"You can't have low inequality by definition if you decide to start paying one group a ton of money."
Very few of even FAANG-level salaries are high enough to put them in the same bucket as the people who wield power through their wealth. Paying the entire field of SWE laborers even 50% more salary is not going to appreciably change the inequality gap.
Plus my job is safer and more comfortable than many others. I sit in my office, I think and I type. Unlike the emergency services, I don't risk my life or health, nor does anyone's life depend on my work. Unlike construction workers, assembly line operators and many others, my office environment is free of hazards.
Software as they say is eating the world. The software you write replaces tons of manual processes generally. Finally it come down to supply and demand. If lots of people know how to program (well) the salary goes down.
You should never feel embarrassed by making a good wage. If you wish, you can always use that wealth to give back to society and your community.
Now that I live in the USA, I've never heard anyone talk like that about a successful CEO. Envy yes, aspiration too, admiration yes.
It's a real mystery to me why people aren't up in arms about wealth inequality instead but I guess as long as the working class is provided with a minimum of comfort (food, shelter, healthcare, education, sex) and are kept busy with the ratrace for the next big career move during the day and with an endless stream of available entertainment and consumerism in the evening, they're too busy to notice, care or bother to do anything about it.
For example, BMW. It is simply ugh. At least with US companies you know they'll do right by shareholders for better or for worse. If you invest in a German company you might as well be pissing your money away because they'll always do what's right for the heirs.
You have quite a few Dutch political parties talking about this, PVDA, The green party, the socialist party etc. The socialist party (SP) actually suggests giving all employees shares in the companies they work for. But these left wing parties, while not unpopular, have the whole ultra capitalist system working agaisnt them. What can the SP do if their legislation simply causes business and the rich move to another company? It's an impossible battle. You need international cooperation for it to work, and there is no such cooperation.
Income inequality is driven by wealth inequality. The wealthiest people don't get compensated in dollars, they get compensated in equity and if that equity is going up, companies can afford to pay more to their executives.
Wealth inequality is driven by domestic economic demand shifting away. It is either concentrating in a few economic hot spots (urbanization), moving to other countries (globalization) and through central bank money that sits around in asset markets. There are probably lots of other factors but they are increasingly less impactful.
Urbanization is not necessarily a bad thing if there is enough housing and people can move to the new location, except not enough housing is built and existing residents hate the new arrivals.
Globalization is not necessarily a bad thing if it also drives foreign demand. Turns out, the Chinese really love buying foreign real estate but nobody is building the luxury apartments they want. So they have to buy less luxurious housing and drive up prices in the middle and affordable segment of the housing market.
Central bank money is not necessarily a bad thing if the money is used effectively. The government can help the economy by providing cheaper funding to companies during bad years when there is lots of work to be done. But what if the economy isn't in a bad year and merely refusing to grow? It means that there is already enough funding but not enough demand for services and workers. In that case you also have to apply the government stimulus on the demand side as well. But that's not what central banks do. They can't do it by definition because that's not their responsibility. The central banks are separated from the rest of government because the government can just abuse it's money printing powers to fund endless debt and cause hyperinflation. However, when it's the central bank that is doing the endless printing people don't seem to care, somehow most economists care even less and will assert that even moderate demand side stimulus will eventually lead to the slippery slope of hyperinflation.
Ultimately history will just repeat. A war is a quick and easy way to get rid of excess workers. It is also a quick and easy way to provide demand side stimulus in a political environment where more sensible options are considered impossible. It's like political capital is like money. Once you have run out you are going to be extremely desperate and are willing to do anything no matter how stupid. Running out of political capital is the reason why Keynesian gold digging is even a thing in the first place. All good options have been exhausted, anything that follows is batshit insane but it is also the only thing that can be done.
