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I explained to someone I supervise yesterday during a conversation that the company pays roughly equal taxes on our income as to what we ourselves pay on it, it

I explained to someone I supervise yesterday during a conversation that the company pays roughly equal taxes on our income as to what we ourselves pay on it, it blew her mind. The only reason I know about it is because I researched self employment taxes for my SO last year and was curious why hers were so high.

Aurornis 1y ago
I think it surprises 80% of the people I talk to about it. Many people don’t believe me or assume I’m wrong. This is why payroll taxes are popular with politicians: They hide the real tax rate out of sight of the employee.
- MrDarcy 1y ago
  They’re not hidden at all. Every pay stub you receive has a line item stating exactly what the employer paid and a separate line of what you paid.
MrDarcy 1y ago
It’s not roughly equal at all. Let’s round up and say the employer pays 10% and the employee pays 10%. For self employment that goes to 20% But, in the US, you can pay yourself whatever wages you want and take the rest as a distribution which is not subject to employment taxes. So if you make 100K as an employee, then quit to freelance, you just pay yourself 40K in wages (or whatever you deem a reasonable salary) take the rest as a distribution and come out ahead. The other comments about PTO and employees costing more are similarly “wrong” in that there’s a simple bottom line and the other costs beyond wages simply aren’t that significant, especially at the higher end. Insurance costs don’t scale with wages. 401k is easily obtained inexpensively as a freelancer, etc. Time off is easily handled with monthly or weekly rates instead of hourly. All in all it simply comes down to if you can convince someone with a budget to get a SOW signed and a PO issued. Everything else is just fungible numbers business move around on a PnL report. The real bottom line is they offered to pay you 30 EUR and you accepted it. The freelancers did not.

Aurornis 1y ago

I think it surprises 80% of the people I talk to about it. Many people don’t believe me or assume I’m wrong. This is why payroll taxes are popular with politicians: They hide the real tax rate out of sight of the employee.

MrDarcy 1y ago
They’re not hidden at all. Every pay stub you receive has a line item stating exactly what the employer paid and a separate line of what you paid.

MrDarcy 1y ago

It’s not roughly equal at all. Let’s round up and say the employer pays 10% and the employee pays 10%. For self employment that goes to 20% But, in the US, you can pay yourself whatever wages you want and take the rest as a distribution which is not subject to employment taxes. So if you make 100K as an employee, then quit to freelance, you just pay yourself 40K in wages (or whatever you deem a reasonable salary) take the rest as a distribution and come out ahead. The other comments about PTO and employees costing more are similarly “wrong” in that there’s a simple bottom line and the other costs beyond wages simply aren’t that significant, especially at the higher end. Insurance costs don’t scale with wages. 401k is easily obtained inexpensively as a freelancer, etc. Time off is easily handled with monthly or weekly rates instead of hourly. All in all it simply comes down to if you can convince someone with a budget to get a SOW signed and a PO issued. Everything else is just fungible numbers business move around on a PnL report. The real bottom line is they offered to pay you 30 EUR and you accepted it. The freelancers did not.