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Comment by alipang | Hacker News Reader

I have a company in Bulgaria while working remotely for a high-salary EU country, and it's almost shocking to realise how much you spend on taxes in most European countries when you see the difference in your bank account.

It's quite a good deal if you want to be a digital nomad since it's an EU country and you can get a really small apartment for almost nothing to use as your official address while travelling. (You'll have to be at least fiscally resident there)

Feel free to PM me if you want some tips on how to get things set up there.

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How bad is it? I pay more than 50 percent of my income in various taxes in the United States.

Before anyone asks, federal income, Medicare, Medicaid, social security, state income, state sales tax, local property tax, and lesser- luxury and gas tax.

For comparison sake, sales tax, gas tax and so on would not be considered under tax by someone living in Europe in that sort of calculation. People would mean income and social tax.

That's not a Europe/US thing. Most Americans wouldn't count them either. However, they're both wrong to not count them. They absolutely count.

Some Americans don't even count the FICA taxes (social security/medicare contributions) as taxes. That way they can claim that the poor don't pay any taxes.

They're fundamentally different, one is a progressive tax designed to support a civil society (income tax) and the other is a regressive usage-based tax designed to dis-incentivize behavior such as smoking, drinking and using gas/private automobiles. One's a benefit driver, the other is designed a penalty or market force.

Ok, but they are both taxes, yes? And they both diminish your effective income. So, when calculating the relative tax burden between countries, they both count.

They do both diminish your income, but only if you insist on doing things society doesn't want you to do. Driving is optional, smoking is optional, drinking is optional. You can opt out by changing your lifestyle to be healthier and more sustainable -- in which case you'd not pay that tax in either country. Income tax isn't optional.

Sure, but you either are or are not willing to make those changes, and you presumably already have made them to the extent that you're willing. Whatever burden ends up being imposed based on your consumption habits simply is what it is.

True of course, but hard to factor in. If you move from rural America where a car is required the gas tax burden is going to drop substantially if you move to Amsterdam where nobody has cars, even if the gas tax is 3X higher. I definitely see your point, it's not easy to directly translate.

Ya you just have to scale by lifestyle factors. If the lifestyle factors are likely to change with location, then you definitely need to account for that with respect to your personal situation.

Denmark has a law that you can't be taxed more than 56% of your income. Then there is 25% VAT (sales tax), so if you're in the top bracket and spend your entire income you can theoretically be taxed 67%. Cars have a special 160% tax (you pay 260% of base price). And there's no capital gains loopholes. There's no payroll tax per se, but the employer contributes to a maternity/paternity fund in addition to some other small items.

It's very true that the Danes receive good free health care and have good universities, but the longer I live here the more I see that a huge amount of tax revenue is squandered on administration. I'm pro taxation, but it's hard to be exposed to such waste.

If you pay taxes abroad the US will still haunt you to show that you paid - and if it's lower than you would have paid back home claim the difference.

Many American expats in Europe that have acquired the right for local nationality give up their nationality for that reason.

> If you pay taxes abroad the US will still haunt you to show that you paid - and if it's lower than you would have paid back home claim the difference.

That's only if you're lucky, and move to a country with a no-double-taxation treaty. There's only a few of them. No tax treaty, you pay the full amount due to both governments (after excluding your US foreign earned income allowance ~$90K).

Worse, if you live in a foreign country and start a business you now own what the US considers a "foreign controlled corporation" and your new nightmare begins. Not to mention many banks won't do business with you abroad because of FATCA and you have to report your balances annually to FinCEN or risk forfeiture of 50% of the balance in the account. And you can't open a brokerage account in a foreign country because you can't have an account not overseen by the SEC.

Then if your child is born abroad with no other connection to America they'll suffer the same fate for the rest of their lives unless they renounce, which itself comes with substantial costs.

I think the number of renunciations is fairly low because most dont make >90K in foreign countries, and FATCA is new-ish.

