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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.

by 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...
- vkou 3y ago
  The overwhelming majority of a person's expenditures (Housing, education, medical, most of the food you buy at the grocery, many forms of transportation) are not covered by VAT. Many forms of energy (residential electricity, gas) are covered at a vastly reduced VAT. And, again, the giant bugbear that is health insurance rears its ugly head on the US side. See the overall 'Taxes as a % of GDP' comparisons. Edit: I stand corrected about taxes as % of GDP. You are right, that the UK is at 33.5%. [1] Unfortunately, again, that doesn't include the percentage of US spending on healthcare - which is 17.8% of its GDP, with much of it coming out of after-tax dollars, instead of pre-tax ones. (Medicaid and Medicare make up about a third of that - and are, obviously, financed by taxes.) [1] https://www.oecd.org/tax/revenue-statistics-united-kingdom.pdf https://www.oecd.org/tax/revenue-statistics-united-kingdom.p...
  - dragonwriter 3y ago
    > And, again, the giant bugbear that is health insurance rears its ugly head on the US side Sure, yes, that's a bigger non-tax expense for individuals in the US. The US having by far the least efficient healthcare system in the world is a huge problem. > See the overall ‘Taxes as a % of GDP’ comparisons. Yes, I’ve updated my post to address your wildly inaccurate “Taxes as a % of GDP” comparison, using the most recently published OECD data which shows that you were close for the US, and way low for the UK.
    - vkou 3y ago
      And I've updated my post to point out the mountain of US post-tax healthcare spending, that in the UK, largely comes out of pre-tax pounds. At the end of the day, Americans still pay, and pay more. 26% in taxes, and then another ~11% in non-government-covered (non-Medicare/Medicaid) healthcare spending.
      - dragonwriter 3y ago
        > At the end of the day, Americans still pay, and pay more They pay less in taxes, by a wide margin. They also get less for them, by a wide margin, particularly (but not exclusively) in healthcare.
massysett 3y ago
> It does get you 11 carrier fleet strike groups, and 5,500 nuclear weapons, though. Which protect the blanket of freedom under which the UK sleeps.
- ch4s3 3y ago
  Other NATO members are really smug about all of this while not spending their 3% obligation on defense, essentially free riding on the US.
- dukeyukey 3y ago
  Although the UK is one of those countries that: 1. Consistently maintains a >2% of GDP military budget, and 2. Is capable of acting independently (albeit less effectively than part of NATO). It's also one of those countries reasonably able to defend itself without the US.
  - 0zemp2c 3y ago
    huh? even the official UK Forces News youtube channel dedicated an entire episode to how hollowed out UK defense spending is at present when Queen Liz set out to sea, half of the planes on her deck were F35s from (and staffed by) the US Marines...afaik the UK cannot provide full air wings for their own carriers
noahtallen 3y ago
A person living in NYC making $155k pays 34% effective tax rate. (Or in Seattle: 25%, Chicago: 30%.) This calculator is pretty good: https://smartasset.com/taxes/income-taxes#4RIGzkc2ey https://smartasset.com/taxes/income-taxes#4RIGzkc2ey I don’t understand your point about the employer portion — it doesn’t come out of your paycheck, so if you wanted to include it in this calculation, you’d have to say your gross salary was higher.
- emptysongglass 3y ago
  If I went one state over in any direction from Washington, could I pay an even lower effective tax rate?
wskinner 3y ago
I'm not sure where you're getting the $20,000/year healthcare spending number, but that looks like it is too high by an order of magnitude. See e.g. https://www.commonwealthfund.org/publications/issue-briefs/2019/may/how-much-us-households-employer-insurance-spend-premiums-out-of-pocket https://www.commonwealthfund.org/publications/issue-briefs/2..., which puts median annual household spending on healthcare between $1,500 and $5,540 in 2019. If you're talking about total annual healthcare spending, that is largely paid by employers so should be accounted for as increased gross earnings for employees, which translates to lower effective tax rates. And yes, the effective federal rate is not the total blended rate paid in the US, but it's not in the UK, either. For example, far as I know, no US region has a sales tax close to the UK's 20% VAT - sales tax is set locally but in most places is around 5-10%.
- waswaswas 3y ago
