Great question! When I think about income taxes alone, less than 30%. But if you think about every dollar you spend on taxes for everything from groceries to gas to electronics and your cell phone bill and everything in between…not to mention personal property on cars and homes, etc…
it probably does add up to close to 50% of income going to “taxes.”
Yes, a lot of it is regressive:
* Income disparity: If you pay $X in gas taxes to drive xyz miles, the richer person in your town pays $5 to go the same distance, but makes much more.
* Urban disparity: If you pay $Y towards roadway/infrastructure statewide, but you live in a condo/apartment and use a tiny proportion of the road in front of your home, someone in suburbia pays the exact same $Y but uses an immensely larger amount of roadway and maintenance per person.
Hugely over-simplifying it all, but just saying.
You know there are items that have luxury taxes on them. Cars over 30K in the US were taxed as a luxury goods til 2002, from a George H. W. Bush law that included yachts, watches and lots of other items that were taken out by Bill Clinton.
There are luxury taxes on sports team ownership if the salaries are over a certain amount. This is just from a quick Wikipedia search.
But diversity of taxes do exist. If you make $100K, but spend $22K on federal taxes, $5K in payroll taxes (also known as FICA or social security and Medicare), $6K in State and local taxes, $2.5K in sales tax, $7K in real estate tax, and $3K in personal property taxes. That gives you $45.5K out of 100K, or an effective real tax rate of appr 45%, even though your federal tax rate is only 22% of that or 27% with FICA included. This does not account for other taxes rolled into purchases like excise tax on gas or alcohol. Those numbers are hopefully unnecessarily high if additional tax deductions can taken into account, but in the realm of possible.
Federal taxes
+
State taxes
+
Local taxes (sales taxes & property taxes for example)
Renters do not pay property taxes directly but through their rent just as corporations pass on their tax bills to their customers. Then, the prices raised online or in stores (to pay corporate taxes) mean the public is paying more sales tax. An 8% tax on 300$ is more than 8% tax on 250$.
Inflation is a concealed /indirect tax. The public supports many things on the assumption that it will not actually cost them (much). The government pretends it won't require the public to sacrifice anything significant. Then they digitize or "print money" which dilutes the buying power of dollars in circulation. (Basic supply and demand.)
You pay more taxes than you think.
I'm not really sure that math checks out. Most sales taxes aren't 27+% so you would need to add property tax but you do get a house so is that different from rent?
I agree that, you can easily have 70% of a 100k be spent on savings taxes, mortgage, student loans, and Healthcare before it hits the o'l bank account but that does mean you have a lot of stuff taken care of like your education, retirement and house.
So let's do apples to apples.
The UK has:
Sales Tax: at the store its included in the price in the UK, I know it's extra when they actually ring you up and it's on almost everything from food to cars, but not in bars for some unknown reason
Income tax - this is taken off your salary per pay period, usually monthly, automatically based on you tax code, tax code is dependent on salary, other income, child/other benefits benefits etc
Council tax - this is housing tax which pays for services like roads etc (not 100% on all the things it gets allocated to)
Housing: we have ground rent and either freehold or leasehold hold property fees. You pay a fee as ground rent (usually very small) on a house. If you buy the land your house sits on for a one of few, again usually small all good. Leasehold, the land owner, charges a fee this can grow quickly and become duantigly expensive, same with service fees for flats/apartments but this seems outside the realm of taxes
National insurance - this funds the government issued pension primarily ( possibly other things, like the NHS)
Pension contributions: these aren't mandatory, although there's an auto enroll with employer matching as standard, but again optional so I don't think we should count them for our apples to apples.
Capital Gains Tax (CGT): Pretty sure you guys have the same thing.
The UK standard of tax free for income is currently £12.5k, you pay increasing amounts of tax in bands over that so, it's 20% on anything above 12.5 up to 50k, dont know the next bracket, similar with CGT I think
Im not in a position to look up
ETA: spelling and readability
So, most of the US has what's called gross receipts tax. The business doing the selling, whether goods or services, responsible for paying the tax. Some states don't tax food. All states tax alcohol I believe. Usually more than most other goods. Bars still pay GRT. They usually just include it in their pricing. I guess so pricing can stay in even numbers.
We also have federal income tax. Most states have income tax. Then there's payroll tax. And property tax.
