Actually i would say, instead of having these charts which compare total comp, its better to have a survey on how much people save after rent, taxes, and basic living expenses (not including loans etc.)
Are you confident about this? My experience as a single guy in that total comp range is closer to 25 percent taxation. The marginal rate is that high, but only a small chunk of a 200k income is taxed at that rate. In fact, Social Security caps out before there. And if you're married, it's even lower.
But my impression was that Europeans are taxed at an even higher rate; is there some reason listing pretax salaries would be deceptively high?
What state are you in? My experience is more similar to the parent post; bonuses which are part of your total comp get taxed slightly higher than base pay. After CA income tax, etc etc effective tax rate is easily 40%+.
This is incorrect. The taxes withheld when the bonus is paid may be different, but for annual tax calculation all that matters is the total income (bonus or not).
https://blog.turbotax.intuit.com/income-and-investments/bonu...
"Remember, taxes may be withheld from your bonus at a higher tax rate at payout, but when you file your taxes at tax time your actual tax rate is based on your total taxable income and overall actual tax rate (...) you may get some of the money withheld back in the form of a tax refund."
> After CA income tax, etc etc effective tax rate is easily 40%+.
For a sufficiently high income, sure. In 2018, a single person living in California with no deductions, no contribution to retirement accounts (401k, IRA) or HSA and earning $364k would pay $145,602 in federal+state+FICA taxes, which is 40% effective rate up to 4 significant digits:
https://smartasset.com/taxes/income-taxes#XFuV4Aoe9F
This is the worst case (high state income tax, no deductions, no pre-tax retirement contributions, single) - change any of those factors and you're paying less than 40% effective rate.
If I had to guess, very few people around the world will be shocked to learn that someone earning $364k in California will net only $220k after paying taxes. In most of Western Europe they'd be surprised your effective tax rate is so low while earning 20x the minimum wage.
California.
> After CA income tax, etc etc effective tax rate is easily 40%+.
The marginal rate is that high yes. Pretty easy breakdown at 200k:
CA Disability: 0.00% (phased out at $114k) Social Security: 0.00% (phased out at $128k) Medicare/Medicaid: 2.35% California Tax: 9.30% Federal Tax: 32.00%
So that's around 40 percent of every _extra_ dollar, emphasis on "extra". The average rate rate is far lower, around 18% federal, 9% cali.
> My experience is more similar to the parent post; bonuses which are part of your total comp get taxed slightly higher than base pay.
Your experience with bonuses is misleading. They're taxed as normal income, but the withholding formulas for paychecks are calculated independently per paycheck, as if you earned that much every paycheck. So if you have one biweekly paycheck with a 15 percent of salary bonus, that's taxed as if you made 5x as much. End result: you are withheld as though in the top tax bracket for the bonus paycheck, and your refund will be larger than expected.
tl;dr: don't look at your pay stubs, look at the actual tax returns you file instead for effective tax rates.
For a $500k income in CA
29.59% Federal Income Tax
+ 10.48% CA Income Tax
+ 1.59% Social Security
+ 1.99% Medicate
----------------------------
= 43.65% total tax rate.
Should be roughly 42% pre-deductions/writeoffs.
...But in truth, if you're making around the $500k ballpark, you're doing pretty well financially.
Also yes; just pay the tax, and then some. It helps everyone. If the country is sane in terms of politics of course, and doesn't have the military as its biggest expense. That makes it clear they're more concerned with international affairs than their own people.
But: 42% is the effective tax rate (not marginal, average). And this is pretty close to 45%. For a hypothetical person making $500k or more as regular income in CA (as many of the posted salaries above would be), they would indeed pay about $210k in taxes plus Medicare plus Social Security.
For lower income levels than that, or if you're married, or live in a state with lower state taxes, the numbers look much better.
Many of these equity packages include components that can top 6 figures a year. $100k in equity every year for 4 years is not an unreasonable equity package for a mid-senior engineers (5+yrs exp).
Actually for RSUs you are taxed at vest, so it's your pay tax rate (probably in the realm of 35%+). What's taxed at 15% after a year is any additional gain from vest time. So if you get 4 google stock at $1000 a piece, they sell 2 to cover your tax liability, refund you the difference between $2000 and .35*4000, and you get 2 stocks you've just paid full taxes on. If in a year they're worth $1200 a piece, you can pay additional taxes of only 15% on the $400 you just made by holding onto them.
This is the one where employees do not have to pay the income tax that would normally be charged on the market value of any shares or options granted to them.
If employees are given options under an approved EMI, they are only charged capital gains tax at 10% on the increase in value over what they pay for the shares (the option's 'exercise price'), so long as that price is at or above the market valuation of the shares on the date of granting the options.
If I purchased them as options, different things would apply. But I'm happy paying tax on income of it means I get the shares for free.
The change in price if the shares is taxed as capital gains though.
Stock gain does account for a significant portion of comp the past couple of years though so it’s not a small thing.
Options (vs RSUs) also have slightly different mechanics.
Gains after vest can't really be counted as comp, since anyone else could have bought those same shares and made those same gains. That's just investment income; attributing it to your employer/employee relationship is silly.