing a pension is nothing more than paying into a pot you will never be able to fully use. Especially given how people are taxed on their pension payments.
    - dan-robertson 3y ago
      To be fair, the amount people are forced(?) to put into pensions from employment income is pretty tiny and there are tax-advantages savings accounts which people can use instead of pensions, up to a limit. There are also limits on incentives for pension contributions.
- fshbbdssbbgdd 3y ago
  If you compute that way, you can find situations in the US where the effective marginal tax rate exceeds 100% due to the phase-out of various benefits: https://www.urban.org/sites/default/files/alfresco/publication-pdfs/412722-How-Marginal-Tax-Rates-Affect-Families-at-Various-Levels-of-Poverty.PDF https://www.urban.org/sites/default/files/alfresco/publicati...

The top marginal rate of 45% in the UK starts at £125,140. Compare that to the US, where the top marginal rate of 37% starts at $578,125. - Edited to correct incorrect US top rate.

Shaanie 3y ago

Top marginal rate in Sweden, 50%~ starts at $59k and our VAT is 25%. So eh, UK doesn't seem so bad.

ilikerashers 3y ago
Can we have your childcare, your healthcare and your housing market please in exchange? Childcare alone in Zone 4 London is £2000 per month.
- rojeee 3y ago
  Yup, it's mad! I pay £2,500 a month for nursery for my son in zone 2. So... to send your kid to nursery you need £40k of spare gross income before paying the mortgage, and everything else. I'm fed up and moving up north!
  - ilikerashers 3y ago
    That’s crap. Means a parent can’t work really.
    - lesuorac 3y ago
      And thats why women generally make less. Losing 5-11 (or more) years of experience really puts you behind a man that didn't (stereotypes w/e) stop working to raise a kid(s) until they could go to school.
  - leoedin 3y ago
    There are cheaper options though - my nursery in zone 3 North London is "only" £1500 a month.
- leoedin 3y ago
  For one child? My nursery in zone 3 is £1500 a month.
  - ilikerashers 3y ago
    Where is this nursery? Even my brother in Newcastle is paying £75 per day. Or is this for over 3's with both parents on <100k.
    - leoedin 3y ago
      North London, near Turnpike Lane. I think all the nurseries I enquired at in the area charge somewhere between £1200 and £1700 a month full time. Our previous nursery in Brixton was £1625 a week for a full time place. It probably helps that those are cheaper parts of the city.
fsckboy 3y ago
>our VAT is 25% VAT is the biggest scam, it's just an income tax under another name. What is a company's income? revenue - costs What is a company's value-add? revenue - costs massive eye-roll. I once asked a real(tm) economist what the difference was and he looked up and thought for a minute and said "payroll tax". Payroll tax is what the US calls social security tax (for retirement, unemployment and the like)
- lesuorac 3y ago
  Isn't VAT the best way to ensure tax is collected? Somebody can just not pay Sales tax and so the government doesn't collect it. But with VAT the seller is incentive to report so they can recover the VAT they paid. i.e. McDonalds buys 10 burgers and pays 1$ in VAT to their supplier. then McDonalds sells those 10 (now cooked) burgers and can recover 1$ in VAT from the government while the consumers ultimately pay >1$ in VAT for the 10 burgers.
  - fsckboy 3y ago
    when your employer pays your wages, they have an incentive to report that to the govt as a cost so they don't pay tax on it. That gives the govt the information they need to come after you for not paying your income tax on it. So, same thing, income tax and VAT there is more enforceability because he structure of payments and information flow can make a difference to ease of enforcement... but the amount of tax is based on what activity is being taxed. Sales taxes are considered "regressive" because poor people spend a greater %age of their income, so in some sense it can be seen as an "undoing" of progressive income tax. That's not strictly true, however, because the working class complaint about rich people is how much rich people consume while living greedy lavish lives: which shows that rich people would be paying a lot more of the overall %age of sales tax than poor people (not really strictly distinguishing VAT from sales tax here) So, anyway, I'm not defending sales taxes here (meaning tax on final sale to consume-ers with no taxes backward up the supply chain). VAT taxes do make more sense in terms of economic efficiency: 10% sales tax on a printer selling for $200 is $20, where the printer cost $300 to make (remember, they're going to sell you expensive ink), and with a VAT tax the tax would be $0 (or would it even be a $30 refund?)... ...point is, VAT tax works out to a high sales-tax-on-high-profit-margin-goods and a low sales-tax-on-low-profit-margin-goods, which is helpful because govt doesn't want to distort the market for low margin goods with high taxes. However, back to my original point, it simply means that income taxes make more economic sense than consumption taxes, and VAT is an income tax, not a consumption tax.

vkou 3y ago

In the US, someone earning $155,000 USD (Equivalent to 125k GBP) will also be paying 6.2% in social security taxes, 1.45% in medicare taxes, and then another 6.2% in social security taxes (employer's portion)[1], and 1.45% in medicare taxes (employer's portion). Added to the rest of their marginal tax rate, they'd be seeing a rate of 22 + 15.3 = 37.3%. Of course, they won't actually get health insurance for it, which will cost a family ~$20,000/year. That's about 6-13% of your paycheck that could have been going into your wallet. Also, don't forget your state income taxes, which will scrape another 0-7-12%. All-in-all, Americans pay ~26% of their GDP in taxes. People in the UK pay... ~27% (Edit - it's actually closer to 33%) of their GDP in taxes. [2] 'Americans pay less taxes' is largely a meme with no basis in reality. [1] Just because that gets subtracted from a different line item on your W-2 doesn't mean that you shouldn't count it. [2] This is the only meaningful apples to apples comparison of overall tax burdens. And it makes the US look really bad, because that 26% won't even get you healthcare. Or cheap university tuition. It does get you 11 carrier fleet strike groups, and 5,500 nuclear weapons, though.