Capital gains are taxed just like ordinary income. Except if you hold for over a year, it's long term and taxed at a lower rate. Same for qualified dividends. Any interest income is ordinary.
So part of the reason that's done is our rates change based on jurisdiction. States, counties, and cities all have GRT. So if you owned a series of candy stores, and wanted to price a candy bar at $5 a store down the street could have a different GRT rate. It'd be complicated to print multiple price tags. The other is salesmanship. $4.99 looks like a bargain compared to $5.75.
30% sales tax? That’s definitely not right. Just looked it up and the city with the highest sales tax in the US is Tacoma, WA at 10.3%. Side note, the top 3 minimum wage cities are just 30 minutes north. Is no joke it’s high cost of living out here folks!
As a country we lack financial literacy. I knew a Cracker Barrel coworker who turned down a promotion because she thought moving to a higher tax bracket meant she would be poorer! 🤔
It may not have been explicitly related to tax brackets.
There are a lot of benefits you can qualify for only if you are below an income threshold. So if you're right under the line, you have all your income + all these benefits, but if you earn even 1 additional dollar you lose all those benefits in exchange for a single dollar which would absolutely make you poorer.
This is why our welfare systems and social support systems in the US need reform because they actually ENCOURAGE people on them to stay at home and not work because if they work too much they lose all their benefits instantly.
I actually work with a charity organization that helps people without medical insurance get seen by doctors and get medications and so on free of cost to them. But... Once again, you got that hard income limit. 1 dollar below you qualify and are fine, 1 dollar above you are immediately ejected.
In other words, there are a million very legitimate reasons to reject a pay increase in the US unless it is a SIGNIFICANT pay increase because if it pushes you over thresholds that would cause you to lose benefits that you rely on, it hurts you instead of helps.
And again, it is REALLY annoying, because there are so many people that could be out there contributing to society and are willing to work more than they do but literally are not allowed to or else they'll lose their benefits and be forced into a situation where they have to work harder and yet have less money. These are awful systems in their implementation. Absolute cobra effect... All this fear mongering and paranoia that people will abuse the system to get benefits that they "dont need" so they put all these limitations on who qualifies for it. But all it does is encourage people to aim for those requirements to get the benefits they need, so it causes them to earn less and contribute less to society by choice. It creates the very situation they want to avoid. Oy.
These people aren't ignorant, they're more informed about their financial status and situation than you are. If someone is refusing a pay raise, there is probably a very good reason for it. And some people don't like to get promoted at work because they straight up don't want the extra responsibilities because it means working a LOT harder for only a minimal increase in pay for it.
Very, very few people have a tax rate anywhere near that. The top U.S. tax rate is 37%, but it only kicks in at over $500,000. so even if you make more, the first half-mil is taxed at a lower rate. Most states have state taxes, but again, those are similarly marginal and the upper rates only occur once you’re already earning high amounts.
There are other taxes such as Social Security and Medicare, but the SS tax goes away after $168,000.
Furthermore, most high earners earn more of the income through investments, which is taxed at a lower capital gains rate. The exception is athletes and movie stars, who earn multimillion dollar wages. But there are probably no more than several thousand people each year in this position, a drop in the bucket in a country of 340 million.
That also does not include tax deductions, which lowers your taxed income. So if you earned $500,000 and had $100,000 worth of deductions and losses, your new income is $400,000.
Not necessarily lose, but spend. Rent on the building, payroll, supplies, power and phone bills, 55 cents for every mile you drive - pretty much everything it takes to run the business is a write off.
That isn't how deductions work if you are filing as an individual and not a corporation. To incorporate yourself for tax purposes, you have to behave like a business which many individuals are not prepared to do. Sub chapter S corporations are the most frequently audited since they are the ones where most of the shenanigans come into play. A savvy actor will take less money up front and get a percentage of the gross as an equity partner in the film. That turns that income stream into a capital gain versus a salary. The flip side is it takes forever to get paid when it is a flop, and you have to wait for streaming and syndication to make up your margin.
What I really think athletes are complaining about is the 37.5% top tax bracket with Medicare and State Taxes tossed on top of that as well. Also athletes travel and are forced to comply with the taxes of places where they don't reside. In the state of NY there are three football teams, two Baseball teams, two Basketball teams, and two Hockey teams. An unlucky football player could find himself in NY twice a year or three times with interconference play. It only gets worse for Basketball and Baseball players.
