Taxes-too-high is a common refrain but income tax + national insurance takes 26% of my 95th-percentile income. Is that so bad?
(for the unfamiliar - the employER has to pay 15% from April - not a typo - of part of your salary in taxes to the government and this is hidden from your payroll taxes as an employee)
What's the % if you include those deductions?
In my case my tax rate is 29% but employers NI is 13% so 42%, going up to 44/45% in April
Employee NI went down by 2pts last year, employer NI is going up by 1.2pts this year.
Most importantly, I don't believe that if employer NI went away tomorrow that money would come to me in increased salary. Including it as a tax on me makes the assumption that it would.
You can see why the government created it in such a way !
In the US, it should be possible to get a 95th percentile household income ($300k, married filing joint) effective federal income tax rate down to 10% to 15%. Including total health insurance costs (employer + employee) plus some amount of deductible/out of pocket maximum for a family of 4 would bump it up to 20% to 25%. And then on top of that would be state + local tax liabilities like property and sales tax.
All in, I bet total proportion spent on taxes is less than 40%, even in California, at 95th percentile income, and 30% in a state without income tax.
Edit: I’m probably understating my numbers by 5% due to forgetting about social security and Medicare taxes.
So that's 42%, not including healthcare costs. Which is gonna be easily another 5%+.
> if you are an employee and that is direct compensation (not deferred capital gains) then your taxes are lower than California
> In the US, it should be possible to get a 95th percentile household income ($300k, married filing joint) effective federal income tax rate down to 10% to 15%.
After standard deduction ($29k), AGI is about $217k. That's the 24% bracket (barely), which adds up to $34,337 + 0.24*$16000 ~= $38,200 federal income tax
$38,200/$300k = 12.7%
You can get even lower with itemized deductions: mortgage interest (might be over $40k) plus SALT ($10k) plus a few donations ($5k) => AGI of $191k => federal tax rate of under 11%
Of course, this is just federal income tax. Most people also pay FICA (medicare+social security) and state and local tax.
Deeper question: Now that you provided a reasonably scenario where a household earning 300K USD combined income can "only" pay 12+% in federal taxes: Does this make sense from a policy perspective? My point: Should it be higher? It seems hard to pay for what a highly developed nation needs to pay for where 300K USD households are paying such measly federal taxes. (To be clear: I very well understand this is one component of total tax burden, but still a worthy discussion.)
Especially when comparing to effective tax rates in countries with universal healthcare and different defined benefit pension schemes. For example, health insurance premiums in the US are a tax, due to the myriad restrictions on how premiums can be priced. Just not collected by the government, but it definitely is young and healthy subsidizing poor and sick.
Also, note that most of the reduction in tax liability is due to setting money aside for later use, so it is akin to deferring taxes, rather than just reducing taxes.
Another way to make sense of policy is that the federal US spend is 60% on defined benefit pensions for old people and healthcare for old or poor people, 17% on military, 13% on interest, and the remaining 10% for the rest of the federal government’s operations.
https://fiscaldata.treasury.gov/americas-finance-guide/feder...
Which IMO should be higher! But also I'd want that to include universal healthcare (my employer and I pay combined about $20k/year or another 4% between premiums and deductible+copays) and generally a better social safety net.
At one of my businesses, we remit 4 separate sales taxes to 4 separate governments, and each has to be itemized, so receipts are multiple pages long for no reason.
Then there are myriad possibilities for being exempt from either all or some of the taxes, and those records have to be kept in case of an audit.
There must be enormous amounts of tax evasion too, the attack surface is so great no one can audit it all. The most tax advantaged account, a Health Savings Account, lets people set money aside today, invest it, and let it grow for however long they want, and then withdraw it for healthcare expenses, all tax free.
But the healthcare expenses can be from any point in time in the past. A 30 year old can save their receipts for purchases ranging from over the counter painkillers to childbirth bills from the hospital, and then reimburse themselves when they are 80 years old.
How can it even be possible to audit someone’s healthcare expenses that happened 50 years ago? The counter party will surely no longer have the records to cross reference, so it’s basically the government taking people’s word for it.
And that’s just simple personal taxes.
Not to say that Canada's overall economy is particularly any better than the UK's, and especially Trump's tariff threats will do a number on us.
There will be losers certainly, but I'm not 100% sure that tarrifs for Canada are bad in the long run.
Firstly, there are already reports of Canadians buying local over US goods. If that sentiment hrows, and becomes entrenched that's good.
Secondly, at least gor some goods, suppliers are incentivised to explore other export markets. Again, long term, that diversification is good.
Thirdly, for at least some goods, the US cannot simply ramp up production. So they'll still be buying, but their consumers will pay more. Canadian suppliers can simply increase prices as well, since any US consumer increase will be ascribed to the tarrifs. This though is somewhat balanced by Canadian oversupply.
Fourthly it encourages producers to diversify somewhat to reduce over supply. In the long run a varied economy is better than one dependant on any one sector.
Ultimately Canada and Mexico could come out of this stronger. While the US consumer gets used to higher prices. (Which Canada et al can take advantage of whe tarrifs are removed.)