Hacker News Reader

I'm also an Australian living in the US; this omits the enormous, multi-decade, apparently recession-proof rise of the Australian real estate market a bit. https://en.wikipedia.org/wiki/Australian_property_bubble

It doesn't change the median to mean discrepancy though. Australia has a smoother wealth divide and that's purely policy.

I was shocked when i found out there's no 0% tax bracket in the USA. All that paperwork to collect tax from those who are struggling. Meanwhile the federal tax caps out at 37% and doesn't even consider very high wage earners. The higher minimum wages in Australia are also clear cut.

OK, but you've highlighted the difference between US and AU median wealth; a lot of Australian wealth is tied up in this real estate. My relatives who own property (purchased cheap decades ago) can hop from enormously expensive house to enormously expensive house; the ones that don't can only dream of home ownership anywhere near a major city.

There is functionally a 0% tax bracket in the US, because everyone gets a default tax deduction.

In general, I agree with you - particularly in the realm of healthcare and college educations - but there's a lot of nuance in the details.

"The higher minimum wages in Australia are also clear cut."

Do you have any links to studies around this? From what I've heard of the past couple years, most economists believe only a marginal increase to around $10/hr would be beneficial. I'm not arguing against that, but $10/hr doesn't seem like it would afford those workers the opportunity to build wealth, and increasing it further is supposedly not going to provide any additional benefit to that group.

37% for federal, and another 13% in places like California, bringing it to 50% (vs 45% in Australia)

Do you understand how marginal tax rates work?

Let's say you make $1,000,000 a year in California. Your effective tax rate is 11.78 percent because the top 12.3% rate is only applied to income you earned over $599k. (13.3% applies only on income above $1,000,000, which you are too poor to pay yet).

Same with federal taxes, that $1,000,000 earner is going to pay an effective rate of 33.3%. Combined, you are paying 45% state and federal income tax.

...Yes I understand how they work, thank you very much.

In California, the highest possible tax rate on earnings, would be 50%.

In Australia that tax on the highest earnings would be 45%.

Nowhere did I claim that all your income is taxed at the same rate. I was replying to the quote "federal tax caps out at 37%" which ignores the significant 13% additional tax in CA.

You would have to be making $5,000,000 a year before you are paying 50% in California (see https://smartasset.com/taxes/california-paycheck-calculator#...).

Sure, but that doesn't change the point of my comment which is that the income tax rates in some US states will actually exceed Australia's in higher earners.

Ya, if that is your point. Australian taxes ramp up faster, so low earners will pay more tax in Australia than in California. E.g. Australia making $50K USD/year will pay 17% in taxes (according to https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=ST..., don't forget to convert to AUD first), while a Californian will only pay 15%.

(If you ignore things like cost of healthcare and college.)

I thought healthcare was funded by a payroll tax in Australia. Are you claiming that they are funding it via income tax instead?

There is also an extra tax to pay for college that graduates (4 percent) pay if they make more than $39k (AUD I think, not sure what the basis that they have to pay is, however).

Both healthcare and college seem to be funded separately from income taxes.

I'm responding to "low earners will pay more tax in Australia than in California".

We were talking about income tax (apples), and you begin to talk about payroll taxes and something funded via an extra tax on college graduates (oranges).

It might be that overall the poor get a better deal in Australia. But surely it's not because of the income taxes (slightly higher than CA for low earners) or the consumption taxes (much much higher than CA). Maybe they get a better deal on health insurance and payroll taxes, plus the idea of paying for college via successful graduates is one that America should definitely consider adopting.

With the exception of NY State, where there's a recapture at $1.1M that makes rates no longer marginal...

Could you explain the recapture please?

For 2020, the top bracket starts at $1,077,550. Then, gradually through the first $50K into the bracket, it becomes a full 8.82% tax on every single dollar of income, other brackets included. For 2021, that rate has been bumped up to 9.65% and two new ones — 10.30 and 10.90% — have been added. I think the cut off amounts at which this flat rate system phases in are still the same.

