Why higher-income workers in California may get surprised by tax hike in 2024
sfchronicle.com
sfchronicle.com
> Someone making $85,000 a year would pay an extra $170. A worker making $200,000 would see an increase of roughly $822 next year.
>This also effectively increases the maximum marginal tax rate for CA high earners. The maximum marginal rate is now:
37% Federal + 2.35% Medicare + 13.3% CA Income + 1.1% CA SDI = 53.75%
My opinion: High tax rates in Europe are the "price" of free (or very cheap) healthcare, cheap university education, and a strong social welfare net. But Californians at the high end are paying almost the same price, and missing out on most of the benefits. I don't think this is a good situation, and I don't think it's sustainable.
Taxes in the USA have a lot of loopholes for the ultra-wealthy and for large corporations. However, there's not much that "normal" salary earning employees can do to escape these high rates. This ends up putting a lot more pressure on workers to contribute economically, which seems misguided since the corporations could haul their weight more here.
My tin foil hat theory as to why I can't find it is because it was removed in hopes of preventing those riots.
It's really insane to see Americans pay the same tax as Europeans (and Canadians, and Australians) but get so, so much less for that money.
Progressive income taxes increase at a far higher rate in Europe. Plus Europe has other forms of taxes: far higher sales taxes (VAT), corporate taxes, and other forms of taxes like buying-property tax (Grunderwerbsteuer).
The easiest way to see the difference is tax revenue as a percentage of GDP. France is 46%, Germany 37%, UK 33%.
The US is 27%.
And certainly this doesn't include the inflation tax either. Governments spend like crazy. No wonder we're not living sustainably! It starts from the top down! That's not corporations, it's the governments!
When you consider actual dollars, not % gdp, Americans pay MORE in actual dollars than many European countries.
https://upload.wikimedia.org/wikipedia/commons/3/37/Federal%...
France gdp/capita is around 43,658.98 USD. 47% is $20.5k/capita.
US gdp/capita is around 66,000 USD. 40% tax revenue is $26.5k/capita.
The US government brings in 30% more tax revenue per resident than the French government.
The differences in social benefits between France and the US are not due to lower taxes in the US. They are due to inefficient spending and systemic economic differences.
"This indicator relates to government as a whole (all government levels) and is measured in percentage both of GDP and of total taxation."
https://data.oecd.org/tax/tax-revenue.htm
The OECD data has the US at 34% and France at 45%.
And the idea that "the US pays more taxes doesn't even pass the sniff test. You only need to look at income tax rates, VAT, etc and anyone can tell that's not true at all.
For example, The US government healthcare spending per capita is 2.5X (250%) that of France- ($10.5K vs $4K per person), and France gets a universal national health insurance for that price, and the US gets medicare and medicaid. [1,2] Yes- you read that right, and it is still true if you adjust for PPP.
The same phenomenon holds true across almost every aspect of US government spending.
Look at infrastructure. The cost to build subways and light rail in the US is 2-7 times higher than in Europe. [3]
Look at defense. US spends ~300% as much as France, which is actually higher than most western European countries.[4]
From a purely numerical sense, the US can't overcome an efficiency problem by raising taxes and throwing more money at it.
1 https://stats.oecd.org/Index.aspx?DataSetCode=SHA
2 https://www.cms.gov/data-research/statistics-trends-and-repo....
3 https://www.nextbigfuture.com/2018/01/subways-and-light-rail....
4 https://en.wikipedia.org/wiki/List_of_countries_by_military_....
The US government pulls in more dollars of revenue per resident than most European countries.
the OECD data refub provided matches up with my claim. Do you have other data?
You can validate this with the opposite approach. Looking at government spending [1] The US government spends 31.5k per person. Germany spends 31.8k per person and France spends 32.3k per person. Deficit spending is a few percent higher in the US, but pretty similar. Switzerland, Ireland, and the UK are all in the mid 20's.
The idea that the US governments is underfunded or that taxes are vastly lower are pervasive myths.
It is based on a bait and switch looking at %GDP instead of dollars paid to the government, as if the cost of government services like roads or insulin are naturally proportional to GDP.
The entire concept of higher GDP implies you should be able to have more purchasing power, goods, and services with higher GDP.
I never said anything about how the money is used.
When it comes to real people and real "burden", what matters how much you have to hand over, and how hard you have to work for it. In this context, Americans pay more than most Europeans to their governments, and work far more hours.
This relates to upthread discussion:
>"If Americans knew what Europeans get for their tax dollars, they (Americans) would riot in the streets"... It's really insane to see Americans pay the same tax as Europeans (and Canadians, and Australians) but get so, so much less for that money.
And of the responses claiming that Americans pay less, and generally implying that Americans have it easy with respect to taxes.
I disagree. Americans work more hours (not a lot more, but more) and make more money per hour and overall.
So when they have to hand over money for taxes, they hand over much less, as a percentage of hours worked. So they end up keeping more in the end.
That sounds like a lower tax burden to me.
And the upthread comment just isn’t true. Americans pay less tax overall and spend fewer work hours paying that tax. So of course they don’t get the same benefits as Europeans. That’s the trade off.
