4 ms·

I have some friends over there and they (or their employers) are cutting back on their business expenditures, staffing and overall outlook. The new payroll tax

by lsllc 2y ago

I have some friends over there and they (or their employers) are cutting back on their business expenditures, staffing and overall outlook. The new payroll taxes (unemployment insurance?) are going to bite both employers and employees alike. Taxes are too high, there's too much red tape for businesses and successive governments have failed to invest in anything outside of the "south" (e.g. Greater London). I was (half) joking with them that the "north" would be far better off if it seceded and joined Scotland!

walthamstow 2y ago
I don't know why you think the north and Scotland would be better off together. The south east would only get richer under such a scenario. Taxes-too-high is a common refrain but income tax + national insurance takes 26% of my 95th-percentile income. Is that so bad?
- mistrial9 2y ago
  if you are an employee and that is direct compensation (not deferred capital gains) then your taxes are lower than California
  - lotsofpulp 2y ago
    Is this including the use of tax advantaged accounts like HSAs/401Ks/IRAs/etc? In the US, it should be possible to get a 95th percentile household income ($300k, married filing joint) effective federal income tax rate down to 10% to 15%. Including total health insurance costs (employer + employee) plus some amount of deductible/out of pocket maximum for a family of 4 would bump it up to 20% to 25%. And then on top of that would be state + local tax liabilities like property and sales tax. All in, I bet total proportion spent on taxes is less than 40%, even in California, at 95th percentile income, and 30% in a state without income tax. Edit: I’m probably understating my numbers by 5% due to forgetting about social security and Medicare taxes.
    - dmoy 2y ago
      If this is MFJ two similar incomes, then Social security and Medicare is another ~14% (it'll say 7.65% on the tin, but really your wage is lowered to compensate for the 7.65% employer portion, working out to about 14% total). Effective federal income tax on $300k income is 20%+, not including healthcare. State tax is another 8%.. So that's 42%, not including healthcare costs. Which is gonna be easily another 5%+.
      - dgfitz 2y ago
        State tax is definitely not 8% for many, many states.
        dmoy 2y ago
        That is fair but we are explicitly talking about California here > if you are an employee and that is direct compensation (not deferred capital gains) then your taxes are lower than California
        dgfitz 2y ago
        Roger that, heard. Had my blinders on.
    - walthamstow 2y ago
      American taxes are so complicated. Let's add another 1-2% for the mental cost of having to know all this stuff, or pay someone else to know it. It's just crazy.
      - lotsofpulp 2y ago
        It’s incredible the US has any other economic output, considering the effort spent on taxes. At one of my businesses, we remit 4 separate sales taxes to 4 separate governments, and each has to be itemized, so receipts are multiple pages long for no reason. Then there are myriad possibilities for being exempt from either all or some of the taxes, and those records have to be kept in case of an audit. There must be enormous amounts of tax evasion too, the attack surface is so great no one can audit it all. The most tax advantaged account, a Health Savings Account, lets people set money aside today, invest it, and let it grow for however long they want, and then withdraw it for healthcare expenses, all tax free. But the healthcare expenses can be from any point in time in the past. A 30 year old can save their receipts for purchases ranging from over the counter painkillers to childbirth bills from the hospital, and then reimburse themselves when they are 80 years old. How can it even be possible to audit someone’s healthcare expenses that happened 50 years ago? The counter party will surely no longer have the records to cross reference, so it’s basically the government taking people’s word for it. And that’s just simple personal taxes.
  - asdf6969 2y ago
    Taxes are a lot higher because the higher brackets kick in at a much lower income while cost of living is similar. A top 5% income is not enough to live a dignified in London where most of those jobs are but it’s high enough that the government won’t let you make more. Very sad situation. Top 5% income in the UK is probably more like top 20% in the USA
