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> "...is he paying that much more in taxes than he would be if was just a salaried employee at a regular company?" Not quite. Some taxes are paid by the employ

> "...is he paying that much more in taxes than he would be if was just a salaried employee at a regular company?" Not quite. Some taxes are paid by the employer, and some taxes are withdrawn directly from your paycheck. When you are self-employed, you see exactly how Uncle Sam gets both sides of the action.

wmeredith 13y ago
Yeah, this was quite the shocker for me once I started making serious side money. Personal income taxes are about 50% in the US. (Which, by the way, would be totally fine with me if it funded infrastructure and social safety nets. Unfortunately, the vast majority of that goes to wars against nebulous foes, i.e. drugs, terrorism, etc...)
- EdwardDiego 13y ago
  > Personal income taxes are about 50% in the US. I'm not American, but every time I look at taxation levels, I come out with a number significantly smaller than that. I presume that America uses progressive taxation, so at what income level does personal income + payroll tax equate to 50% of gross?
  - stirno 13y ago
    You'd need to combine a very very high income level (well above $450k/yr with lots of money getting taxed in the highest federal nominal bracket), live in a state with high income tax and have a bad accountant. In short, if anyone is paying that much in taxes they are very much doing it wrong... and I kind of doubt people are.
  - derekp7 13y ago
    According to the 1040 tax tables, 100,000 gets taxed at 21,454, so that is 21.4%. Add on 15% FICA (if self employed), 5% state tax, and you are up to 41.4%. Now if you own a house that the county assessor says is worth $200K, you are talking about 8K a year in property tax (this will vary by area, but is true for where I'm at in the midwest). That leaves $55,546 out of the 100,000 to spend. Ok, now try to spend it -- you will pay 8% in sales taxes, for another $4443.68. So all you have left is a shade over 51k, out of that initial 100K that you earned. So not quite 50% taxation, but close enough (actually, some sales taxes are higher, such as gasoline, etc).
    - EdwardDiego 13y ago
      That FICA number is high, at least according to Wikipedia. > Under the SE Tax Act, self-employed people are responsible for the entire percentage of 15.3% (= 12.4% [Soc. Sec.] + 2.9% [Medicare]); however, the 15.3% multiplier is applied to 92.35% of the business's net earnings from self-employment, rather than 100% of the gross earnings; the difference, 7.65%, is half of the 15.3%, and makes the calculation fair in comparison to that of regular (non-self-employed) employees. The rest of your figures aren't really what I'd consider personal income taxation, although they're definitely interesting. Also interesting is that married people in the US of A experience a tax advantage when filing jointly - not so our tax code, it's very theoretically pure.
      - nbouscal 13y ago
        > Also interesting is that married people in the US of A experience a tax advantage when filing jointly It's not quite that simple. Filing jointly confers a tax advantage when the couple makes relatively little, but becomes neutral as they earn more, and is actually a tax disadvantage when the couple makes a significant amount.
        dragonwriter 13y ago
        The advantage to filing jointly is actually when the couple makes sufficiently different income, and the penalty is actually when they are close in income.
        nbouscal 13y ago
        I was simplifying, and your simplification is more accurate, but neither simplification quite captures it. Both aspects play a role, with the amount the couple makes essentially scaling the benefit or detriment. If a couple makes the exact same amount but it's a low amount, there's zero detriment, but if it's a high amount there's a significant detriment. If they make very different amounts and it's a low amount, there's a significant benefit, but the size of that benefit decreases and can disappear entirely as they make more.
- dragonwriter 13y ago
  > Personal income taxes are about 50% in the US. No, they aren't. There are a handful of states where the top marginal rate (combining federal and state rates) is at or above 50%, but that's not the overall rate even for those top earners, and its certainly not the average overall rate in the country.
  - 001sky 13y ago
    Its not an unrealistic marginal rate for NYC or perhaps even parts of California.[1] This is a case where 'average' is often misleading. When you take a salary...its a take it/leave it package (X net of tax). When you are self-employed, you are always deciding: do I do another X for another Y in return. At that stage, its all about marginal ROI from your time. [1] Because of the real estate, many of these types of places are not really 'livable', and you see entry level jobs that offer salaries already at or neat the top tax brackets (despite the fact that these people have few/no assets or real 'net worth').
    - davidw 13y ago
      Nathan lives in Idaho, IIRC.
      - 001sky 13y ago
        There are several states without income taxes and/or sales taxes as well (NV, OR, TX, FL). Depending upon your income stream/sources and lifestyle this is hugely important. Once you retire...for example...you may spend more than you earn...or you may buy a car (that last 10 years). For other people, its real-estate (maintenance) taxes that are a function of asset-bases (often inflated, and not income). {etc}
        davidw 13y ago
        Yes, Oregon has no sales tax. Whenever I go there (home), I always load up on stuff - the VAT here in Italy is 22%!
- stirno 13y ago
  If you add up all the entitlement programs (Social Security, Medicare, Medicaid, etc.) you'll notice they account for more than 60% of the federal budget. Not sure this leaves a 'vast majority' to fund wars.
  - JDShu 13y ago
    Those are not (supposed to be) paid through our income taxes, that's why we get taxed medicare and social security separately. The "vast majority" description does apply if you look at non-discretionary spending. Edit: I suppose it could be argued that money that goes to the military doesn't directly mean funding wars. We have bases all over the world after all.

wmeredith 13y ago

Yeah, this was quite the shocker for me once I started making serious side money. Personal income taxes are about 50% in the US. (Which, by the way, would be totally fine with me if it funded infrastructure and social safety nets. Unfortunately, the vast majority of that goes to wars against nebulous foes, i.e. drugs, terrorism, etc...)