I doubted that "many" expats give up their US citizenship so I tried to find some numbers. Found some secondary sources like: https://www.forbes.com/sites/robertwood/2018/05/14/fewer-ame...

which states that, worldwide, just over 5,000 Americans renounced citizenship in 2017. There are also about 9 million Americans living abroad and ~1 million living in Europe. So, no, I don't think that even if all 5,000 were in Europe that 0.5% renounced their citizenship would count as "many".

How many of these " ~1 million living in Europe" are with the US Armed Forces? (Be it as service member, spuse, family)

Quick research: Kaiserslautern Military Community has ~50k people. https://en.m.wikipedia.org/wiki/Kaiserslautern_Military_Comm...

Now that's the largest, but by far not only location with US Military presence in Europe.

I'm curious, where are you heading with this counter argument? That perhaps, something like 900k Americans living in Europe are in the US Armed Forces, leaving 100k regular US citizens. So then, if all 5k of the US citizen renouncers worldwide are in Europe, then 5% of the remaining 100k _does_ count as "many"?

Additionally, you still owe the US tax for ten years after renouncing

Look mate, I know a lot of American expats and in my circle not a single one has relinquished citizenship. The few that are aware of our dumb tax laws just see it as another cost of being american. Except for the extremely rich, the cost to return the passport is much higher than simply keeping and renewing it.

Why are white people expats when the rest of us are immigrants ?

" Defined that way, you should expect that any person going to work outside of his or her country for a period of time would be an expat, regardless of his skin colour or country. But that is not the case in reality; expat is a term reserved exclusively for western white people going to work abroad.

Africans are immigrants. Arabs are immigrants. Asians are immigrants. However, Europeans are expats because they can’t be at the same level as other ethnicities. They are superior. Immigrants is a term set aside for ‘inferior races’. "

https://www.theguardian.com/global-development-professionals...

In terms of finding things to be angry about this one is the particularly pathetic. Thai people call outsiders Farang. The Japanese are hostile to foreigners of any other nationality. Take up your cause with them first before you start accusing an entire continent with a rich modern history of tolerance of thinking they are superior.

You have to make more than $2M a year to pay 50% or more of your income in taxes in California: https://smartasset.com/taxes/income-taxes#nJbFzkKePY

Of course, above calculator doesn't include sales, property, luxury or gas taxes.

10% sales tax, and a couple percent property tax on a $500k-1mm home (in CA) moves that threshold a lot, lot lower.

When most people say "50% of their income" they tend to mean on a marginal basis.

Now that Donny capped state, local and property tax deductions at $10,000 per year (meaning you get double-taxed on the rest) and reduced the mortgage interest tax deduction cap from $1M to $750K, that number got much closer.

At $300,000 you're paying 48.65% marginal. That doesn't include, in SF, a 9% sales tax, a 1.188% property tax (that of course even renters pay as owners use rental income to offset that cost), and to your point, luxury and gas taxes.

That seems steep? What about health insurance? I worked for a few years in The Netherlands and paid a little over 50% of my salary in taxes, however in return I had access to amazing government resources and some of the best health care in the world. At 50% I'd expect the US to provide at least some healthcare :(

> At 50% I'd expect the US to provide at least some healthcare :(

So would many Americans. But those defense contractors need their cut. And non-US projects tend to be more expensive than other countries as well.

Surprising to most, the US governments spend a higher percent of GDP on healthcare than most European countries[1]. Then we also have high private sector spending on healthcare. Its pretty crazy.

[1] https://www.healthsystemtracker.org/chart-collection/health-...

Those comparisons aren't very enlightening if you don't compare the quality of services provided.

Luckily for you the OECD [1] and WHO [2] did just that and the results are awful for America, performing markedly worse than systems that cost one third as much.

[1] https://www.oecd.org/unitedstates/Health-at-a-Glance-2017-Ke...

[2] https://en.wikipedia.org/wiki/World_Health_Organization_rank...

Great, that's exactly what I was talking about.

