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Comment by ccktlmazeltov | Hacker News Reader

If half your paycheck is going to taxes you must have a bunch of $$$, I personally make around 300k/year and I feel like I'm not paying that much taxes. I could be paying much more and still live pretty comfortable, it's pretty outrageous.

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Economists calculate taxes using the “tax wedge”—i.e. what you pay in taxes versus what you cost your employer. According to: https://smartasset.com/taxes/california-tax-calculator#WP4gh..., take home on $300,000 in California is $185,000. But including employer side payroll taxes but excluding benefits, you actually cost your employer $313,000. So your tax wedge is about 41%. Then add in the sales and property taxes you pay directly or indirectly, and you’re probably close to 45%. At $500,000, your tax wedge is 45% before sales and property taxes, so you’re probably over 50% all in.

If we are making international comparisons, I would add the cost of health insurance in california as a "tax". That's the only way to reasonably compare western countries.

I had a friend try to adopt a baby from china many years ago (1990s). He was rejected. The Chinese thought he didn't earn enough to safely raise a kid. They were using a means test designed for US applicants. My friend lobbied to explain all the things he gets in Canada for free, health care being the big ticket item. The Chinese authorities relented and he was allowed to adopt.

> cost of health insurance in California as a "tax"

My company would happily hand our insurance premiums over to California in return for not having to deal with sleazy insurance dickwads.

I like that analogy. But it falls apart in the catastrophic cases where having to pay your own medical bills can bankrupt you, no?

I don't follow how this could be possible. I'd think most people in the US either would be getting health insurance from the government (Medicare, Medicaid), from an "Obamacare" exchange and subsidized, or from an employer where they don't pay cash.

So where would the discrepancy in accounting between that and Canada come from? It seems unlikely that the Chinese government would assume that even Americans buy health insurance retail.

>> It seems unlikely that the Chinese government would assume that even Americans buy health insurance retail.

They aren't assuming anything. They know that healthcare in the US is hit-or-miss, that it is normally for people to move between having and not having healthcare throughout a lifetime.

>> The new report highlights that 5.5% of children under the age of 19 were uninsured, largely because of a decline in public coverage.

https://www.census.gov/library/stories/2019/09/uninsured-rat...

1 in 20 American kids are uninsured, not counting the undocumented who don't answer the census. That's ridiculous today but it was even worse in the 90s. That's why the Chinese didn't want to give kids to non-wealthy Americans. Uninsured children are almost unheard of in Canada. Only some illegal immigrant children, but even there they have systems in place.

"They aren't assuming anything. They know that healthcare in the US is hit-or-miss, that it is normally for people to move between having and not having healthcare throughout a lifetime."

That's a general complaint that has nothing to do with insurance being a cost you pay out of your take-home salary in the US.

Your anecdote seemed to be predicated on an accounting difference between the US and Canada, that the Chinese supposedly didn't know about. I'm saying that doesn't really exist. The sort of people who adopt would have a job with insurance, but the price of the insurance would not be included in their salary.

In my lifetime, I have been uninsured, insured by my employer, on an ACA (Obamacare) plan, etc. But never been in the situation where I was making a good salary and paying full price out of it for a health insurance policy, like people do with car insurance. Nor have I ever known anyone who did. Of course, somebody probably has, somehow, but it's not common, let alone a norm that some government would assume.

I never said my friend had a job. Part of the problem, in the US, is the link between employment and insurance. My friend earned reasonable money as a moderately-sucessful artist but did not have an employer. In the US that would mean paying out of pocket. In canada he didn't have to pay a dime.

Also the self-employed in the USA have to pay over the odds for rubbish schemes. Large employers can be assumed to employ mostly healthy people, but an individual is more likely to want health insurance if they already know they are a bad risk. This "moral hazard" means that selling health insurance to the self-employed is a money-losing proposition unless you screw them at every opportunity.

I’m no fan of health insurance as currently instantiated, but I don’t see it as screwing them at every opportunity if they are actuarially unprofitable otherwise.

Depends on framing. If you divide the population by an arbitrary standard with a very high health bias (employed, in big co), and adjust payments accordingly, then those on the wrong side of your arbitrary standard get shafted.

The second group may be unprofitable with lower payments, but the insurer doesn't even want the second group, the profits are from decreased expenditures on the first group.

Absent an individual mandate with actual teeth (or outright government providing of healthcare), do you have a solution that seems workable on a voluntary arms-length basis for all actors involved?