The idea of talking about money is slightly awkward anyway, and I guess I'd say embarrassed rather than ashamed? Different culture and motivation, but a datapoint for you :)
The wealth inequality gini coefficient is not very useful and misleading. You could have a country where people choose to take on debt when they are young, and all of them end up with the same higher level of wealth later in life. This would be a very equal society, but could have a very high wealth inequality gini coefficient. To actually judge the wealth inequality of a society the analysis should be done cross-sectionally, comparing within age cohorts. [https://www.sv.uio.no/esop/english/publications/articles/201...]
And as I've noted in another comment, top 10% doesn't put you in the same socioeconomic class as the actual wealthy (https://www.investopedia.com/personal-finance/how-much-incom...).
There's a gap between FAANG and, say, a janitor's salary; that's just not debatable. The gap is much smaller than between Mr. FAANG and Mr. Top 5%, and for all intents and purposes Mr. FAANG is Mr. Janitor when compared to Mr. Top 1%. That some FAANG employees are in the top 1% doesn't negate this.
To me this feels like falling into perfect is the enemy of great trap. Just because this topic might be affecting you (assuming you're a software dev), and because it doesn't affect the top 1%, doesn't make it smart to widen the gap between the 99%.
FAANG salaries would help close that gap.
And then the German finance ministry keeps trying to squeeze blood from the turnip even further every year by dreaming up new taxes, while actively discouraging investing (Olaf, the finance minister, claims not to invest in the stock market and keeps his money in a savings account while at the same time pushing negative interest rates) with Transaction taxes and no tax-advantaged savings account. You could consider that maybe conservative Germany encourages investment in real estate. Nope, you get to pay 6% sales tax and 1% notary fees when you buy a home, with no breaks for first-time home buyers, and you can't write the interest off on your taxes either.
Even compared to Sweden, personal taxation is comparable for high-earners, although Ireland's much more progressive and redistributive scheme results in lower taxes for low-earners, and thus a smaller tax base.
Ireland is bang on the EU average for taxation of high earners. It seems Austria has higher (although not massively so) taxation of high earners - source below.
Ireland has the most progressive taxation system in the EU, so low-earners do indeed pay less personal incomes taxes than any country other than Cyprus and Estonia.
Ireland is definitely not a tax haven for tech workers - you're the only person I've ever come across to hold that opinion. The UK may be closer to that, as self-employment is much more attractively taxed there than Ireland.
https://www.uhy.com/uk-imposes-highest-taxes-on-inheritance-...
False, this mechanism only prevents income inequality but not wealth inequality as existing wealth is not taxed much in Europe.
For example, inheritances, assets and properties are not taxed much in Europe (people scream double taxation if you propose that) but income is taxed substantially so you'll never be able to save enough to catch up to the upper classes who own assets.
So actually, in some European countries, while having low income inequality because of high income taxes, you end up with huge wealth inequality due to untaxed inheritances, assets and overvalued properties rolled over across multiple generations to the point where Germany's top 10% own two thirds of the country's wealth:
https://www.iamexpat.de/expat-info/german-expat-news/germany...
To level the playing field and reduce wealth inequality, a sound policy would be to tax income less and tax inheritances and assets more but fat chance of that ever happening as that would be a blow to the ruling class.
> For example, inheritances, assets and properties are not taxed much in Europe (people scream double taxation if you propose that) but income is taxed substantially so you'll never be able to save enough to catch up to the upper classes who own assets.
In Ireland, apart from relatively small tax-free thresholds (€335,000 lifetime from parent to child, for example), gifts and inheritances are taxed at 33%.
In the UK, above its (similar) threshold, the rate is 40%.
The US Federal Estate tax rate is 40%, but with an enormous $11,580,000 estate threshold, which is orders of magnitude higher than Ireland or the UK.
Even though Ireland and the UK have some of the highest inheritance taxes in the world, the EU effective average is still ~14% - double the global average of ~7% and on par with the US, where added State taxes vary the average between 12% and 19%. Source: https://www.uhy.com/uk-imposes-highest-taxes-on-inheritance-...
Of course it's not, never said it was but cherry picking countries with larger inheritance tax is also a mistake as you can't choose where you pay your taxes as an EU resident. You pay them where your main residence is.