I'm not sure what warrants that tone, when I was simply stating something obvious (you can't judge a healthcare system by its cost if you don't look at the outcomes).

Thank you for contributing more valuable data/information.

It's interesting to see that the WHO methodology also got criticized. This points to the complexity of actually picking the right metrics/outcomes you want to optimize for.

> I'm not sure what warrants that tone...

Sorry if it didn't come across that way, it was meant to be light-hearted ^_^ tone doesn't always carry well over the internet. I wasn't criticizing you at all.

The OECD data is pretty damning. America leads its peers in obesity, smoking, air pollution and bankruptcies, and lags dramatically (1-2 standard deviations) in consultations skipped due to cost, population coverage, life expectancy, doctors per capita and beds per capita. Mission failed, IMO.

All for the low, low price of twice to three times what most other countries spend.

Does it really matter how much better it is when you can go immediately bankrupt from a simple procedure? I imagine there is immense pressure and loss of wealth by simple virtue that people probably don't maintain good health but go in when it gets bad enough that going bankrupt is worse than dying or being violently ill with no end in sight.

You're muddying several issues here. I'm simply stating that the value of a healthcare system in terms of outcomes must be compared to how much it costs. What you're talking about is how the system is financed, which is a different issue.

For example, as a French citizen, I would expect that if we're in the top 5 in terms of spending (regardless of whether it's done privately or publicly), we should have a system that's in the top 5 in terms of outcomes.

I wasn't in any way trying to suggest the US healthcare system is the "best" or whatever, just pointing out that pure cost comparisons are meaningless.

You would hope an increase in cost is correlated to an increase in the quality of care.

That does provide healthcare - Medicare and Medicaid, which I believe covers about half of the US population. One reason some are opposed to going to a government paid system is the fact that we spend so much on that where if the costs were simply doubled it'd be a rediculous expense.

Well, by looking at more advanced countries that do have universal healthcare at fairly reasonable tax rates, there are models for how it can be done without doubling our taxes..

> One reason some are opposed to going to a government paid system is the fact that we spend so much on that where if the costs were simply doubled it'd be a rediculous expense.

They're wrong because Medicare and Medicaid are more efficient and control costs better than the private sector. Costs are already more than doubled once you add in the private sector. Even if taxes were doubled y'all would still end up paying less on the net because your employers are already paying for healthcare, which is a private tax.

>One reason some are opposed to going to a government paid system is the fact that we spend so much on that where if the costs were simply doubled it'd be a rediculous expense.

Or maybe people would realize a County like Germany is able to cover the entire County (2x as many people as Medicare) while spending half the Medicare budget. Then, questions of waste and fraud might pop up, which no one involved wants to happen.

Germany's healthcare is very efficient, but definitely very conservative in the treatments.

Issues are often just ignored until they go away. It usually works fine though, so it's not necessarily bad.

>Issues are often just ignored until they go away.

In someways thats part of the reason our Medicare program is so expensive.

In the US we essentially go an entire lifetime without regular/preventative care, then when patients become eligible for Medicare, they have a lifetime worth of chronic illness that is treated on the tax payers dime.

7 out of 10 Medicare have at least 1 chronic condition, and chronic conditions are notoriously expensive to treat. Whereas nearly 100% of chronic conditions could be avoided if the patient had regular/preventative care (for example identifying prediabetics or patients with high blood pressure, or heart disease) while they were young enough to make the lifestyle changes to avoid these conditions altogether. Our system is essentially designed to ensure patients are both chronically ill and expensive before they are eligible for coverage.

Excess care and excess testing are not always correlated with better health outcomes. Doing more isn't always better.

Medicare and Medicaid cover about 1/3 of the us population.

They are about half of the spending though. Old people use a lot of health care.

well for comparison, in beautiful Greece, your total income tax & social security ranges from 50% - 75%. In return you get lots of sun, bureaucracy and sweat.

https://s.kathimerini.gr/resources/2017-12/s3a_3112foroi-eis...