  This article is specifically limited to people with employer-sponsored healthcare plans. $20k is a reasonable estimate for a family trying to get decent health insurance independently.
  - xmprt 3y ago
    You mentioned this earlier > In the US, someone earning $155,000 USD... Later you say > $20k is a reasonable estimate for a family trying to get decent health insurance independently So are we talking about people who have full time jobs and employee sponsored healthcare or are we talking about people getting health insurance independently?
  - jjav 3y ago
    > $20k is a reasonable estimate for a family trying to get decent health insurance independently. That's on the low side. I'm currently taking a break between jobs and thus paying for health insurance out of pocket. For a family of 3 in California, I'm paying $42,000 annually.
- Spooky23 3y ago
  Good employers usually pay 75% or more. My family health insurance costs $28500. That median number also includes people without coverage or with Medicare and Medicaid, which aren’t accounted for that way.
pb7 3y ago
Extremely disingenuous to include employer taxes in personal income taxes to make whatever point you're making. Might as well toss in the costs of accounting in there while you're at it. Edit: I'm being throttled from posting but response below: There are a lot of factors that go into deciding the gross pay that an employee receives. What you are doing is muddying the waters to make a point but it just makes it trickier to compare. If you are an employee that is deciding where to live and work, the specific employer taxes make no difference to you -- what matters is your net pay and the services you get for the taxes paid. The rest of the costs, including things like parental leave, time off, and healthcare have already played into deciding your wage. I'm also not sure why you included health insurance costs for the US total but not the 12-14% regressive UK national insurance tax or the regressive 20% VAT for the UK total unless you're deliberately trying to argue in bad faith. I'm suggesting comparing apples to apples. There's enough to criticize as is.
- vkou 3y ago
  It's disingenuous to not include it. It still comes out of your paycheck, just because it happens above the fold doesn't mean it's not a real tax burden, equivalent to the one that is listed below the fold. Splitting it into an 'employer and employee' portion was just an accounting trick to get political buy-in for it. At the end of the day, it's still a regressive 15.3% tax rate that gets slapped onto your wages.
adventured 3y ago
> All-in-all, Americans pay ~26% of their GDP in taxes. It's more like 35%-36%. The far more accurate picture is that the local + state + federal spending is going to be around $9.5 trillion in 2023. The IMF has the US at an estimated $26.8 trillion GDP for 2023. Beyond the federal government, the US has two other massive layers of government that spend well over $4 trillion each year. I fully understand the difference between taxes and spending, and that spending comes out of your pocket either directly via taxes or via inevitable currency debasement (look at the enormous value loss in the dollar since the rampaging deficits & later debt monetization began after 9/11). The bill comes due, period.
- emptysongglass 3y ago
  No it really depends on the state. Washington would get me much closer to 25 percent. Plus as a tech worker you're making at least double what your counterpart in Europe is making (especially considering the insanity of taxes here) so you need to factor in a lot more variables than what I see most commenters doing for total take home.
sieongioetnio 3y ago
>It does get you 11 carrier fleet strike groups, and 5,500 nuclear weapons, though. The majority of government spending is on social services. Defense is usually under 20% of the budget. These are 2022 numbers, so a bit out of whack from Covid-19, but they get the point across. https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ https://fiscaldata.treasury.gov/americas-finance-guide/feder... The problem in the U.S. is inefficiency. The U.S. spends more public money per capita on healthcare than most of its peers. Simply nationalizing the healthcare system would quite possibly lead to lower taxes, and would certainly lead to much lower healthcare spending. We know how to make a system that provides for everyone and we know it will save us money, but we can't do it because that would be SOCIALIST!!! There's no need to slash the defense budget to make the U.S. government function better. All we need to do is jettison the ideologues deliberately sabotaging good government at every turn. (I do support slashing defense budgets, but that has nothing to do with saving money. I'd support lighting the money on fire rather than spending it on "national security".)

