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Comment by jhasse | Hacker News Reader

> you have to give away sometimes more than half of it

Where?

This is the tax in Germany for example: https://upload.wikimedia.org/wikipedia/commons/thumb/0/06/ES...

In the UK the marginal tax rate between £100000-£123700 is 60% as you gradually lose your tax-free allowance, so even though the tax is technically 40%, you're losing another 20% at the other "end" of your income - https://eqinvestors.co.uk/library/avoiding-the-60-percent-ta... .. Admittedly this never means 50%+ of your entire salary is tax (you keep 59.6% net of even a £1M salary, for example) but is a real pain point for earners around the £100K level.

Above 70k, you are supposed to start your own business and optimize your expenses through that. Despite recent squeezes on related practices, it's still much better. Not doing it, is basically a gift to the taxman.

Agreed, though I think it's even more a disincentive to pay yourself more than 100K, even if you're mostly on dividends, once you've already seen ~20% come off for corporation tax.

For third parties unfamiliar with the setup, to pay yourself those dividends that take you from £100k to £110k, you need to take £12500 of biz profit, then £2500 goes to corporation tax, then £6000 to the taxman in personal taxes, leaving you with £4000 from that initial £12500 profit(!) which "feels" like a 68% tax to, say, a contractor in that situation (note: I am not a contractor).

But that's the thing, you don't pay yourself in cash - you move most of your expenses to the company (cars, houses, investments, pension payments etc), so that money is only touched by corp tax. You take out the bare minimum that you cannot reasonably claim as business expense, squeezing your taxable income all the way down. When you reach a point where that's not possible, either you are making way more than 150k or you have a poor accountant.

At >£100k it is better to create offshore structure, but they are honing on that bit as well.

Employer spends 4k€ on salary. Gross salary will be 3k€ (Bruttolohn) due to social security the employer pays for you. Net salary (Nettolohn) after taxes and your social security is 1850€.

This example is from 2010 back when I was a student. Since I only worked 6 monhts, I got back 300€ per month, so effectively received 2150*6 = 12,9k out of 24k paid by the employer.

Note that when you spend money, you'll most likely additionally pay 19% VAT, so out of your standard 1800€ another 324 are spent on VAT.

Hopefully you don't buy gasoline, electricity or products that are produced or transported using gasoline or electricity, because then the taxes paid will be higher.

;-)

The highest tax rate in the Netherlands is 51,95% (Note that this only covers anything you make over ~70k+ a year, 0-20k is taxed ~35%, and 20-70 is taxed 40%). Then you pay 6-21% VAT over anything you buy, so yeah, in some scenarios you definitely lose >50% of your gross income to taxes.

https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/...

> Note that this only covers anything you make over ~70k+ a year, 0-20k is taxed ~35%, and 20-70 is taxed 40%

Which means that you'd need an income over 480k a year to get an effective tax rate >50%.

I hope I calculated that correctly: http://www.wolframalpha.com/input/?i=solve+((x-70)*0.5195%2B...

> Then you pay 6-21% VAT over anything you buy, so yeah, in some scenarios you definitely lose >50% of your gross income to taxes.

If you count VAT, you'd also need to take into account all the benefits you get in return from the state.

You don't just count VAT, let's count everything: 150%-250% taxes on energy, ridiculous amount of fees and duties. As a Dane, we're probably the most taxed in the world and for a high earning software engineer it's approaching 75%.

The state enables a lot of stuff for you in return though, which we'd also have to count as a benefit if we "count everything". It's just infeasible to come up with a concrete number of how much they "take away" from your earned money.

I have the same benefits in the US as in Denmark (more or less). In the US the government take 25% of my income in Denmark it was around 75%. Personally I don't think the extra 50% is worth it. The only ones better off in Denmark is the minimum wage earners.

I highly doubt it's that simple, sorry.

@rglullis: Well. There is social security, health care, retirement funds and there are taxes.

Well: I gladly pay health insurance in Germany instead of having an American system. Could it be better - hell yes. There is so much bullshit being paid for and so much in the system is made to extract money. But first: taxes are not the culprit here. And second: Pay for healthcare in the US yourself and see what system you like better. Esp if you get older.

As a Dane living in the US. I'll take the US health system anyday over the danish system. Just too bad Obama increased premiums by 50-100%.