So on the other side of the spectrum you have Austria which has high income tax (because socialism and income equality) but basically no inheritance taxes, and taxes on assets are levied on their original purchase price so you end up having countless residents who earn small incomes but are sitting on millions of euros of wealth due to exploding real estate values but only pay 5 Euros tax per year as that's levied against the purchase price from 60 years ago when their grandparents bought it for pennies.
So you end up with huge wealth inequality where even people with good incomes pay high taxes and are priced out of the real estate market if they don't come from families of means.
> False, this mechanism only prevents income inequality but not wealth inequality as existing wealth is not taxed much in Europe.
The E.U. is home to both the highest and lowest inheritance taxes in the world, and averages very close to the US. I think this adequately refutes your statement that "existing wealth is not taxed much in Europe."
There is also the big issue that you can just transfer most of the wealth well before death.
If I were to suggest an inheritance tax it would not be significantly higher than 30% but it should have a generous tax exemption for at least $10 million.
However, I personally do believe not that this is an effective solution against wealth inequality because it is a very slow mechanism. It would make more sense to just raise capital gains taxes and decrease dividends taxes so that there is no longer a heavy skew towards wealth building in the first place.
You can still get returns but they have to be paid through a dividend which generally correlates with useful economic activity. You can't just flood the market with cheap money and then use the cheap money to pay dividends if you didn't earn the income in the first place.
Borrowing money doesn't increase the value of a company. It is neutral. If the company is spending that borrowed money on dividends then the company is losing value by exactly the amount that is paid out.
- Federal: 24%
- State: 9.3%
- FICA: 7.65% (6.2% social security, 1.45% medicare)
- SDI: 1%
This gets you to 42%. Your employer matches the FICA payments too, so that's closer to 50% of your take-home pay.
Once you make enough to pay off the regressive FICA taxes ($142K) you get bumped back down to "just" the mid-high 30% range briefly, until you hit $163K, then its back up to 40% again.
A lot of those "taxes" are also not going into the government's budget. They are used to fund specific services exclusively.
I'm actually curious, is there somewhere you can see the total revenue for a state from the union of all collected taxes and fees?
I get your point that the US doesn’t provide as much social services as other developed nations. Almost all these nations depend on US hegemony to not have to spend as much on their military. This is a choice that the US made. There are good arguments for scaling back military spending and increasing social spending without compromising US hegemony though, however those choices may not be politically expedient so here we are.
But I would want to point out the curious phrasing and of your first paragraph and what that says about USA way of thinking. All these points are business targeted while all european points are individual targeted.
I don't think there is anything curious about this way of thinking. And US hegemony plays directly into this!
Pre-World Wars, European nations had their colonies and their militaries and the priority of thinking was along similar lines: access to expansive markets, large pools of labor, protection of business interests etc, chiefly through colonies.
WW2 changed all of that, reducing European nations to client states (no disrespect) of the US, that funded their reconstruction. Colonialism was no longer allowed, and European nations could not freely pursue foreign markets without competing with US companies, which would always get precedence. With no real way to compete with the US militarily, and with NATO aligning with their immediate geo-political needs anyways, European nations invested heavily on Social Services, rather than blow up their military budgets. This geopolitical equation hasn't changed post WW2 and you have generations of people that consider social services as the primary function of their Government.
However, its a fundamental mistake to assume that a Government can provide effective social services without having a strong economy. Strong economies require successful businesses.
Umm... I would say the social services in european countries are pretty successful.
I frankly have no idea why US govts on all levels, and from all parties, seem so much more incompetent than many European/Asian ones (I have a pet theory), but they are.
And Washingtonians do not? What you wrote does not address the question that the parent poster asked.
100k USD in GBP is 73347.60. In the UK you'd be taxed 30% on that, including national insurance. https://listentotaxman.com/73347.60
Between 100 and 120k there is also the loss of personal allowance, which results in a marginal tax rate of 62% in that bracket. If you have children between the ages of 3 and 4, you also lose out on 15 hours/week childcare, resulting in that marginal tax rate hitting 89%
Student loans operate like a tax in the U.K., taking 9% of your pre-tax income above 15 or 25k directly from your payslip.