by vkou 3y ago

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...

vkou 3y ago
The overwhelming majority of a person's expenditures (Housing, education, medical, most of the food you buy at the grocery, many forms of transportation) are not covered by VAT. Many forms of energy (residential electricity, gas) are covered at a vastly reduced VAT. And, again, the giant bugbear that is health insurance rears its ugly head on the US side. See the overall 'Taxes as a % of GDP' comparisons. Edit: I stand corrected about taxes as % of GDP. You are right, that the UK is at 33.5%. [1] Unfortunately, again, that doesn't include the percentage of US spending on healthcare - which is 17.8% of its GDP, with much of it coming out of after-tax dollars, instead of pre-tax ones. (Medicaid and Medicare make up about a third of that - and are, obviously, financed by taxes.) [1] https://www.oecd.org/tax/revenue-statistics-united-kingdom.pdf https://www.oecd.org/tax/revenue-statistics-united-kingdom.p...
- dragonwriter 3y ago
  > And, again, the giant bugbear that is health insurance rears its ugly head on the US side Sure, yes, that's a bigger non-tax expense for individuals in the US. The US having by far the least efficient healthcare system in the world is a huge problem. > See the overall ‘Taxes as a % of GDP’ comparisons. Yes, I’ve updated my post to address your wildly inaccurate “Taxes as a % of GDP” comparison, using the most recently published OECD data which shows that you were close for the US, and way low for the UK.
  - vkou 3y ago
    And I've updated my post to point out the mountain of US post-tax healthcare spending, that in the UK, largely comes out of pre-tax pounds. At the end of the day, Americans still pay, and pay more. 26% in taxes, and then another ~11% in non-government-covered (non-Medicare/Medicaid) healthcare spending.
    - dragonwriter 3y ago
      > At the end of the day, Americans still pay, and pay more They pay less in taxes, by a wide margin. They also get less for them, by a wide margin, particularly (but not exclusively) in healthcare.

massysett 3y ago

> It does get you 11 carrier fleet strike groups, and 5,500 nuclear weapons, though. Which protect the blanket of freedom under which the UK sleeps.

ch4s3 3y ago
Other NATO members are really smug about all of this while not spending their 3% obligation on defense, essentially free riding on the US.
dukeyukey 3y ago
Although the UK is one of those countries that: 1. Consistently maintains a >2% of GDP military budget, and 2. Is capable of acting independently (albeit less effectively than part of NATO). It's also one of those countries reasonably able to defend itself without the US.
- 0zemp2c 3y ago
  huh? even the official UK Forces News youtube channel dedicated an entire episode to how hollowed out UK defense spending is at present when Queen Liz set out to sea, half of the planes on her deck were F35s from (and staffed by) the US Marines...afaik the UK cannot provide full air wings for their own carriers

noahtallen 3y ago

A person living in NYC making $155k pays 34% effective tax rate. (Or in Seattle: 25%, Chicago: 30%.) This calculator is pretty good: https://smartasset.com/taxes/income-taxes#4RIGzkc2ey https://smartasset.com/taxes/income-taxes#4RIGzkc2ey I don’t understand your point about the employer portion — it doesn’t come out of your paycheck, so if you wanted to include it in this calculation, you’d have to say your gross salary was higher.

emptysongglass 3y ago
If I went one state over in any direction from Washington, could I pay an even lower effective tax rate?

wskinner 3y ago

I'm not sure where you're getting the $20,000/year healthcare spending number, but that looks like it is too high by an order of magnitude. See e.g. https://www.commonwealthfund.org/publications/issue-briefs/2019/may/how-much-us-households-employer-insurance-spend-premiums-out-of-pocket https://www.commonwealthfund.org/publications/issue-briefs/2..., which puts median annual household spending on healthcare between $1,500 and $5,540 in 2019. If you're talking about total annual healthcare spending, that is largely paid by employers so should be accounted for as increased gross earnings for employees, which translates to lower effective tax rates. And yes, the effective federal rate is not the total blended rate paid in the US, but it's not in the UK, either. For example, far as I know, no US region has a sales tax close to the UK's 20% VAT - sales tax is set locally but in most places is around 5-10%.