But the craziness with the most recent changes doesn't end there. From July 2021, employers are required to withhold from bonuses and overtime at the new supplemental rate of 13.78%, which is quite a bit higher than even the top bracket. That guarantees even more and larger refunds for taxpayers next year. Or, if you look at it another way, a bigger interest-free loan to the state.

Recapture only applies to tax credits, and is itself gradually phased in. It also doesn't seem to be based on income, but rather not adhering to the terms of the tax credit over the long term:

https://www.tax.ny.gov/bus/ct/Recapture-of-tax-credits.htm

The state doesn't call it as such and it doesn't really mention much about it anywhere, other than implicitly in worksheet 7 on page 59 of the 2020 IT-201 form. It's still a recapture, though, and it does apply to income. It's separate from tax credits. Try the worksheet. By the way, most online tax calculators seem not to know about it, either.

See e.g. https://www.bogleheads.org/forum/viewtopic.php?t=247046 where someone points out that CT does the same and calls it recapture.

I'm not finding that to be very reliable, as I can't find a news article or even someone else complaining about the same problem. Are you sure they just didn't mess up on their tax return somewhere?

You can enter toy numbers in TurboTax and see, but I found more references, e.g. when they wanted to make NYC track NYS' model:

https://www.nytimes.com/2003/05/12/nyregion/highest-tax-will...

https://www.empirecenter.org/publications/new-yorks-ugly-ste...

AR, too? https://taxedright.com/new-york-taxes/

> I was shocked when i found out there's no 0% tax bracket in the USA.

That isn't exactly true:

https://www.npr.org/sections/thetwo-way/2012/09/18/161333783...

Yes, the bracket isn't zero percent, but after deductions and the child credit, it effectively becomes that. That doesn't include payroll taxes however, which are much more regressive (in the case of social security with an income cap even more so). Does Australia exempt low earners from payroll taxes as well as income taxes?

I often see that payroll taxes are regressive. But the benefits from payroll taxes are progressive... Replacing a top 1% income or standard of living with unemployment or social security doesn't happen in the US system. Are payroll taxes regressive relative to the benefits paid from payroll taxes? I genuinely don't know.

The median to mean discrepancy is not particularly interesting though, given that median disposable income between the two countries is almost identical (in other words there are no winners with a "smoother wealth divide," only losers).

Given the other comments about the real estate situation in Australia it seems problematic to compare median wealth instead of disposable income.

The US gives deductions which can make your effective tax rate 0%.

Exactly what I was going to reference.

An Aussie with a $1M home, and a $500k mortgage will have $500k in "wealth." But if that wealth is tied to their home, and all other homes cost the same or more, what good does that do them?

We're seeing the same happen in many US cities.

Is wealth in a home an illusion, then?

To some extent, yes. It's fairly illiquid, and unless you're willing to be homeless, move from the city to a rural area, or take a serious cut in living style, you're likely going to need to buy a replacement at similar cost.

It's certainly not the same thing as having that wealth in the bank, or as stocks.

It does help with loans.

If I take a $100k loan, my wealth doesn't go up $100k.

To the OP's question, the value in a home is not an illusion if you can do things like borrow against it.

maybe not a full 'illusion', but it's just not liquid. when using 'net worth' calculators, I severely underestimate the value of my home - between delays, fees in selling, and the cost of moving someplace else, there's probably 10-15% gone from whatever paper 'wealth' the raw number is. It doesn't really help me in any meaningful way with respect to planning. Most of my stocks are liquid. There's a potentially similar hit re: taxes, but... I can buy and sell $1000 of stocks tomorrow, I can't buy/sell $1000 of 'house' tomorrow (REITs notwithstanding).

Sort of. In the same way that selling 2% of your company for $10M gives your company a valuation of $500M. We don’t know what the other 98% of shares would really sell for.

In a given year, just over 1% of a typical city’s homes are transacted. Over a decade, about 10-15% are transacted.

It's an illusion because it is based on the presence of infrastructure, other people and their work. If those people weren't there your house wouldn't be worth as much. You can build the same house in the middle of nowhere and it would be worthless.