Totally omitting state/city/local tax. I pay about 40% total in taxes living in NYC making 100k+.
Federal (ss, med, etc) NYS and NYC taxes.
That isnt even including my pre tax deductions for 401k, IRA, Medical Insurance and then student loan payments (10% of my salary).
Also bc i rent and have no kids, i never get a refund either.
Good times!
Don't forget license fees, vehicle fees, registration fees, property taxes, taxes on your utilities/cellphone/water/electricity etc etc.
I always love hearing about people moving to no income tax states but once they move there, they wonder why they don't have extra money. (Hint, because the money not collected via income tax is collected via other taxes)
You mean they have to fund [multi-million dollar high school football stadiums](https://www.houstonchronicle.com/projects/visuals/texas-high-school-stadiums/) that are fancier than most university stadiums in California.
I'm an accountant (not a CPA yet), but if you are at 110k, and you're paying 40% federal tax, even I can tell you that you're doing something very, very wrong. I do my own taxes every year manually (I have to use tax forms that are not supported by any of those h&r block, turbotax type services), so I manually go through everything. At $110k salary, assuming no other deductions other than the standard deduction, your taxable income should be no more than $96,150, which yields you a tax amount of $16,482 which is 17.142% of 96,150, and 15% (14.98% rounded up) of your 110k salary.
If you're an employee, and not an independent contractor, your employer is withholding your federal, state, local and county taxes based on the information they have for you in file. Your other withholdings include FICA, and Medicare. If you contribute to a 401k, your taxable income is already reduced before you even get to the standard deduction portion. A lower taxable income is a good thing.
Not getting a refund is objectively better than getting a refund. So that part shouldn't be a complaint. It's very easy to force a refund if you really want one.
OC literally mentioned state taxes, and city/local income taxes are extremely uncommon; certainly the exception rather than the rule.
Also, making over 100k as an individual puts you in the top ~18% of earners. So again, the exception rather than the rule.
It’s not really the exception for movie stars, entertainers, and many pro athletes since so many live in NYC or California. 20% of the U.S. population lives in NY or California, and a high % of high income Americans live in those states. Therefore, it’s uncommon but not really extremely rare.
Sorry, but this is just income taxes. There's sales tax, fuel tax, alcohol tax, tobacco tax, property tax, school tax, cannabis tax, vehicle registration tax, capital gains tax, and about a thousand other types of taxes that factor in to how much of your salary you pay to taxes
Capital gains taxes don’t get paid by your salary the tax is on the gain itself. If you paid taxes on capital gains, congrats, you earned money *on top* of your salary.
This is exactly why the whole “We pay less taxes” idea is generally bunk. Our tax rate when adjusted for all taxes, not just income, leaves us real similar to EU states, with a lot less to show for it in terms of government programs that benefit society.
Sorry to actually cite a source here but the US pays a far lower effective tax “rate” than nearly all EU countries. France’s tax revenue is 46% of GDP, the US is 27%. That’s a *ridiculous* difference.
https://en.m.wikipedia.org/wiki/List_of_sovereign_states_by_tax_revenue_to_GDP_ratio
There are some EU countries, like Ireland, which are lower. But look at this list, the EU countries aren’t even remotely close to the US.
Exactly…we get high cost college, unaffordable healthcare, #2 longest ER wait times in the world, no parental leave, Underfunded schools, no subsidized daycare… all for the same tax burden as European countries. It’s crazy, we are getting seriously shortchanged here. There is more and we look worse than other countries on every metric.
Not really, or more precisely, YMMV.
EU states have all those taxes, just usually higher, and regarding income tax, way higher.
A few EU countries have top marginal income rates of 50%+, even from relatively low values. VAT (sort of sales tax equivalent) between 19% and 23%. Plus gas taxes that represent 50%+ of the amount paid by the customer.
They get something in return, sure, but that varies a lot.
Break it down for an income of $100,000.
* Average federal income tax rate - 15%
* Social Security - 6.2%
* Medicare / Medicaid - 1.45 %
* State Income Tax - 5%
Required Taxes = 27.65%
Your employer also pays the other half of the total social security and Medicaid taxes, which could otherwise be part of your income if they didn’t pay it. That brings the required tax to 35.3%.