I’m not arguing those other conditions shouldn’t exist, but rather making the weaker, more limited argument considering “given the arrangement of the insurance market as it exists today, what should the price for that insurance offer be?” In other words, “What should a for-profit insurance company do, acting on their own and immediately?” because I think that’s pretty close to the question they’re facing when setting pricing for individual plans.

Ah, yes, the good old supply and demand theory of health: if you can‘t pay for your healthcare, you obviously have no need for it, because needs are only things you are willing and able to pay for.

It’s more like “if the cost to serve a broad population P is $X, I don’t think it’s screwing them to say ‘the price cannot be lower than $X’ because we are a health insurance company, not a charity.”

I think you’re arguing that perhaps health outcomes should not be funded by private for-profit insurance companies and I’d agree, but while it is, this outcome seems grounded in actuarially sound math.

How is charging X more for Y's behavior not screwing X?

I’m genuinely not understanding the X and Y category or behavior you’re contemplating here.

Is Y’s behavior being on average healthier and therefore less costly to insure?

Well, if I was the Chinese government, it sure wouldn't make sense to me to let him adopt in either country regardless.

  5.5% of children under the age of 19 were uninsured

Bear in mind that this paper is a survey, not a study that looks at actual coverage records, and the survey population is not consistent year to year.

>> or from an employer where they don't pay cash.

Most employers in the US subsidize healthcare, but employees still pay. You usually pay X if you are single, a bit more if you are married, and ~2.5X if you are married with children. Each company has negotiated it slightly differently and it also depends on the specific plan and the state you are in.

but that is not all.

You also pay a co-pay ($15-$50) per visit to a doctor and a co-pay for many prescription drugs. In NYC, a pregnancy with my diamond healthplan cost ~$10k

You also pay a deductible (can be $0 to $5000 or more) where you cover the first $X of the annual payments.

Finally, depending on the state you are in (some allow it, some do not) you also pay balance billing. Basically, the hospital/doctor comes up with some surprise figure of how much you owe, they subtract what insurance paid, and you owe the rest. Usually it is nothing. In the case of more complicated things like surgery, it can be thousands.

> or from an employer where they don't pay cash.

I only heard of startups doing this. Outside of that you pay x % for healthcare per paycheck the employer covers some other amount. Healthcare might not be socialized but at least I can always find a new provider if I absolutely wanted one just pay out of my own pocket is the only downside. The subsidizing happens for bigger corps usually and negotations between healthcare providers vs insurance companies. The more clients you have the more effective the negotiations.

When Obamacare was going through I read in The Economist that about 1/3 of Americans had their health care paid for by Uncle Sam. The schemes were Medicare, Medicaid, Veterans Administration, and health schemes for government employees.

Most companies don't pay for 100% of health care coverage - and even if they do, that might only be for you, and not for your dependents. The main leverage of private company health insurance is their negotiating power, but it can still be something in the ballpark of $10k/year/person I don't know exact numbers, but definitely Not Cheap.

It doesn't make sense to me to talk about a "cost to the employer" because obviously we are a profitable enough purchase to continue employing us.

Few countries even in Europe will let your effective income tax rate reach 50% but this may be an effect of tax system structure more than anything else. Eg in the U.K. the max marginal income tax rate is 45% but that doesn’t count payroll taxes (employer or employee), which are called “national insurance”, or student loan “repayments” (9% of income above a threshold, though not super relevant to people in the top band), or oddities of the tax system like a somewhat hidden 60% marginal rate or a discontinuity with the married couples allowance or withdrawal of certain otherwise-universal benefits for children.

It is similar in other European countries (at least as far as I can tell from a cursory search showing that sources can’t really agree on what the highest marginal rate is).

I would be interested in seeing a chart of gross to net income and effective tax rate in different countries but this is hard (eg do you count employer payroll taxes? Do you count removal of state’s benefits that might not be used anyway? How do you deal with countries that have more complicated systems with eg deductions or allowances based on personal situations?)

All that said, I think the post you’re replying to could just mean “approximately half,” ands I think 40% would fit that description.

According to an official simulator for France [1], more than 50% of what is paid by the employer goes to taxes and "cotisations" when you earn more than €32k/year (USD $35k) after all taxes.

[1] https://mycompanyinfrance.fr/simulators/salaried

  in the U.K. the max marginal income tax rate is 45%

That's a big change from years ago, when it was 95% (hence "it's one for you, nineteen for me" in the Beatles' "Taxman").

That was 50 years ago. The top rate was 75% for income over £20k (something like £250k in todays money). Now how many people were in this category, or how they managed to avoid appearing to have that much income I don't know.

I think income tax was even higher during WW2, but that's pretty much a special case.