That doesn't make it an illusion. Yes if they circumstances are different the house will have a different value.

Right up until you downsize, move to a cheaper area, or pass the value along to the next generation (you die).

Same here. Most of my "wealth" is tied to the house and I would have to move to an area of limited opportunities to get one substantially cheaper.

The other interesting part is that one has to pay annual tax and maintenance on that "wealth". Unless the market is very hot, primary homes are not a very lucrative investment compared to other assets.

Like the first sentence at the WP article says,

> The Australian property bubble is the economic theory that the Australian property market has become or is becoming significantly overpriced [...]

IOW bubbles can only be called historically asset prices fall dramatically and even then typically in housing they don't fall that much.

Housing prices have been rising much faster than inflation in a lot of places due to historically cheap financing. The alternatives to "bubble popping" are that they plateau, or continue rising, or decrease moderately over time.

The point is that the difference in wealth between AU and US is, to at least some extent, due to a vast amount of largely inaccessible paper wealth.

If I'm willing to sell my house in Sydney and move to rural Queensland, I'm wealthy. If I'm not, selling my $1M house means I have to go find another $1M house now.

(And yes, the median house price in Sydney is over $1M.)

I think big cities have diverged from the country average globally and the impact on country average metrics then depends on the degree of urbanization.

According to https://en.wikipedia.org/wiki/Urbanization_by_country the urbanization rate in AU is ~2x the US, so people are moving to cities at a much bigger rate? Even in the face of the high prices.

But yep I still see what you mean, on the country-averages level the AU prices seem to have been constantly rising faster in AU than US.

The median home price in Melbourne is nearly $1M as well; between the two cities, that's about 40% of the population of Australia that needs a million bucks to own a house.

America's low ranking in median wealth is mostly caused by their high amount of consumer spending rather than a lack of income. America ranks #4 in median income. The only nations that rank higher are tiny countries with whose economies are disproportionately propped up by a single highly lucrative industry (financial services or fossil fuels). To be fair, the high amount of consumer spending partially boosts America's median income as well.

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

I'd argue that there's other causes of spending. Education, health care, etc.

If you consistently earn more but have less total wealth that to me reeks of the broken window fallacy. There's spending that could be done via more efficient means. eg. Australia spends less tax on healthcare per capita. America spends more tax and then on top of that essentially has a private insurance requirement as well. That's spending that doesn't need to happen but does due to inefficiencies. You could get rid of this but apparently efficiency created by government intervention is socialism (it's not but the USA political system is a mess and people have been swayed).

Most Americans are fighting for things besides their financial well being, unfortunately. Some would rather have the freedom to sue a stranger who may have driven a woman to get an abortion in Texas. It is disheartening that this is what the political machine is focused on, instead of raising money and investing in things like infrastructure and Americans.

Although, some do think that the only thing standing between them and wealth like Bezos is a few hundred bucks a year in taxes (that they want to cut, ramifications be damned).

s disheartening that this is what the political machine is focused on, instead of raising money and investing in things like infrastructure.

https://www.nytimes.com/2021/03/31/business/economy/biden-in...

>You should have increased taxes on the rich. You should have increased minimum wage.

Pretty obvious and orthodox solution, tried and tested worldwide in the last century, however: it goes against neoliberal creed and thus is anathema since the 80s.

Once upon a time (war time) the US had 94% top tax bracket[1]. Let that sink it.

Obviously there's no WW2 right now, and that extreme level of confiscation is probably unwarranted. But it makes you think how far the US has strayed and how impossible any slightly more progressive tax brackets seem today.

[1] https://teachinghistory.org/history-content/ask-a-historian/...

Visualized in one chart: https://ritholtz.com/wp-content/uploads/2018/08/inequality.j...

Wow, you can really see the top 1% being affected by major financial events: '92 recession, '01 dot bomb, '09 global financial crisis. Meanwhile, the bottom 50% is just a slow downward slide, not majorly affected by any of those.

