So Denmark would forcibly take more than half of my income to invest in stuff I don't have a say on, while no one is held accountable by competition and economic incentives.
I'll pass.
I'll pass.
I get, in no order:
- free transportation (free high quality high-ways, train network, subway, tram, bus, rent-a-bike...),
- free education for myself and my children, from pre-kinder garten up to university.
- paid very high-level education (PhD, postdoc) for myself and my children,
- free health-care for everyone,
- universal salary for everyone (no homeless people around, extremely low crime rates)
- free sport offerings, open-air health activities, safety sport training (climbing, skiing, ...)
- free internet,
- free cable TV,
- all the usual stuff (garbage collection, street cleaning, access to water and power networks, etc.)
Of course, "free" does not mean "free", since I'm paying all of this with my taxes.
But how many taxes do you pay, and what do you get from them?
Because what I get is that my biggest worry in life is "How will the weather look like at the weekend?" and "Depending on that I might go hiking, or cycling, or surfing, or skiing...".
I don't worry about my children, or school, or being able to pay for anything, or crime, or security, I don't worry about my 6 year old son taking the subway and a bus alone to go to primary school, or them making it back home safely, or my 16 year old daughter going partying till 5am and then walking home alone at night, or what happens if they break an arm and need to go to the hospital, or whether I can afford the university they want to go to, etc.
Like, really, my only worry in life is "What's the weather like and what am I going to be able to do in the weekend depending on the weather".
This is why tax rates aren't constant for all incomes, they depend on income, costs (family, children, etc.), etc.
My tax rate would be slightly over 40% if I were single, but my partner's income isn't as high (still over >35% taxes), and we have two children. We get taxed as a family, so our incomes kind of get added and divided by four, and then our "family" tax rate is ~30%.
If you earn a lot of money and have no family / children to care for, then you get taxed with the highest rate which is slightly less than 50%.
If that's not your situation, your tax rate will be lower.
Also, there are some ways to delay paying at least a portion of your taxes (e.g. by getting stock compensation, and paying the taxes on the original price of the stock much later when you sell, etc.), which are often used for high paying jobs (somebody working on a dinner doesn't get "stock").
Having said all this, I've payed almost 50% taxes before, and it was ok. My net salary was still way above the median, and the cost of living here is relatively cheap.
The only real difference of this tax systems are (1) all the benefits that you get, and (2) the variable tax-rate widens the middle class significantly: it is harder to become "poorer" if your salary decrease because the tax rate decreases with it, and it is harder to double your net salary because the tax rate grows with salary increases, at least up to the almost 50% limit.
Many of the benefits are just the outcome of having a large number of people that live with 1 job, working 35h/week, and that don't have to look at their bank account ever to see if they'll make it to the end of the month.
It isn't like you get a real say in where your taxes are spent in any country, honestly, and part of paying taxes is that they get spent on some thing you don't like. Not only that, but no one is really held accountable by competition in most things that taxes pay for (health care and infrastructure and a safety net aren't held accountable because of economics since someone always has leverage and they are easily monopolies as the choice isn't real).
If you could invest in humans, you'd want a diversified portfolio anyways. Indeed to keep operating costs low, you might want a passive investment scheme, like index funds.
Paying taxes to fund education and pensions is kind of like investing in an index fund tracking all humans in a given country.
Only kind of like! Such schemes definitely shouldn't be the primary assets in your portfolio. But it's failure modes a very different from stocks, so some exposure is good.
Average tax rate in Denmark is around 45%.
In San Francisco I was paying 38%.
Can you pay education for your kids with 7% of your income? How about healthcare?
What is a social safety net worth?
7% of 130k is that enough to cover education, healthcare, etc?
Note. To be fair, the us does have some pension through medicare. (But I was honestly shocked to learn that it was regressively taxed)
Generally all income is taxed. I think the personal deductible is around ~10k USD. -- That's not meant to ask, but it's what you asked :)
Taking all taxes deductibles etc. then all in all I think I pay around ~48% of my income in taxes. Note. that lower income means less taxes too.
When I lived in SF it was around 38% (I think). Not that much considering cost of healthcare wasn't covered through taxes in the US.
None of this includes sales tax or VAT, just income.
I don't know if a better way to fund public services. Maybe we could tax work less and tax natural resources higher.. but I'm not expert on the long-term economic implications -- so who knows.
In any case: my point was that getting exposure to human capital as an investment instrument is probably best done through public pension schemes rather than ISA or human token IPOs :)
Investing in humans makes sense. Most countries already do it! Do we need to reinvent it?
I can't believe that not even HN can get tax brackets into their head. It is not a hard concept!
I hear similar statements from my relatives in the US.