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> Real question for OP (and others): What do you think is a reasonable effective income tax rate? (Please do not confuse effective and nominal tax rates!) In my view: "All in" should be about 50-55%. When I say "all in" I mean absolutely everything -- federal, state, local, national pension, national health (if applicable), yada yada yada. That would mean top 1% still have net income (after taxes) of more than 200K USD.

In my view one of the big problems is that capital gains are taxed less than income from working and they are a proportional tax. The result of that is that once you get to the 0.1 % taxation becomes regressive because a bigger chunk of your income comes from capital gains.

+9000 votes! I agree 110%. I didn't say it, but the 50-55% "all-in" should also include capital gains receiving no special treatment for high-income people.

Which special treatment is this ?

Might be more sensible to give smallish tax breaks for CGT to ordinary workers and reform the taxation of worker share options no more crippling tax bills for worthless options.

Id also encourage listed companies to offer UK style share saves to all workers to allow those lower down the food chain to actually get some equity.

You wrote: <<Which special treatment is this ?>>

Good question. For the United States, I reference: https://www.investopedia.com/articles/personal-finance/10151...

If you hold one year or more:

Filing Status: Single

0% rate: Up to $40,000

15% rate: $40,000 to to $441,450

20% rate: Over $441,450

In the above, personally, I would like to remove the brackets for 15% and 20%. My point: For anyone beyond middle class, tax capital gains as regular income.

Not sure what your point is those with more gains pay more here - is residential property included in this?

Taxing cgt as income has some negative aspects.

And almost 1/2 mill a year income is not what id call "middle class"

I pay more than 55% in effective tax rate, and my income is about 60k USD a year.

I live in Uruguay, South America - my taxes include healthcare and retirement.

It's definitely not ideal and it's crippling my chance of ever owning a home, but it does pay for a lot of social services way beyond what the U.S. provides - key differences being state provided healthcare and education up to and including the university level.

Wow. This is a great reply. Thank you for your honesty. I hope more people will leave valuable, personal stories like you.

Do you feel the healthcare and national pension are high quality ("good value")?

This sounds like a terrible deal.

In the US - your effective income tax rate could be as low as ~24% on $60k. There is nowhere it would be higher than ~33%.

So your tax rate is AT LEAST 22% higher - and all you're getting is "free" education and healthcare.

=FV(0.075, 40, -13200, 0).

That's $3M by the time you would retire if you invested the difference in taxes in a total market index fund and got average returns. Adjusted for inflation - that's $822k. You could reliably drawdown the equivalent of ~$3.5k per month forever. That's 50% more than you make after taxes now...

And in the US - you would already be getting $3k+ from social security... Plus you'd have free healthcare via Medicare...

Individually, you are unquestionably better off with the lower tax rate in the US. Unless you went to Princeton to study underwater basketweaving without a scholarship. Even if you had ridiculously expensive chronic conditions - there's plans you can get cheaper than $13k per year.

And as a whole you are also worse off.

The cost of "free" education is estimated at $47Bn in the US. That would increase taxes by about 1.1%.

The cost of "free" healthcare is estimated at an additional $1.6Tn. If evenly distributed - that would increase everyone's taxes by about 43%.

That means your tax rate would be as low as ~31% or as high as ~41% -- depending on which state you lived in.

With a USD60K salary, I assume that the Uruguayan you are responding to is in the 1%. So he's not just paying for his own health care and education, he's probably covering health care and education for ~10 people.

The important question is: How good is the "free" health care ? And is it fully free or is one charged beyond a point ?

Hongkong is not free, so I am not sure if this is a valid comparison. People of Hong Kong do not have the same opportunities as people of the US. The problem is how much of the tax payer money is being wasted. I think the absolute maximum tax should be no more than 30% and the goal should be to reduce it to 15% by reducing waste in public sector. I currently pay over 50% and this is demotivating. I am at the point when I consider moving to another country or finding less stressing job, that pays much less. It would be a different matter if I saw that 50% actually benefits me in any way, but I feel like this money goes down the toilet each month.

Interesting, I always thought Hong Kong was pretty good.

>What do you think is a reasonable effective income tax rate? (Please do not confuse effective and nominal tax rates!) In my view: "All in" should be about 50-55%. When I say "all in" I mean absolutely everything -- federal, state, local, national pension, national health (if applicable), yada yada yada.

Who is this for? The “rich” or for everyone else?

An effective rate of 50-55% is obscene. I would relocate for anything approaching 40%.

Where do you live?

In California - if you don't have a ton of mortgage interest deductions and you count state income tax - you're above 39.5% on $400k. If you count both sides of payroll tax, you're in the mid 40s. And even if you own a home, if you count property tax, you could be close to or above 50%.

The median state income tax is about half of California's at $400k - and property taxes here are somewhat low. Most places - you're gonna be above 40%.

If unclear, the "reasonable effective income tax rate" was for the top 1%.

1) Where do you live?

2) Are you in the top 1%?

3) In your location, what is the effective income tax rate for top 1%?

Texas.

That would depend on how you classify 1%.

The effective tax rate for an individual earning $400k would be around 31%.

Like I said, even approaching 40% is obscene. 50-55% is absolute thievery. I would relocate from Texas if my effective tax was even close to 40%.