Plus EU taxes often cover healthcare so there's another huge chunk of change gone for US residents when comparing.

That's incorrect. Essentially all decent paying jobs in the US take care of most or all of the healthcare cost you're referring to. That is especially true for eg software developers who earn six figures at the median.

To balance a proper comparison if you're going to include the EU taxes re healthcare, you would have to inflate US wages even higher to account for the benefit that employees receive (money that otherwise would be available for labor competition in the form of salary), which is often a large sum of money given the cost of US healthcare.

US healthcare per capita is typically 100% (double) more expensive than in Western Europe. It's about 130% more expensive versus Britain. It's 200%+ more expensive versus Italy.

A software developer earning $125,000 - $150,000 per year is receiving a minimum of an additional 10% equivalent of their salary in the form of healthcare coverage. More likely 15-20% these days. The cost to put a small family on a good health plan will easily run you $20,000+ per year.

you might want to check the stats for the claims in your first paragraph, unless "decent job" in this case is top 5%. Only 49% of Americans have employer sponsored health plans and most of those are not entirely paid for by the employer. and only 91% of Americans are insured.

My family healthcare coverage at my "decent paying job" at a software company in the US cost me about $13,000 out of pocket in 2018 including employee premium and medical cost before reaching deductible. I would certainly consider that to be an additional tax when comparing against the EU tax rates that include healthcare.

> small apartment for almost nothing

ha-ha-ha-ha-ha, the only problem is with people gone infrastructure around those apartment is quickly going down the drain

Don't you have to spend > 50% of your time in Bulgaria in order to be considered a tax resident there? I suspect a lot of the "too good to be true" tax evasion stories in this thread depend on lying about your true place of residence?

There's definitely some hoops you may have to jump through, and as I mentioned I'm recommending this for digital nomads, not some random tax evasion scheme if you actually live permanently in some other location. This is probably doable, but illegal and risky.

In my case I officially rent a very cheap place in Sofia, Bulgaria's capital (< $100) which I don't use much, and travel a lot to other places (even within Bulgaria, as it's so affordable, so I actually do end up spending a good chunk of time there anyway though).

As a nomad, all you really need to do is make sure no other country has any claims on your tax revenue. Conditions varies - and it may be a good idea to not even own property in some countries. But mostly as long as you don't spend >50% of your time in any other given location they won't consider you liable to pay taxes there.

Note that Bulgaria of course does not have any complaints about me paying taxes in Bulgaria, regardless of whether I'm there or not. I'm basically just giving the tax money - this would probably be different if I wanted, say, citizenship, but that's a different issue.

Hope that's helpful.

You have to spend less than half a year in your home country to lose its tax residency AND you have to spend over 6 months in some other country. This applies for most if not all European countries: https://europa.eu/youreurope/citizens/work/taxes/income-taxe...

Therefore such tax optimisations won't work if you can't actually move to the other place and I guess for 99% of us it's not worth the hustle even if it allows you to save much more.

> I suspect a lot of the "too good to be true" tax evasion stories in this thread

Considered by whom and for what purpose? Bulgaria certainly aren't going to complain if you start declaring your income as arising there, for example via a Bulgarian company.

Much more important is where any other country who might have a claim on your tax think you are resident, and if you manage to not be resident elsewhere, you're doing fine.

That would still be illegal, just because no one is enforcing it doesn't make it legal.

FWIW, some of the other low tax jurisdictions in Europe actually do audit expats living there, to ensure they are actually spending time there. I know Monaco does.

> That would still be illegal, just because no one is enforcing it doesn't make it legal

What is it you think would be illegal? You appear to be pretty confused between "liable to pay tax", "resident enough to convince your home tax jurisdiction that you're no longer resident there" and "resident enough to qualify for citizenship programme", all of which are quite different.

cute games only work so long.

first rule and most important one... never F the tax-man.

There's downsides too, for example Stripe is not available in Bulgaria.

Is there a way to PM on YM?

PM ... how?

What's the best way to contact you?

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