- jamie_ca 2y ago
  I'm in the 45-49 age bracket this year. In BC (Canada), a 95th percentile income for that age is $126,000 (2021 Census). Before any deductions (specifically retirement investments that reduce taxable income) I'd be looking at a 26.85% tax rate, with a marginal rate of 38%. So pretty much the same rate here. Not to say that Canada's overall economy is particularly any better than the UK's, and especially Trump's tariff threats will do a number on us.
  - bruce511 2y ago
    >> especially Trump's tariff threats will do a number on us. There will be losers certainly, but I'm not 100% sure that tarrifs for Canada are bad in the long run. Firstly, there are already reports of Canadians buying local over US goods. If that sentiment hrows, and becomes entrenched that's good. Secondly, at least gor some goods, suppliers are incentivised to explore other export markets. Again, long term, that diversification is good. Thirdly, for at least some goods, the US cannot simply ramp up production. So they'll still be buying, but their consumers will pay more. Canadian suppliers can simply increase prices as well, since any US consumer increase will be ascribed to the tarrifs. This though is somewhat balanced by Canadian oversupply. Fourthly it encourages producers to diversify somewhat to reduce over supply. In the long run a varied economy is better than one dependant on any one sector. Ultimately Canada and Mexico could come out of this stronger. While the US consumer gets used to higher prices. (Which Canada et al can take advantage of whe tarrifs are removed.)
  - benmmurphy 2y ago
    the UK has a 20% VAT as well. I don't think the person you were replying to was taking that into account. Also, they are probably not taking into account employer NICs which are effectively the same in terms of tax incidence as employee NICs but people incorrectly treat them differently because the employer nominally pays them. But if you think about it for a second, your employer makes two payments to the government one of them is called employee NICs and one of them is called employer NICs and both of them are based on the employee's wage so it is silly to treat them differently. Though, I'm guessing Canada probably has employer payroll taxes as well. Employer NICS can get up to almost 14% so it is a significant tax in the UK.
- switch007 2y ago
  You forgot employers NI (for the unfamiliar - the employER has to pay 15% from April - not a typo - of part of your salary in taxes to the government and this is hidden from your payroll taxes as an employee) What's the % if you include those deductions? In my case my tax rate is 29% but employers NI is 13% so 42%, going up to 44/45% in April
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  - walthamstow 2y ago
    I didn't forget it, it's not a deduction from my salary. You don't pay 42% of your salary. Employee NI went down by 2pts last year, employer NI is going up by 1.2pts this year.
    - benmmurphy 2y ago
      Employee NICs and employer NICs are effectively the same thing, they just have different names. Your employer has a bucket of money to pay employees with. Some of this money is given to the government and some of this money is given to their employees. Saying the money given to the government is on behalf of the employee or the employer is mostly irrelevant. There are cases where it is relevant if the employee or employer can get tax refunds against the money but mostly it is irrelevant. Who actually pays the burden of tax is a question of tax incidence (https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence). In theory the burden of income taxes could even be falling on your employer. But it is very likely that most of the burden of income taxes/payroll taxes falls on the employee. But if you are doing cross-country comparisons its much easier to just total up all taxes related to employment in one bucket and compare them under the assumption the incidence burden would be similar across different countries.
laurencerowe 2y ago
> The new payroll taxes (unemployment insurance?) are going to bite both employers and employees alike. Increases to employers' National Insurance contributions. It's the equivalent to Social Security in the US. Mostly goes to pensions.
secondcoming 2y ago
Scotland has higher income tax than England and Wales.

