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Comment by Cyclone_ | Hacker News Reader

Looking at salary data from several places, even a $200k base seems pretty rare, most developers are not making that much in the bay area. People in the bay area are going to have less purchasing power than developers in most other places around the country.

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$3690/month * 12 months = $44280. If you're making ($44280 - current rent in your city) more for a SF job, you net out ahead, even without considering stock options.

(It's also significantly more reasonable in the South Bay - my family pays about $2650/month for a 2BR, and most of the fat Facebook/Apple/Netflix/Google salaries are in Silicon Valley proper.)

I'd definitely keep in mind that those are after-tax figures, though. At the higher income levels, CA+Federal taxes hover around 50%. So, roughly double that rent difference to get the salary offset needed.

Really? At what income level in California are you paying half your income in taxes?

From what I've seen I think it's around 38-40% state+federal when you reach about $200-300k then about 50% by $1m annual income... Might be better or worse this year with the new tax bill, not sure.

> Might be better or worse this year with the new tax bill, not sure.

Much better for those who can arguably restructure their salary as business income (e.g., real estate developers, some contractors), then they only get a 15% tax. Far worse for those who cant make that argument and live in high tax states like NY, CA, and many others.

When comparing alternatives you want to look at marginal rate. Above $82k, your marginal tax rate is: 24% federal income + 6.3% social security + 1.45% medicare + 9.3% California + 1.5% San Francisco for a total of 43%. This is not the same thing as paying half your income in taxes, but it is paying (nearly) half the additional income in taxes.

6.2% social security drops off after $132,900.

https://www.irs.gov/taxtopics/tc751

50% is a high estimate, good for budgeting though. With property taxes, vehicle registration fees (aka taxes), school fundraising (aka taxes), tolls (also tax), health insurance (a tax if it’s mandatory), and other fees for dealing with government, you get pretty close to 50%.

The only way to beat this is to make a significant portion of your income via capital gains, that’s one big advantage of the real estate business, various loopholes exist to let you minimize taxes (like 1031 exchanges) on increases in your net worth.

What’s the 1.5% SF tax here ? Never heard of it. Isn’t SSN and Medicare only apply to 100k of income ? Also, you have deductions for mortgage, state taxes, property taxes that lower your tax liability quite a bit. I would be surprised if anyone paid more than 30% effective tax rate on their income

Sorry, I meant marginal tax rate, since we’re looking at the diff. At the $300k level, that’s around 35% Federal, and 11.3% CA. CA also has a relatively high 9% sales tax, and I believe SF proper has some special taxes as well.

That's if you only consider the housing cost. But if housing costs more then so does everything else, because everyone providing everything else has to pay the housing cost too, both for commercial real estate and higher costs per employee. Then you have the tax implications, i.e. all the extra money required should be calculated as after-tax at your marginal tax rate, both federal and state, and California has the highest income tax rate in the nation.

"But if housing costs more then so does everything else"

That's not really true. Restaurants are more expensive in the Bay Area. Fresh produce is not, if you know where to shop - actually, when I go basically anywhere else in the world, one of the things I miss is the ability to fill a whole shopping bag with 10-15 lbs. of vegetables for < $10. Gas is more expensive, largely because of taxes. Cars are not. Durable goods cost the same as everywhere else. Amazon charges the same (modulo taxes) regardless of where you live. Airline tickets don't have appreciable differences. Baby things (modulo housing and childcare) are cheaper, because the Bay Area is dense enough and tech savvy enough that you can get a lot of toys/cribs/strollers/mats/gates/playthings for free or cheap on NextDoor/Craigslist. A dollar of savings is the same in SF as in Alabama.

The point about tax rates is true for rentals. You can do the math yourself on whatever offer you happen to get - figure on housing in SF being ~$40K/year, meals out costing about $20/person, grocery food being about the same, public transportation being a few dollars a trip, and gas being negligible because you'd have to be pretty crazy to want to drive (and park) in SF.

A dollar of savings is not the same, because your savings needs are proportional to housing costs. Whether it is to make a down payment, pay rent while laid off, or maintain your lifestyle in retirement, you need a much larger savings balance to buy the same capability. Even if it’s a kid’s college fund, as an upper middle income worker in a flyover state you will probably qualify for financial aid; even with the same take home budget, in a high wage high cost scenario you will not.

There's nothing stopping you from moving to a lower cost-of-living area when you need to dip into savings. If you save up a million dollars in the Bay Area, you always have the option of moving to Chicago and buying 4 houses, if you're willing to put up with the cold. The reverse does not necessarily hold: if you save up $100K in Chicago and then need to come up with a down payment for a home in the Bay Area, you're screwed.

For that matter, the higher home prices also come back to you if you choose to move elsewhere (as long as Bay Area real estate doesn't crash). A number of the homes I've been looking at are on the market because the kids are grown, the owners are retired, and now they want to take their $1.3-$2.4M and move to Nevada/Florida/Arizona or some other low-COL area.

Besides the life you and your family have built.

If saving $30k in Chicago lets you sustain your lifestyle for 12 months of unemployment, and saving $30k in San Francisco gives you the option to leave everyone you know and move 2200 miles to Chicago for 12 months of unemployment, those dollars of savings are not at all the same in terms of the protection they offer.

Living in the Bay Area can be a good deal, but to figure out whether that's the case, you need to set savings targets in terms of equivalent capabilities. Different people can place higher and lower value on location stability, but in any case the value is not $0; moving trucks and realtors are not free.

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