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I don't know. What's the right amount of tax?

Broadly, retail people like you and me, we don't have an opinion of a specific value, like 22% or 44% or whatever, we just feel up and down or whatever. That's fine.

That notwithstanding: your business profits come from somewhere right? Maybe your customer's customers, seeing as it's probably a software business.

How much lower would taxes get until your customers spend money on health insurance / health catastrophes? On cars to replace a worse metro, or on apartments closer to work? On private schooling? On vacations out of the country?

What if people stopped moving to London? If its services got worse and people left, how could that possibly be good for anyone?

I don't really want to generalize why because I don't live there, it is of course an amazing place to live. Is the underlying problem that London and the UK, the way they are, are expensive?

What you wind up not paying in taxes, your customers will pay anyway, and maybe not even in a strict sense of Non Tax Compulsory Payments - the accounting mechanism typically used in the US - but simply to enjoy a high quality of life.

And maybe this is why so many low tax locales have such primitive economies, people are spending on other things besides sophisticated software services.

Ironically this aligns me still with a "right" amount of slightly lower tax. It's probably about 38-44%, and it ought to be simpler. I really don't like people leaving California, especially high earners, but I understand that they also blame tax for other grievances. So maybe the real takeaway is to not generalize, and instead support technocrats who can explain and analyze these issues.

You do not pay the government VAT. You collect VAT on purchases on the governments behalf, that amount was never yours in the first place.

That aside I make a comfortable living as a software developer in London. My effective tax rate is around 35%. If I was earning > 10x what I currently earn I don't think I'd be complaining about an extra 18% in tax.

> You do not pay the government VAT. You collect VAT on purchases on the governments behalf, that amount was never yours in the first place.

While technically true from the legal and accounting point of view, but from economic point of view one could argue that there would be one market price level without VAT (p0), and current market price level with VAT (p1, p1+vat). Then real effect of VAT on consumers is (p1+vat-p0) and on providers is (p0-p1).

It seems you’re relocating on principle, and the principle is: you deserve the majority of your company’s profits for yourself.

There are other principles you could apply, though. For example, placing even a very small weighting on overall social welfare would probably reverse your position.

How much happier do you think the increase you are pursuing on your extremely large income will make you?

How much happier do you think the same money could make the kinds of people on whom much of your tax receipts would have been spent? For example, state pensioners, or people struggling in the gig economy and relying on food banks to get by?

You raise good points, and I am not fundamentally against taxes. I believe they are an extremely important part of society.

That said (and this may be unique to me), I am a 1 employee corporation and I still work 15hour+ days. If they keep taking a larger and larger cut, I'm simply going to start working less (and therefore earning less), and I feel like it won't have the impact on tax revenues they are hoping for.

I do however understand that my situation is maybe not "normal".

Thanks for your thoughtful reply.

It's interesting that you mention that higher taxation might lead you to work less hard. In general, it's possible that this would be a good thing for everybody.

You'd get more time for relaxation and other interests. At the same time, everyone else would experience less envy.

I appreciate that this may sound weird. However, there's evidence that people are much more rivalrous about income and consumption than they are about their leisure time.

In the extreme, if people cared only about relative income (i.e. rank), then earning more money would be wholly zero-sum.

In reality, of course, people care partly about relative and partly about absolute income. But that still implies that the socially optimal income tax is non-zero, since that encourages more (non-rivalrous) leisure at the expense of (rivalrous) consumption. The economist Richard Layard has made this argument more formally [1].

[1] e.g. https://core.ac.uk/download/pdf/208274889.pdf

Your points are valid, and I tend to actually agree with them. I think you have to consider a longer term outlook however to really piece this all together.

I would absolutely prefer more leisure time in my life right now, the grind is real. However I also have the ability to earn large amounts of money relatively "easy" right now, and that may not be the case in the future.

I think striking while the iron is hot is wise, and will then financially land me in a position whereby I will have more leisure time for the rest of my life, along with being able to provide my family with the same.

My entire upcoming move to Monaco is basically centered around this belief. I am 99% sure I am going to prefer living in London where I currently reside, over Monaco. That said, but just living in Monaco for 5 years, it will put me in a much better position for the next 50 years of my life.

Once I feel I am in that comfortable position, I can choose to reside where I wish almost anywhere in the world, and in theory be the happiest version of my self, regardless of the tax laws where I reside.

I don’t know if this is right and can’t find the source, but I vaguely remembering around 40% is when the government doesn’t actually take home more income by raising taxes, because rich people start moving away/hiding income.

I do have to say anecdotally that 40% does “feel” around the upper limit of what’s “fair” to me..

From 1932 to 1986 the marginal top rate was >= 50%, topping out at 92%

https://cdn.theatlantic.com/thumbor/fNk9ykzBXTBck1HJK0pFxYhX...

As soon as it fell below 50%, median income growth stalled and hasn't really budged ever since:

https://en.wikipedia.org/wiki/Causes_of_income_inequality_in...

Compounding is one potential reason why. A 92% top tax rate helps keep a lid on geometric wealth growth via compounding.