Wait till you see the impact of quantitative easing and the K shaped recovery:

https://static01.nyt.com/images/2021/07/09/us/covid-fed-qe-p...

https://www.nytimes.com/interactive/2021/07/12/opinion/covid...

That makes it clear. For a reference I've been in between the USA and Australia since first coming to the USA in 1997. The change in wealth of the USA is dramatic. Things were never as extreme in terms of the 3 miles of homeless camps i see in SFO just North of Kings st station. I've never seen so many sleeping under bridges in the valley are itself.

Things have objectively taken a downturn in the USA for the bottom 50% but somehow there's push back against this fact? People are arguing against numbers in this thread.

Perhaps the difference is that since I've been between two countries i haven't suffered the frog in a boiling pot of water effect? To me i leave and come back half a decade later and see huge downwards changes and get frustrated that no one else is noticing :(

I'm sure there's a bit of that, I've traveled to SF and Seattle every few years from NYC and both cities looked drastically more depressing each time that I visited. At the same time I haven't really noticed the huge rise of homelessness in NYC.

From talking to both Americans and immigrants from Asia and Eastern Europe about these issues it seems to me like a lot of Americans have never been outside of North America and have a warped view of the rest of the world, while immigrants from poorer nations still see America as a land of opportunity and compare the living standards of the middle classes in the US vs their home country.

It's really wild to hear Americans act like universal healthcare and free/affordable college is a radical communist agenda that's not fiscally feasible even though most other 1st world nations are able to do it (https://en.wikipedia.org/wiki/List_of_countries_with_univers...).

The trouble with comparisons like this is the lack of scale and perspective. Australia and Taiwan are roughly half the size of California. The United States has a far larger size, and a far greater regional diversity.

If you draw comparisons across similar population sizes and similar geographic regions, for example comparing the USA to all of Europe, the numbers look a lot more similar:

Europe median: $26k Europe mean: $174k

USA media: $82k USA mean: $505k

Both regions have roughly a factor of 6 difference between median and mean wealth.

According to the Australian Bureau of Statistics, median total income for Australians in 2017-2018 was 49,805 AUD (68,232 USD)[0]. According to the US Census Bureau, median total income for Americans in 2018 was 63,179 USD. That's about 7.4% less which isn't insignificant, but it's also not near enough to account for such a striking difference in wealth. There's clearly something else going on here.

[0] https://www.abs.gov.au/statistics/labour/earnings-and-work-h... (Table 1)

[1] https://www.census.gov/data/tables/2019/demo/income-poverty/... (Table A-1)

>49,805 AUD (68,232 USD)

49,805 AUD is 37,039 USD.

Woops, you're absolutely right. I had the division flipped. Then that's a considerable amount lower than the US median income, which makes the difference in median wealth even more suspicious.

I don’t disagree with this sentiment, however, American culture explicitly drives what you’re describing here. There’s really no money to be made by battling inequality and people want to become wealthy more than they want to live in an equitable society. Because once you’ve become wealthy, you get to join the ranks of the privileged few that have the ability to make the choice that Dan Price made, but they don’t.

I remember reading once that America is the land of the frustrated wannabe millionaire, and it’s kinda true. We’re all on a warpath to make a ton of money with no real incentive to fight the fight you’re talking about.

lottery mindset

You sure as hell don't want to pay too much tax once you are a millionaire.

> I get rather annoyed when a USA resident boasts about wealth. You have massive loans dickhead.

Isn't much of Australian household wealth built on surging property prices? Which is also backed by the same massive loans that Americans are dealing with? And also, the Australian government is forced to keep the property bubble going at all costs, even more so than the American government?

https://www.ratecity.com.au/home-loans/mortgage-news/rba-gov...

Billionaire Nick Hanauer and his team at Civic Ventures are working towards this (as are others, of course):

https://civic-ventures.com/

There are powerful forces fighting against what AnotherGoodName is suggesting. They have money and propaganda and lobbying. It’s a tough fight.