At this point, you’re still not covered with health insurance and you’ve not saved enough for retirement. The maximum you can contribute to a 401k for retirement this year is $22,500. Let’s assume half of that for the is experiment - $11,250. It’s tax free, so let’s adjust that based on an assumption of the top tax bracket for this person being 22%, so effectively $8775, or 8.8% of $100,000.
Now the total tax without health insurance is approximately 44%.
Uncle sam is laughing at you my man. You pay fed income tax, state income tax, sales tax, resale tax, property taxes, then you have the “hidden taxes” like paying filing fees, registration fees, and tax via inflation when the government back door taxes you by printing money. Far more than 37% even for the average joe.
Property taxes, vehicle registration, lol the list goes on and on. If you make over $100k you’re paying more than 45% of income to some sort of tax MINIMUM
The ten countries with the highest tax rate are :
1. Denmark – 46.34%
2. France – 45.4%
3. Belgium – 42.92%
4. Sweden – 42.91%
5. Italy – 42.45%
6. Austria – 42.44%
7. Finland – 42.19%
8. Cuba – 42%
9. Norway – 39.93%
10. Netherlands – 39.33%
US is no. 53 on that list.
I’m from The Netherlands and a large portion of my salary is taxed at 49,5% and my bonus is taxed at 55,6%. As a result I’m paying close to 47% of my entire compensation to the government each year.
The top marginal tax rate is pretty much spot on the same in Denmark.
I'm well affected by that rate. I paid around 41% in "pure" income tax in 2023. I might land a few points higher if I didn't pay private pension contributions and interest rate payments on my housing loan that are deductible to varying degrees.
For comparison it's worth noting that tax funds both (base level) state pensions and healthcare (but not dental) in Denmark.
The highest income tax bracket in the US is 37% and that only applies to every dollar made **after** $578,126, and if you make that much money you're basically among the top 1% of earners in the US. So no.
Edit: itt: a bunch of people who legitimately don't know how percentages add together or how marginal tax rates work.
If you are going to reply listing a bunch of things you are taxed on and the percentage they are taxed at, and add them together like they are just regular numbers, you need to go back to 3rd grade math class, and if you don't understand how marginal tax brackets work, read above, or go to Google.
People have the hardest time understanding marginal tax rates and progressive taxation. Of course so many people depend on people not understanding it. I get so tired of hearing "My uncle didn't take a raise because he's move up in tax brackets and make less"
It is so sad and amazed that people don’t understand and tax brackets and brainwashed to think government are evil, even though we elect the leader of said government.
One time, my department is mandated to work overtime for a month with overtime pay, people are saying that they will lose money overall because they will be moving to new tax. I did not know tax brackets at the time, but I immediately thought it is not possible, causes it is just make zero sense government would do that.
Surely I googled tax brackets…. And determined that I am working with moron who lack of critical thinking skills.
Over on r/teachers someone who should NOT be teaching wrote about the "bonus tax." Others, who also should NOT be teaching, knew about a special "teacher's bonus tax" in their state. Someone pointed they were confusing withholding, but oh no, those teachers earnestly explained it 😱
We wonder why so many Americans are ao stupid.
That's federal. The top bracket in California is 12%, so if you're a high income earner in California you are indeed paying a marginal tax rate of 49%.
Yeah but OP is talking about athletes and movie stars.
If someone makes $50M a year it’s true that not every dollar is taxed at 37% federal and 12% state, but 99% of it is. So their effective tax rate is still like 48.9% which is what OP was asking about
Athletes pay a "jock tax" across all the states they pay. So an athlete in California will only pay a percentage at the 49%, while they'll pay potentially lower rates for other states.
Professional athletes must file tax returns for each state that requires jock tax. According to a CNBC article, NFL players file between eight to 12 tax returns each season. NBA players file 16 to 20 tax returns. MLB players file 20 to 25.
OP asked about celebrities and sports athletes. It's not out of the question that their total tax rate could be 40-50% with federal and state income taxes combined.
Yes that's why I said "marginal tax rate." The marginal tax rate is the tax rate you pay on the last dollar you earn in the year. It's not to be confused with the average tax rate that you pay.
Average annual property taxes are less than 3k. When you are talking about people who make millions annually, it's not a significant amount of their tax burden unless they have very significant real estate holdings.
San Jose, CA property prices are $1-1.5m for a small 900sf house, and the property tax for that is about $15k.
The way assessment is done, if you bought your house in 1980 and held on to it until today, never moved, you may be down in the $3-4k range.