Student loan deductions reduce a balance that doesn’t impact your credit score, can’t chase you for repayment (unless you do something stupid like move country and fail to inform them) and doesn’t impact lender decisions. Most people have no hope of repaying their ‘loan’ in their lifetimes and instead expect the loan to be written off after 25 years. U.K. student loans being debt is a technicality, it’s a tax with a countdown timer that might be shorter if you’re baller.
Plan 2 students are screwed, with the high interest rates and slower repayment schedule I wouldn’t even be sure non-London devs would finish paying it off.
Tax is (arguably, different argument) progressive.
1-(1-0,24)*(1-0,093)*(1-0,0765)*(1-0,01) = 0,37
In Austria the total is 75%. In Austria going through capital gains would still be 70%.
I'm very disappointed at how much money Europe sucks out of my work.
"Capital gains" through GmbH is 25% KÖSt (Körperschaftssteuer) and then 27,25% KESt on Profit. The highest VAT rate is 20%, there are also lower ones. This results in 56.35% percent including VAT (1-((1-25%)(1-27.25%)(1-20%)).
If you go through income tax as a freelancer this is even lower when you claim the default deductibles (Pauschalierung), which is common in IT jobs, because you have very low expenses. The later is also cheaper if you factor in health insurance.
Austria is one of the worst countries in the world to do any kind of small business. Self-employment is also taxed aggressively.
A form of self-employment in Croatia allows a fixed tax payment of about 5k EUR a year with an income cap of 39k EUR per year, leaving you with 34k EUR after taxes. Similar thing in Serbia but even more money.
In Austria there's nothing like that.
It would be nice if it was possible to assign a significant amount of life expenses to business but that also is heavily bureaucratized and regulated that even buying a 5k EUR computing machine has weird tax consequences (not immediately deductible as expense in the full amount or now, because expenses are higher, you might not be able to take that 12% of profit untaxed).
I mean, I guess I'm just miserably following every word of law and my accountant's advice and maybe other people just ignore a bunch of these guidelines and hope that inspection never comes.
20% "forced savings" (Pension + Vorsorgekasse) 7% health insurance 6% income tax
But 39k a year is definitely not a freelance programmer in Austria.
80-120k is the average I see at my colleagues and enterprise customers for freelance programmers with regular working hours compared to regular employees (5 week vacation, sick absence, ...). I know people scratching at 200k, but they are senior consultants.
So a more realistic view would be 100k 40,5% tax+insurance+pension 15% "forced savings" (Pension + Vorsorgekasse) 6% health insurance 19,6% income tax
This calculation assumes that you do not really have significant expenses of business. Having those actually makes the picture look worse.
You can calculate here for yourself, no "cheating" required: https://abrechnen.wko.at (official chamber of commerce calculator)
A GmbH is always better at 220k+/year. But there may be reasons you would want one earlier (liability, employees, IP, investments, ...)
Employing people in Austria is expensive ("cost of labor"). Beeing self employed is not bad, if you factor in benefits and costs of life and quality of life.
Are you owner of property like apartment or house there? Just wandering, if that makes a significant personal economic difference for owning it in EU.
What I also dislike is the tax prepayments for business owners, which is basically legal theft. The government takes tax in advance and then gives you back the money if you overpaid after about a year. I wouldn't mind this if taxes were low.
Imagine being a business owner and there's a period of irregular income yet the advance tax payment arrives and bankrupts you.
The taxes here are just insanely high and everything is insanely inefficient. Healthcare, education and municipal services.
After moving from Croatia to Austria, it's much worse in Austria, a wealthier country but still, I see all of the same patterns of inefficiency and they are even worse because Croatia can't afford being so inefficient.
The federal tax rate is much lower if you account for that.
Plus having that more money means one can invest a bit, and a generation later dad can give a big gift to help seed the kid's startup.