First, I don't disagree with your general conclusions, but the median salary of South Korea is not even close to the United States. It is closer to 30K annual. Taiwan is lower. Maybe for an expat it may seem higher, but if you get paid by a Korean company in accordance with local salaries, it doesn't get close to that.

"instituting 0% tax for the lowest wage earners"

Well, we do for income tax. It's just that the cut off limit is extremely low ($12k). Based on tax credits, one can even pay $0 in tax and get money back.

If we were serious about reducing the tax burden on the poor regressive state and local taxes would be on the chopping block.

Nobody ever complains about sales tax (which is the quintessential regressive tax) until you get deep in the weeds of policy discussion.

A state removing taxes - that'll be the day! It's always more more more.

Some sales taxes have been sort of progressive. I don't know the current details but years ago the first $10k on a vehicle purchase was excluded. This was at a time when average/cheaper cars cost under that. Theoretically, that only impacts the wealthy people buying luxury cars. Of course I don't think they ever adjusted it for inflation and they may have even removed that exclusion. But yeah, it's mostly regressive. I do hear people complain about sales tax sometimes.

I think many people agree that the best kind of tax would be on money inflow (income, capital gains) rather than things like property, sales, etc. I think the implementation is the part nobody can agree on.

I disagree. All transaction based taxes are regressive and most of them can be easily dodged by avoiding taxable events. There is absolutely zero reason to tax any form of work whatsoever.

From a theoretical standpoint the best taxes would be on monopolies that extract economic rent and taxes on externalities. The prime candidates are the land value tax and carbon tax.

"There is absolutely zero reason to tax any form of work whatsoever."

Can you expand on that? Does that include capital investment if one meets the loose "materially participated" stipulation?

"The prime candidates are the land value tax and carbon tax."

This doesn't seem like a good idea. A carbon tax is transactional, so it could be avoided. Maybe good for policy implementation but not good for revenue. Land tax seems very similar to property tax already. We are seeing pushes in many states to eliminate it due to the high burden on lower income families and the elderly. For example, you may be taxing them on "wealth" that doesn't exist. This places the government in a position to take assets someone already owns. It's also mostly regressive as property tax is now. If you tax the inflow of money, then you know there is money that can be paid and can even be collected before the person ever receives it.

Huh! With all that vitriol, I would sure hope the unparalleled salary for software people is not the reason why you migrated (and continue to stay) here.

This is the "if you don't like having money, you be the first to give it all away, lol" strawman.

It's not that me or anyone else wants higher taxes. We're willing to accept higher taxes for the benefits of living in a higher-taxes-for-the-wealthy society, specifically: a) enjoying high quality infrastructure, particularly around education, healthcare, and transportation, and b) getting to live in a place where the poorest are being properly cared for and have a path to reintegration, rather than being stuck on the street reminding you every day that society has failed them, and might fail you or your kids one day too.

You can't get either of these by giving away your own money, especially if you're only upper middle class.

You referring to it as a strawman is the only strawman in this argument now, if we're being technical about the definition of strawman.

People migrate from countries like Australia, or sit in their armchairs in Sweden and expect the US be on par with X or Y social infrastructure and rage perpetually at the citizens (like the GP, which prompted my response) when they find this isn't the case.

Why is it reasonable for the US to align social policy to every European or South Pacific developed nation when the scale of the US is not even remotely comparable? What is the philosophy 101 term for that level of delusion?

And why is OP justified in spitting venom at the citizens? Get real.

It's not some "haha i got you!" for me to move to the USA to be in the top 1% of wage earners in the USA (high level within FAANG). I'm in a very privileged position and I'm happy to take advantage of it.

It's weird that the existence of ultra privileged positions somehow gives you the thought that therefore America is fine the way it is. It's clear for the remainder of America they'd be better off elsewhere in the western world. They'd be better off fighting for their situation.

The sad fact is that many Americans just aren't educated enough to care, nor do they want to care. You have to remember: the country was founded by the conspiracy theorist farmers of the day that believed the government was out to fuck them, when in reality they were just mad that they had to pay taxes. This mentality persists today that people don't want the government helping them in any way, even if it means they get fucked over by their employers.