dragonwriter 3y ago
> In the US, someone earning $155,000 USD (Equivalent to 125 GBP) will also be paying 6.2% in social security taxes, 1.45% in medicare taxes, and then another 6.2% in social security taxes (employer’s portion), and 1.45% in medicare taxes (employer’s portion). In the UK, there is also National Insurance tax on top of income tax, which works similarly (but is a bit more complicated.) The employer share is 13.8%, which is a hair below the combined employee + employer share US federal payroll tax. And there is also a 20% VAT impacting the cost of pretty much anything you might use your after-tax income to buy. > All-in-all, Americans pay ~26% of their GDP in taxes. Close: 26.6% (2021, provisional), 25.8% (2020) [0] > People in the UK pay… ~27% of their GDP in taxes. Not so close: 33.5% (2021, provisional), 32.1% (2020) [0] > ‘Americans pay less taxes’ is largely a meme with no basis in reality. No, the UK has a much higher tax burden; the US is significantly below OECD average, the UK a bit above. [0] https://www.oecd.org/tax/tax-policy/revenue-statistics-highlights-brochure.pdf https://www.oecd.org/tax/tax-policy/revenue-statistics-highl...
- 3y ago

c7THEC2DDFVV2V 3y ago

this isn't correct. At that rate of 125,140 you have already lost your tax free allowance of 12,500.

dukeyukey 3y ago

Although you gotta add state taxes too, especially property taxes, which don't exist anywhere near as much as they do in the US.

nly 3y ago

Actually it's 47% since there's 2% national insurance

zamnos 3y ago

California's state income tax is 12.3% starting at $677,276, so the top rate is 49.3%, and actually surpasses 50% once other taxes are taken into account, and then you have to factor in healthcare costs on top of that. Which as you get older and later into your career (which is when you'd make that much money anyway) can't be ignored either.

imagainstit 3y ago
But that's the top marginal rate filing single. A California tax payer earning $677,272 pays 49.3 percent on each additional dollar but 43.9% is the effective rate on whole income. This is a very high single earner income. A married couple with this income pays only 37.5% and doesn't max out until going over 1,359 million, at which point they pay the 43,9 effective. You have to be a truly massive earner to hit 50% effective in CA.
fshbbdssbbgdd 3y ago
High-income wage earners on the US typically get health insurance from their job, which is a tax-exempt benefit that isn’t included in income statistics. After retirement age, Medicare will pay for most medical expenses, although it’s still smart to save some extra money for whatever Medicare doesn’t cover. Amortized over a career, reasonable savings for post-retirement health care might amount to 1% or so for someone in that income range.
- ztrww 3y ago
  > High-income wage earners on the US typically get health insurance from their job This increase the total cost of labor which effectively is the same. Of course on the higher end paying a lump sum is way more optimal than an extra 10% tax to fund healthcare. If your income is low.. we’ll it’s a highly regressive system without government support. And with government subsidies it becomes effectively the same just extra hoops.
trgdr 3y ago
The healthcare thing is really a moot point. Everyone who can afford private medical care in the UK goes private for anything they can. The NHS is good (and I _do_ mean just 'good' -- the quality of US healthcare is very uneven across the country, but the best care possible, by a substantial margin, is undeniably in the US) for emergency medicine and surgery, but the general consensus is that it just-barely-kind-of-works-sometimes for everything else.

azornathogron 3y ago

Speaking as a pedant: The top marginal rate is actually 60% and happens when you cross the threshold where you're nominally in the 40% band but you're also losing your personal allowance. The effect is, for every £2 extra income you lose £1 personal allowance (exposing an extra £1 to taxation) and pay 40p tax on that. That's 20% in addition to the 40% you're paying anyway, hence 60% marginal rate. Once you hit the income level where all your personal allowance has been fully cancelled out, then your marginal rate drops back down. And then the next threshold after that puts you in the 45% band.

ac2u 3y ago
yeah if you're on that rate and not dumping every penny you can into your pension allowance each year (and using up any unused allowance for previous three years), you're crazy.
- c7THEC2DDFVV2V 3y ago
  whats crazy is forcing people to save for something they have no guarantee of seeing. Giving the pension age keeps increasing a pension is nothing more than paying into a pot you will never be able to fully use. Especially given how people are taxed on their pension payments.
  - dan-robertson 3y ago
    To be fair, the amount people are forced(?) to put into pensions from employment income is pretty tiny and there are tax-advantages savings accounts which people can use instead of pensions, up to a limit. There are also limits on incentives for pension contributions.
fshbbdssbbgdd 3y ago
If you compute that way, you can find situations in the US where the effective marginal tax rate exceeds 100% due to the phase-out of various benefits: https://www.urban.org/sites/default/files/alfresco/publication-pdfs/412722-How-Marginal-Tax-Rates-Affect-Families-at-Various-Levels-of-Poverty.PDF https://www.urban.org/sites/default/files/alfresco/publicati...