EdwardDiego 13y ago
> Personal income taxes are about 50% in the US. I'm not American, but every time I look at taxation levels, I come out with a number significantly smaller than that. I presume that America uses progressive taxation, so at what income level does personal income + payroll tax equate to 50% of gross?
- stirno 13y ago
  You'd need to combine a very very high income level (well above $450k/yr with lots of money getting taxed in the highest federal nominal bracket), live in a state with high income tax and have a bad accountant. In short, if anyone is paying that much in taxes they are very much doing it wrong... and I kind of doubt people are.
- derekp7 13y ago
  According to the 1040 tax tables, 100,000 gets taxed at 21,454, so that is 21.4%. Add on 15% FICA (if self employed), 5% state tax, and you are up to 41.4%. Now if you own a house that the county assessor says is worth $200K, you are talking about 8K a year in property tax (this will vary by area, but is true for where I'm at in the midwest). That leaves $55,546 out of the 100,000 to spend. Ok, now try to spend it -- you will pay 8% in sales taxes, for another $4443.68. So all you have left is a shade over 51k, out of that initial 100K that you earned. So not quite 50% taxation, but close enough (actually, some sales taxes are higher, such as gasoline, etc).
  - EdwardDiego 13y ago
    That FICA number is high, at least according to Wikipedia. > Under the SE Tax Act, self-employed people are responsible for the entire percentage of 15.3% (= 12.4% [Soc. Sec.] + 2.9% [Medicare]); however, the 15.3% multiplier is applied to 92.35% of the business's net earnings from self-employment, rather than 100% of the gross earnings; the difference, 7.65%, is half of the 15.3%, and makes the calculation fair in comparison to that of regular (non-self-employed) employees. The rest of your figures aren't really what I'd consider personal income taxation, although they're definitely interesting. Also interesting is that married people in the US of A experience a tax advantage when filing jointly - not so our tax code, it's very theoretically pure.
    - nbouscal 13y ago
      > Also interesting is that married people in the US of A experience a tax advantage when filing jointly It's not quite that simple. Filing jointly confers a tax advantage when the couple makes relatively little, but becomes neutral as they earn more, and is actually a tax disadvantage when the couple makes a significant amount.
      - dragonwriter 13y ago
        The advantage to filing jointly is actually when the couple makes sufficiently different income, and the penalty is actually when they are close in income.
        nbouscal 13y ago
        I was simplifying, and your simplification is more accurate, but neither simplification quite captures it. Both aspects play a role, with the amount the couple makes essentially scaling the benefit or detriment. If a couple makes the exact same amount but it's a low amount, there's zero detriment, but if it's a high amount there's a significant detriment. If they make very different amounts and it's a low amount, there's a significant benefit, but the size of that benefit decreases and can disappear entirely as they make more.
dragonwriter 13y ago
> Personal income taxes are about 50% in the US. No, they aren't. There are a handful of states where the top marginal rate (combining federal and state rates) is at or above 50%, but that's not the overall rate even for those top earners, and its certainly not the average overall rate in the country.
- 001sky 13y ago
  Its not an unrealistic marginal rate for NYC or perhaps even parts of California.[1] This is a case where 'average' is often misleading. When you take a salary...its a take it/leave it package (X net of tax). When you are self-employed, you are always deciding: do I do another X for another Y in return. At that stage, its all about marginal ROI from your time. [1] Because of the real estate, many of these types of places are not really 'livable', and you see entry level jobs that offer salaries already at or neat the top tax brackets (despite the fact that these people have few/no assets or real 'net worth').
  - davidw 13y ago
    Nathan lives in Idaho, IIRC.
    - 001sky 13y ago
      There are several states without income taxes and/or sales taxes as well (NV, OR, TX, FL). Depending upon your income stream/sources and lifestyle this is hugely important. Once you retire...for example...you may spend more than you earn...or you may buy a car (that last 10 years). For other people, its real-estate (maintenance) taxes that are a function of asset-bases (often inflated, and not income). {etc}
      - davidw 13y ago
        Yes, Oregon has no sales tax. Whenever I go there (home), I always load up on stuff - the VAT here in Italy is 22%!
stirno 13y ago
If you add up all the entitlement programs (Social Security, Medicare, Medicaid, etc.) you'll notice they account for more than 60% of the federal budget. Not sure this leaves a 'vast majority' to fund wars.
- JDShu 13y ago
  Those are not (supposed to be) paid through our income taxes, that's why we get taxed medicare and social security separately. The "vast majority" description does apply if you look at non-discretionary spending. Edit: I suppose it could be argued that money that goes to the military doesn't directly mean funding wars. We have bases all over the world after all.