If you grew up in the US I'd like to demand the resignation of whatever American history professor you had growing up.

"Mad they had to pay taxes" completely obfuscates (probably in bad faith) the fact that colonists had no say in what that taxation went toward, and the people who _did_ lived thousands of miles away before any real communication infra even existed. It's right there in the name. The way you speak about "conspiracy theory farmers" reveals your real agenda, which is to push narrative-snark bemoaning the origins of our country (even if it's at the expense of the historical truth).

No, it is a "haha i got you!". You want the US to be like the rest of the world (or specifically Australia) and yet you came to the US because the US is unique in providing extremely high paying comfortable and interesting jobs. This type of environment is possible because that's what the US optimizes for, at the detriment of class equality. You're a hypocrite, specifically one that calls out people's alleged wealth when you came here to amass your own. Poetic given the thread we are in.

Let me remind you that being a hypocrite does not make one wrong.

If I smoke and I tell you smoking causes cancer, will you disbelieve me?

It's actually a strange form of argument from authority: you don't follow your own rule, and I believe your honest self that I think you're showing by not following it.

If anything it should tell you something that a guy who is milking the system says the system is broken. That at least is a first hand witness.

Well put. Exactly what I was getting at.

Right, the old "Americans don't want to improve anything" bit. Enjoy your vesting options.

>I would sure hope the unparalleled salary for software people is not the reason why you migrated (and continue to stay) here.

This has nothing to do with taxes. It's not even true in America. If high taxes are such a massive depressor of wages, why are all the highest paying jobs concentrated in the states with the highest taxes?

That's not so simple. A lot of the jobs around the beltway are high paying because they depend on taxes in some way, eg defense.

Reagon won. The top rax rate on ordinary income went from 70% to 28%, while the bottom rate went from 11% to 15%.

We’re still living in his world.

>> Honestly as an Australian living in the USA it does show. I get rather annoyed when a USA resident boasts about wealth. You have massive loans dickhead

Australia has the second highest household debt to GDP ratio in the world, second to Switzerland. The US isn't in the top 10: https://en.wikipedia.org/wiki/List_of_countries_by_household....

As others have pointed out, a large part of this is due to increasing house prices, and it is fairly recent:

"Australian household debt levels have increased substantially over the past thirty years, with the ratio of household debt to annual disposable income rising from 68% in June 1990 to a recent peak of 188.5% in June 2019. Since June last year, the ratio has reduced slightly to 185.0%.

Most of the debt held by households is housing debt, which comprises around 76% of overall household debt. Thirty years ago housing debt comprised a much smaller 46% of overall household debt.

...

Most of Australia’s household debt accrual occurred between 1990 and 2010. The ratio of household debt to income increased by 45.7 percentage points between 1990 and 2000, and by another 49.3 percentage points between 2000 and 2010. The past decade has seen growth in the ratio more than half to 21.5 percentage points, with most of that growth aligned with the property boom between late 2012 and 2017.

Importantly, the value of assets held against the debt has recorded a more significant increase, pushing household net worth to new record highs at the end of 2019. Residential dwellings comprise by far the largest component of household assets, totaling $6.8 trillion, or 53% of household wealth."

-- https://www.macrobusiness.com.au/2020/11/could-australias-hi...

Australians took on massive debt to buy houses at increasing prices. As long as prices keep going up, their wealth increases. And what are they doing with that wealth increase?

"not all of that housing debt has simply been used to buy homes — many people have been cashing in on the rising value of their properties over the past two decades.

'Even for people who don't buy and sell a home, and stay in the one place, we're finding between 30 and 40 per cent of these people are increasing their debt from one year to the next,' Professor Wilkins says.

'When people are increasing their debt from one year to the next, they're essentially accessing the equity in their home ... people are evidently using that increased equity to fund consumption."

-- https://www.abc.net.au/news/2019-10-18/household-debt-leaves...

As long as prices keep going up, it will be fine. But I suspect I know how this story ends.