40%?! Where do you live? The effective federal income tax at 100k is 22.75%. I don't think any state has a 17.25% effective income tax, certainly not if you only earn 100k.
- 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.
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.
And Washingtonians do not? What you wrote does not address the question that the parent poster asked.
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.
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?
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
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.
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%
Tax is (arguably, different argument) progressive.
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.
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.
"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.
The federal tax rate is much lower if you account for that.
1-(1-0,24)*(1-0,093)*(1-0,0765)*(1-0,01) = 0,37
A lot of those "taxes" are also not going into the government's budget. They are used to fund specific services exclusively.