Also in the UK. When you take into account the council tax and national insurance (extra income tax by another name), the effective tax rate for is easily above 50% for most "high earners". And that is without considering fuel duty, VED, VAT etc.

No, you'd have to be earning an enormous amount to pay 50% tax in the UK. If you earn e.g. £150k, you get to keep £90k. Only £7000 of the money withheld is NI, so NI doesn't make that huge of a difference. Council tax isn't going to cost you £15,000 a year [1], so you're pretty clearly keeping more than 50%.

[1] If you're paying £15,000 a year in council tax, you must have some kind of gigantic property whose maintenance costs would dwarf that figure anyway.

Gah, you're right, I accidentally added an extra zero to my council tax!

My effective rate is actually 40%, not 50%. (although this doesn't include VED, fuel duty, insurance tax, alcohol tax, tobacco tax, flight taxes, VAT or any of the myriad of little taxes here and there)

* (Edit: Leaving original for traceability, but note my math was incorrect as per subsequent comment:) *

Depends on where and depends how you're counting it.

In Ontario, Canada, and I'm not an accountant so very approximately based on GoC website:

At ~~$150k CAD you are at 29% federal + 12 % Provincial tax.

On anything you buy though you get another 13% VAT

So now we are at 54%, plus CPP and EI.

Plus any other taxes - property, land transfer, etc - overall it's well above 50% for what would be ~100k USD

You are confusing marginal and effective tax rate, a very common mistake. At $150k you pay only 29%+12% on each additional dollar, but your earlier dollars were taxed much less.

https://www.taxtips.ca/calculators/basic/basic-tax-calculato... is a good resource - it shows that your effective tax rate in Ontario on $150k gross is 30.3%.

You probably also contribute 18% to your RRSP on that huge salary, which drops your effective tax rate to about 27.4%.

Also, you aren't paying 13% VAT on everything you buy - lots is exempt like food and your mortgage/rent. Even if you spend every dollar of your net income, VAT is probably closer to 8% of your total net income (which is 72.6% of your gross, so 5.8% of your gross going to VAT).

CPP and EI total $3754 in 2020, so that's another 2.5% total.

So that's a total of 35.8% tax on your gross salary. Also note it's much less if you have any common deductions, like children, dependents, education expenses, etc.

Fair point and I stand corrected :)

As an Ontarian it is frustrating how the marginal tax rate has risen over 50% over the last decade, but ignorant people think things are the same as in the US. Of course capital gains on primary residences is taxed at 0% so it isn't really surprising that real estate and its financialization is Ontario's main industry.

I'm actually with the OP - taxes as such don't offend me; I'm more concerned to get value out of them / their efficiency and purpose, rather than what they are in absolute terms. But wanted to point out that 50% is not unheard of and doesn't have to be in "millionaire" category of income.

I don’t think it’s just that it has risen over 50%, the increases over the last ~6 years are quite rapid. Consider BC [1]:

Top income tax bracket in BC in 2013: 43.7%

Top income tax bracket in BC in 2014 and 2015: 45.8%

Top income tax bracket in BC in 2016 and 2017: 47.7%

Top income tax bracket in BC in 2018 and 2019: 49.8%

Top income tax bracket in BC starting in 2020: 53.5%.

I believe that there have been similar effects in ON from increases & new brackets, on both the federal and provincial level.

[1] https://twitter.com/cperciva/status/1229900065726054400?s=21

Don't forget the tax brackets:

2015 top bracket: "over $151,050"

2019 top bracket: "over $205,842"

So anyone anywhere near that bracket, despite the increased percentages, is probably paying less tax overall.

How would they be paying less overall? They just added new brackets.

The rapidity is similar in Ontario. I think that's why the public still thinks that the top rates are around the 2013 values and say we need to raise the top rates higher.

Wouldn’t operating real estate as a financial market all involve secondary or fund-owned residences, and therefore be subject to capital gains tax?

Well, if half your payments is going to taxes it might very mean you have a bunch of €€€ instead of $$$, that bunch being calculated relative to median income of your country - what I'm saying is that while I don't know what country you're from tax rates are also calculated differently in different countries, in Denmark where I live it isn't impossible for a software developer to hit the top tax rate.

I generally assume that 40% of my paycheck will go to taxes and savings. That’s not quite correct, but it’s a good first order of magnitude estimate.

and savings?

That includes anything that’s pre-paycheck, which would include 401k and HSA in my case, but would exclude post-tax savings (I was imprecise in my original comment).

Again, this is a rough rule that’ll typically be personally conservative, not a precise calculation.

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