It is a false dichotomy. I don't mind the health insurance being mandatory, much like I don't mind people being forced to pay for car insurance if they drive a car. What I find absurd in Germany is that you pay based on your income, just that. I would accept it being factored in, but not being the sole metric to determine pay.

Most health insurances will give you benefits for staying healthy (e.g. visiting the gym or a nutritionist). Visiting the dentist at least once a year will also give you a benefit. There might be other stuff I can't think of right now.

So income isn't the sole metric which determines the pay.

Please tell me how I can reduce my TK payment by showing them my gym membership, and I will be very grateful. No sarcasm here.

Also, as far as I know there is no benefit in going to the dentist, except as "We pay one dental check-up and one clean-up for year, more than that comes out of your pocket". That is at least what I was told when I went to the dentist.

> Please tell me how I can reduce my TK payment by showing them my gym membership, and I will be very grateful. No sarcasm here.

It looks like the TK doesn't pay for just visiting the gym: https://www.tk.de/techniker/service/leistungen-und-mitglieds...

> Also, as far as I know there is no benefit in going to the dentist, except as "We pay one dental check-up and one clean-up for year, more than that comes out of your pocket". That is at least what I was told when I went to the dentist.

They will pay more for a tooth replacement if you visit the dentist on a regular basis: https://www.tk.de/techniker/service/leistungen-und-mitglieds...

Some public insurances tried giving benefits for going to a gym or having reduced membership fees at partners but this has been shut down by the regulator.

You might be interested in their bonus programme: https://www.tk.de/techniker/service/gesundheit-und-medizin/p... Some public insurers have a more extensive one or special, reduced tariffs under some conditions (Wahltarif).

Anyone earning over €60k in Germany can opt for private health insurance.

Bear in mind this is only income tax. If you put deductions like health insurance (mandatory, and also dependent on income level) my take-home pay was indeed less than 50%.

Right, but that money isn't used for the benefits of "people who don't give a flying toss" - you'll get a value out of it (health insurance).

Furthermore you'd also need to take into account all the costs you can set off against tax liability.

Paying health insurance is apart from the income tax. So in this particular case your income tax money is not getting you anything in return, healthcare-wise.

Worst in case of health insurance, the amount you pay is dependent on your income, not your actual actuarial risk. This means that, indeed, the healthy people working are subsidizing the costs of the ones "who don't give a flying toss".

And don't get me started on things like Künstlersozialkasse...

I consider "health insurance" to be somewhat of a scam, just less so in Europe than the U.S. I feel like I'm forced to pay into a black hole with no accountability.

Don't know anything about Künstlersozialkasse - "artist social fund". Is that like a tax to (supposedly) support cultural activities..?

No, more like a social security system separate for the artist "class". If you manage to declare yourself as an artist, they pay a substantial part of your health insurance, social security, etc... All funded by us, poor feeble minded workers with no creative bone in our bodies, to support 20-somethings and eternal Peter Pans who can't keep a job.

The Künstlersozialkasse is funded by companies which utilize creative work such as publishers, media, ad agencies, museums, etc.

You are technically correct. In practice, I had colleagues working as "web designers" who were working right next to me and would not get a substantial part of their salary taken out for health insurance. So, they were still funded by the non-artists.

Why the distinction? Because this work involved Photoshop and mine used emacs?

As I said, the portion they don't pay is taken from companies using creative work. Not from you and not from me.

It is only available to freelancers. People working in those fields usually don't have the option of regular employment. For that reason was decided that companies using their work still need to contribute to health insurance (as all regular employers need to do as well). For everybody else the answer is: seek regular employment if you want someone else to pay half of your health insurance.

Alright, then. One could argue that the costs that companies have with this still get passed along to the consumers and other workers, but I will concede it is not "funded by us".

Still does not explain why there is a distinction. Why do artists get to have companies paying them part of their social security while other freelancers still need to make this out of their own pocket? If this is a good idea for the artists, why not for other professions?

> I feel like I'm forced to pay into a black hole with no accountability.

Why exactly is it a black hole? Doctors need to be paid, too.

German public insurance is pretty transparent about what happens with their money. Why exactly do you feel it's a black hole?

I'm curious, but you do know that there's other taxes than income tax, right?

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