waswaswas 3y ago
This article is specifically limited to people with employer-sponsored healthcare plans. $20k is a reasonable estimate for a family trying to get decent health insurance independently.
- xmprt 3y ago
  You mentioned this earlier > In the US, someone earning $155,000 USD... Later you say > $20k is a reasonable estimate for a family trying to get decent health insurance independently So are we talking about people who have full time jobs and employee sponsored healthcare or are we talking about people getting health insurance independently?
- jjav 3y ago
  > $20k is a reasonable estimate for a family trying to get decent health insurance independently. That's on the low side. I'm currently taking a break between jobs and thus paying for health insurance out of pocket. For a family of 3 in California, I'm paying $42,000 annually.
Spooky23 3y ago
Good employers usually pay 75% or more. My family health insurance costs $28500. That median number also includes people without coverage or with Medicare and Medicaid, which aren’t accounted for that way.

pb7 3y ago

Extremely disingenuous to include employer taxes in personal income taxes to make whatever point you're making. Might as well toss in the costs of accounting in there while you're at it. Edit: I'm being throttled from posting but response below: There are a lot of factors that go into deciding the gross pay that an employee receives. What you are doing is muddying the waters to make a point but it just makes it trickier to compare. If you are an employee that is deciding where to live and work, the specific employer taxes make no difference to you -- what matters is your net pay and the services you get for the taxes paid. The rest of the costs, including things like parental leave, time off, and healthcare have already played into deciding your wage. I'm also not sure why you included health insurance costs for the US total but not the 12-14% regressive UK national insurance tax or the regressive 20% VAT for the UK total unless you're deliberately trying to argue in bad faith. I'm suggesting comparing apples to apples. There's enough to criticize as is.

vkou 3y ago
It's disingenuous to not include it. It still comes out of your paycheck, just because it happens above the fold doesn't mean it's not a real tax burden, equivalent to the one that is listed below the fold. Splitting it into an 'employer and employee' portion was just an accounting trick to get political buy-in for it. At the end of the day, it's still a regressive 15.3% tax rate that gets slapped onto your wages.

adventured 3y ago

> All-in-all, Americans pay ~26% of their GDP in taxes. It's more like 35%-36%. The far more accurate picture is that the local + state + federal spending is going to be around $9.5 trillion in 2023. The IMF has the US at an estimated $26.8 trillion GDP for 2023. Beyond the federal government, the US has two other massive layers of government that spend well over $4 trillion each year. I fully understand the difference between taxes and spending, and that spending comes out of your pocket either directly via taxes or via inevitable currency debasement (look at the enormous value loss in the dollar since the rampaging deficits & later debt monetization began after 9/11). The bill comes due, period.

emptysongglass 3y ago
No it really depends on the state. Washington would get me much closer to 25 percent. Plus as a tech worker you're making at least double what your counterpart in Europe is making (especially considering the insanity of taxes here) so you need to factor in a lot more variables than what I see most commenters doing for total take home.

sieongioetnio 3y ago

>It does get you 11 carrier fleet strike groups, and 5,500 nuclear weapons, though. The majority of government spending is on social services. Defense is usually under 20% of the budget. These are 2022 numbers, so a bit out of whack from Covid-19, but they get the point across. https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ https://fiscaldata.treasury.gov/americas-finance-guide/feder... The problem in the U.S. is inefficiency. The U.S. spends more public money per capita on healthcare than most of its peers. Simply nationalizing the healthcare system would quite possibly lead to lower taxes, and would certainly lead to much lower healthcare spending. We know how to make a system that provides for everyone and we know it will save us money, but we can't do it because that would be SOCIALIST!!! There's no need to slash the defense budget to make the U.S. government function better. All we need to do is jettison the ideologues deliberately sabotaging good government at every turn. (I do support slashing defense budgets, but that has nothing to do with saving money. I'd support lighting the money on fire rather than spending it on "national security".)