I could see this being true.

I know myself, and several others I know who are currently moving (mainly in the 7 to low 8 figures per year range) that are currently moving abroad that would likely just stay put at a flat 40% rate.

I know it's entirely psychological, but going over the 50% mark has annoyed several of my peers (and myself) and fueled this move. Something about receiving less than half of what you work for rubs you the wrong way.

50% is a very psychological number. It's half, and telling people that half of their time is spent on money that they literally let someone else spend for the social-good is not a good thing. Start getting into the 80%+ range, and the conversation should rightfully center around indentured servitude and slavery.

One thing that I don't understand why were not discussing/suggesting: If we must have taxes, and we want to go above 40/50%, why not consider giving people more choice in where that money gets spent as a way to offset the "negative" feelings. I think a lot of people would be more okay with large percentage tax-values if they were in control of what that money was being spent on.

You may be thinking of the Laffer curve (https://en.wikipedia.org/wiki/Laffer_curve). Though my understanding of it is that it doesn't prescribe any singulary "point" like 40%, but just says that there is a point somewhere and that this is the relative behavior of total tax collection around it, wherever it exists.

50% seems reasonable and inline with living in California when you add up state (13%) and federal (37%) tax.

I think its good value in the UK compared compared to how little social benefit you see in the US yet still pay a massive amount of tax.

Why not take your compensation as salary rather than dividends? You'll be paying the top rate of 45%. Am I missing something?

Because it is my copporation, I would also have to pay the employer and employee NI contributions, and therefore dividends have always been the most tax efficient way for UK business owners to extract their profits.

That said with these new corporation tax hikes, it's approximately the same now (dependent on the amount £££).

Cheers. I thought NI was capped at a fairly low level so I ignored it, but it turns out that employer's NI is not.

> I do wonder how much tax is lost due to people dodging/hiding or relocating, vs if the tax rates were more "reasonable"?

Just look at the 70s in the UK. It was 'tax them until the pips squeak', and it had exactly the effect of driving business and high net worth individuals away from the UK.

> but paying over 50% just seem wrong.

It doesn't seem wrong, it is outright wrong. It's stealing.

how about increasing wages? I doubt that every one of your employees is getting taxed 53%. So I think the system is just working as expected.

This.

The problem is that Monaco exists as a tax haven, and is easily accessibly (at least for Europe's wealthy). 99% of the time I hate that the US taxes citizens' income when they move overseas, but then I hear a story like this and change my mind for a day or two.

I don't have any employees.

> I understand that I'm a higher earner, and therefore naturally am going to be paying high taxes, but paying over 50% just seem wrong.

I have to agree with you. A huge number of regular (albeit comfortable) people, also pay > 50% in income tax. When they complain about "the 1%", it's because they see people like you having the means to get out of this system. They're angry you're not suffering alongside them.

I have the means to do it right now, but may not in the future - which is why I am doing it right now. I'm currently 26, with no children. In 10 years, this move may not be so simple.

My goal with this move is to leave for 5 years or so and acquire enough wealth that I will be personally comfortable for the rest of my life.

At which point I would likely to move to wherever I preferred to live in the world (regardless of tax rate), and to work on something more enjoyable and meaningful rather than simply chasing dollars.

Since you're on a throwaway, forgive my curiosity- how on earth did you get to that level of success at a young age? Family money?

Not at all, I actually come from a normal upbringing. I mean we always had food on the table, but not much else. There was certainly no family money.

I started a couple of small niche SaaS tools over the years from age 18-23) which helped me amass low 6 figures. I then jumped head first into the affiliate marketing space for a few more years which took me to around $1M net worth.

From there, I just leveraged my money to launch a couple of other businesses in gaps I saw in the market, primarily in the ecommerce space. Now I have a few businesses that I continue to run on a daily basis.

It's very tiring if I'm honest, I'm an exceptionally hard worker which has definitely attributed to my success, however I have an extremely hard time delegating which means I still work around 15 hours average per day (and have zero staff). It's something I'm working on.

Wow- very humbling and inspiring, especially at such a young age. Congrats on your success. I didn't mean the family money as a dig, just to feel better about achieving less ;)

I've also hit the low six-figures from crypto, now looking to diversify into real estate (a friend is rapidly becoming wealthy and retiring early with low fixed rate mortgages in Germany and is luckily educating me) and building an affiliate site (just dipping my toes in outsourcing and YouTube soon, no way I can grind out content forever). If you'd ever like to shoot the breeze let me know. Email in my profile. I'd love to get in touch.

> They're angry you're not suffering alongside them.

I tend to doubt OP is suffering at $450k/month profit, even if half of it goes to tax.

Half of that going to tax is terrible for the business's cash flow. That and the abysmal interest rates just incentivise businesses to waste money rather than save it for a rainy day.

> Half of that going to tax is terrible for the business's cash flow.

It's almost like there's an entire society outside the business to think of.

A more profitable business is slightly worse for society now, but much much better in terms of long term tax revenues.