by lsllc 2y ago

walthamstow 2y ago

I don't know why you think the north and Scotland would be better off together. The south east would only get richer under such a scenario. Taxes-too-high is a common refrain but income tax + national insurance takes 26% of my 95th-percentile income. Is that so bad?

mistrial9 2y ago
if you are an employee and that is direct compensation (not deferred capital gains) then your taxes are lower than California
- lotsofpulp 2y ago
  Is this including the use of tax advantaged accounts like HSAs/401Ks/IRAs/etc? In the US, it should be possible to get a 95th percentile household income ($300k, married filing joint) effective federal income tax rate down to 10% to 15%. Including total health insurance costs (employer + employee) plus some amount of deductible/out of pocket maximum for a family of 4 would bump it up to 20% to 25%. And then on top of that would be state + local tax liabilities like property and sales tax. All in, I bet total proportion spent on taxes is less than 40%, even in California, at 95th percentile income, and 30% in a state without income tax. Edit: I’m probably understating my numbers by 5% due to forgetting about social security and Medicare taxes.
  - dmoy 2y ago
    If this is MFJ two similar incomes, then Social security and Medicare is another ~14% (it'll say 7.65% on the tin, but really your wage is lowered to compensate for the 7.65% employer portion, working out to about 14% total). Effective federal income tax on $300k income is 20%+, not including healthcare. State tax is another 8%.. So that's 42%, not including healthcare costs. Which is gonna be easily another 5%+.
    - dgfitz 2y ago
      State tax is definitely not 8% for many, many states.
      - dmoy 2y ago
        That is fair but we are explicitly talking about California here > if you are an employee and that is direct compensation (not deferred capital gains) then your taxes are lower than California
        dgfitz 2y ago
        Roger that, heard. Had my blinders on.
  - walthamstow 2y ago
    American taxes are so complicated. Let's add another 1-2% for the mental cost of having to know all this stuff, or pay someone else to know it. It's just crazy.
    - lotsofpulp 2y ago
      It’s incredible the US has any other economic output, considering the effort spent on taxes. At one of my businesses, we remit 4 separate sales taxes to 4 separate governments, and each has to be itemized, so receipts are multiple pages long for no reason. Then there are myriad possibilities for being exempt from either all or some of the taxes, and those records have to be kept in case of an audit. There must be enormous amounts of tax evasion too, the attack surface is so great no one can audit it all. The most tax advantaged account, a Health Savings Account, lets people set money aside today, invest it, and let it grow for however long they want, and then withdraw it for healthcare expenses, all tax free. But the healthcare expenses can be from any point in time in the past. A 30 year old can save their receipts for purchases ranging from over the counter painkillers to childbirth bills from the hospital, and then reimburse themselves when they are 80 years old. How can it even be possible to audit someone’s healthcare expenses that happened 50 years ago? The counter party will surely no longer have the records to cross reference, so it’s basically the government taking people’s word for it. And that’s just simple personal taxes.
- asdf6969 2y ago
  Taxes are a lot higher because the higher brackets kick in at a much lower income while cost of living is similar. A top 5% income is not enough to live a dignified in London where most of those jobs are but it’s high enough that the government won’t let you make more. Very sad situation. Top 5% income in the UK is probably more like top 20% in the USA
jamie_ca 2y ago
I'm in the 45-49 age bracket this year. In BC (Canada), a 95th percentile income for that age is $126,000 (2021 Census). Before any deductions (specifically retirement investments that reduce taxable income) I'd be looking at a 26.85% tax rate, with a marginal rate of 38%. So pretty much the same rate here. Not to say that Canada's overall economy is particularly any better than the UK's, and especially Trump's tariff threats will do a number on us.
- bruce511 2y ago
  >> especially Trump's tariff threats will do a number on us. There will be losers certainly, but I'm not 100% sure that tarrifs for Canada are bad in the long run. Firstly, there are already reports of Canadians buying local over US goods. If that sentiment hrows, and becomes entrenched that's good. Secondly, at least gor some goods, suppliers are incentivised to explore other export markets. Again, long term, that diversification is good. Thirdly, for at least some goods, the US cannot simply ramp up production. So they'll still be buying, but their consumers will pay more. Canadian suppliers can simply increase prices as well, since any US consumer increase will be ascribed to the tarrifs. This though is somewhat balanced by Canadian oversupply. Fourthly it encourages producers to diversify somewhat to reduce over supply. In the long run a varied economy is better than one dependant on any one sector. Ultimately Canada and Mexico could come out of this stronger. While the US consumer gets used to higher prices. (Which Canada et al can take advantage of whe tarrifs are removed.)
- benmmurphy 2y ago
  the UK has a 20% VAT as well. I don't think the person you were replying to was taking that into account. Also, they are probably not taking into account employer NICs which are effectively the same in terms of tax incidence as employee NICs but people incorrectly treat them differently because the employer nominally pays them. But if you think about it for a second, your employer makes two payments to the government one of them is called employee NICs and one of them is called employer NICs and both of them are based on the employee's wage so it is silly to treat them differently. Though, I'm guessing Canada probably has employer payroll taxes as well. Employer NICS can get up to almost 14% so it is a significant tax in the UK.
switch007 2y ago
You forgot employers NI (for the unfamiliar - the employER has to pay 15% from April - not a typo - of part of your salary in taxes to the government and this is hidden from your payroll taxes as an employee) What's the % if you include those deductions? In my case my tax rate is 29% but employers NI is 13% so 42%, going up to 44/45% in April
- deleted 2y ago
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- deleted 2y ago
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- walthamstow 2y ago
  I didn't forget it, it's not a deduction from my salary. You don't pay 42% of your salary. Employee NI went down by 2pts last year, employer NI is going up by 1.2pts this year.
  - benmmurphy 2y ago
    Employee NICs and employer NICs are effectively the same thing, they just have different names. Your employer has a bucket of money to pay employees with. Some of this money is given to the government and some of this money is given to their employees. Saying the money given to the government is on behalf of the employee or the employer is mostly irrelevant. There are cases where it is relevant if the employee or employer can get tax refunds against the money but mostly it is irrelevant. Who actually pays the burden of tax is a question of tax incidence (https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence). In theory the burden of income taxes could even be falling on your employer. But it is very likely that most of the burden of income taxes/payroll taxes falls on the employee. But if you are doing cross-country comparisons its much easier to just total up all taxes related to employment in one bucket and compare them under the assumption the incidence burden would be similar across different countries.

laurencerowe 2y ago

> The new payroll taxes (unemployment insurance?) are going to bite both employers and employees alike. Increases to employers' National Insurance contributions. It's the equivalent to Social Security in the US. Mostly goes to pensions.

secondcoming 2y ago

Scotland has higher income tax than England and Wales.