If Americans had to pay European tax rates they’d see a huge increase in tax burden., even the middle class. We’re talking a 50% increase in taxes. That’s very significant.
So if you asked Americans “do you want European level of benefits?” almost all would say yes. If you asked them if they wanted to pay much higher tax rates in exchange? A lot would say “no”.
I'm so glad the founding fathers protected my right to bankrupt myself at the hands of an incredibly profitable healthcare industry. Stupid Euros don't know what they're missing.
I have hard to seeing why you think you're worthy of incurring unending health cares expenses on a human health care system that by nature is not unending. If we are human and therefore our system can only by provide limited health care, then consequently you either go bankrupt at some point or you don't get health care. America chooses the former, EU chooses the latter.
So what’s missing?
And if you think America doctors are not rushed and often misdiagnose stuff then you’ve probably not been to an American medical facility in quite some time.
Oh, trust me, I'm sure they are, but it's even worse in Europe.
> And yet European health outcomes are significantly better than American ones across the board.
What on earth are you basing this off of?
In my opinion, if the EU social benefits are even a little bit better than in the US, it's definitely because of other factors, not at all because of health care.
It’s also that if you lose you’re job you immediately have to think about where you are going to get your healthcare from and changing a lot of paperwork or even providers.
> The US left expectancy has also been going down even after the worse of Covid while the EU is returning to a slow upward trend.
This is complete meaningless non-sense. You can't draw trends from this. And it's not relevant to the discussion anyways!
> It’s also that if you lose you’re job you immediately have to think about where you are going to get your healthcare from and changing a lot of paperwork or even providers.
You think you have lots of paperwork in the US?? Come to Europe man.
Gun death as a leading cause of youth deaths is not life choices.
PFAS exposure is not life choices.
A medical system that allows advertisement and more or less open bribery leading to an opioid crisis that’s killing enough people to bring down life expectancy across the midwest is not life choices.
Ineffective pandemic management by the government is not a life choice.
Obesity is a boogeyman, but it has been around for long enough that the recent significant drops in life expectancy cannot be blamed on it. And even obesity is likely not a pure life choice, food quality and regulation of food supply play a vital role.
I always found it amusing that we pump estrogen / hormone affecting chemicals into things and then give people a hard time if they have gender identity challenges and call it a life choice despite all the science to the contrary.
Life choices are a catch all diversion, a fairy tale people tell themselves to feel like they have power to avoid the horror.
This isn't even remotely true. In France, the highest marginal rate kicks in at EUR 160k (approximately $170k). To get the same marginal tax rate in California, you would need to be making approximately $350k (approximately EUR 330k), or more than twice as much. (Note that in all cases, I am excluding payroll taxes like US SSI or French CSG).
(or very cheap) healthcare, cheap university education, and a strong social welfare net
The Europeans paying the same marginal rates as their extremely wealthy Californian counterparts generally do not qualify for most of this benefits of the strong social welfare net, and for the most part have chosen to have the bulk of their medical treatment in the U.S., paying out-of-pocket even though they could get the same treatment locally for free or very cheaply.
> $350k… extremely wealthy
In many parts of California this is someone who can buy a just okay house with a long mortgage. Have we redefined the word wealthy?
If you can't afford a nice house with 350k/year, move a mile or two away from your upper class enclave to the middle class neighborhood and live like a king. (Per Nerdwallet, 350k/year is enough to qualify for a mortgage for a $1.35 million property with 20% down. I live in a nice part of LA and places here cost significantly less than 1.35 million.)
People really do think of themselves as at the top when they're not. You're very good but not the top.
[1]: https://en.wikipedia.org/wiki/Income_in_the_United_States
[2]: https://www.visualcapitalist.com/mapped-the-top-1-percent-in...
Look up housing prices in some major European cities (generally way less affordable that in most of the US if adjusted by income).
In London, Paris or Munich prices are about as bad as in SF or NY yet median income is considerably lower (also good luck getting a fixed 30 year mortgage, so there is also considerably more risk even if you can afford it)
> suddenly become poor
If you earn over €350k per year you really have to make some very poor financial decisions for that to happen. Besides from changing illnesses/accidents etc. but you would still most likely end up in a much better position financially if you saved that extra 10% you pay in taxes or went with a private insurance option.
Of course healthcare is probably a different matter.
I've heard of people paying for private medical care, to supplement their free healthcare, but not traveling to the US for it.
Citation? Because that is very rare, even for the very rich.
France is 41% at 78k EUR. UK is 40% at 37k GBP, Netherlands is 50% at 73k EUR.
Then add on top the VAT which is high teens.
You’d need to earn over $200,000 to get to a >40% marginal rate in CA, with the standard deduction and SALT it’s probably closer to $300,000.
Europe taxes the middle class at those higher rates to raise enough income for all those social programs. You couldn’t fund those sort of social programs in CA relying solely on taxes the top 5%
Edit: plus it's not exactly the UK since Scotland has different tax rates and services but I think it's confusing enough already.
The context behind this statement is that Californians at the high end are also making over $650k/year. That said, I agree with your general point about generally insufficient healthcare and increasing taxes on corporations.