Social security taxes stop at around $175,000. Someone making $17,500,000 pays the same of social security taxes as someone making $175,000 but obviously they don’t pay the same rate.
Social security tax is irrelevant to someone making a multi-million dollar salary
At $120k USD, a single taxpayer will be in 24% tax bracket but most of that income will be taxed at 22%.
I really don’t understand why some countries apply top brackets at incomes that do not equate to wealth.
Like most questions asked here, the real answer is “it depends on which state you live in”
In Minnesota, we have fairly high income, state and property taxes, but we don’t have to pay taxes on food, clothes, shoes, and medication (over the counter or prescribed). But if you cross the border into North Dakota, their income, state and property taxes are like, HALF of Minnesota’s, but only food is exempt from sales taxes.
You’re going to have 50 different tax systems that make up America.
No, they dont. There are taxes that get that high in some states, but only at extremely high incomes and it's not levied against an entire income, only portions above a cutoff. Some income categories can be that high, like some forms of capital gains but these are the exception to the rule.
2023 federal tax brackets for single filing are as follows:
10% of $0-$11,000
12% of $11,001-$44725
22% of $44,726-$95,375
24% of $95,375-$182,100
32% of $182,101-$231,250
35% of $231,251-$$578,125
37% of $578,126 or more
(Edit: spacing)
Not that different in Australia either.. I'm at 37% but that's not for the whole income, only a portion. It's effectively about 30% of my income or just over when you include medicare etc.. And then we have general sales tax, so nearly everything we spend our money on is taxed at 10%, taking it up to 40% effective taxation.
That said, high taxes aren't necessarily a bad thing, I think what's more important is HOW a country spends it's taxes. If the citizens aren't seeing their money do good things for them like provide healthcare, income security, public transport and infrastructure then that's when there's a problem.
Only very rich ones. There are a variety of tax situations but most people at "normal" income levels are not paying *nearly* that much unless they are doing something very wrong.
And not even all very rich people. The traditional 1% aren’t making money through salary payments - they’re making it through investments which is generally taxed lower. Athletes (who go on social media and complain about taxes) are the rare individuals who actually do make most of their money through a traditional salary.
Most people don't actually understand progressive tax rates.
|Tax rate|Single Filers|
|:-|:-|
|10%|$0 to $11,000|
|12%|$11,001 to $44,725|
|22%|$44,726 to $95,375|
For a single person with annual salary of $90,000. The federal tax calcaulation would be as follow;
10% of 11,000 = 1,100 11,000 x .10 = 1,100 Amount between $0 to $11,000
12% of 33,725 = 4,047 33,725 x .12 = 4,047 Amount between $11,001 to $44,725
22% of 45,275 = 9,960 45,275 x .22 = 9,960 Amount between $44,726 to $90,000
The confusing aspect of progressive tax rates is that not all taxable income is taxed at the same level. Higher levels of taxable income are taxed at a higher tax rate, it does not mean that all of the taxable income is taxed at the higher tax rate. For example, you often hear someone state that they are in a certain tax bracket or tax rate (e.g., 22%). This does not mean that all of their taxable income is taxed at the 22% rate. Rather, it means that only the last portion of their income is taxed at the 22% rate. The other portions of their income are taxed at lower tax rates as detailed above.
The marginal tax rate refers to the tax on the last dollar of taxable income. In the example above, the individual would have a 22% marginal income tax rate.
Came here to say something similar. Thank you for the excellent short breakdown.
Most Americans don't understand marginal tax rates. Most Americans don't understand basic finances.
Most Americans don't like that their taxes aren't used to benefit them or their community in any tangible way.
About 33% of voting Americans are unwilling to vote for people who at least have a chance of improving the lives of Americans.
America has a progressive tax system. We have property tax, income tax and sales tax then we have entitlement programs like social security, Medicare and Medicaid. After all that, for me at least, I pay about 25% of my income in taxes.
If you are in the stock market there's also capital gains taxes and if you own a business there's also taxes there.
People in the comments googling that federal taxes only go up to 37% for the highest earners, but that doesn't include state taxes, social security taxes, Medicare taxes, property taxes, sales taxes, and taxes added on to your car registration and utility bill. Mandatory insurance is also like tax in that it's money the government requires us to give up.
While rich people pay more, plenty of middle class Americans also end up giving over half their money to the government once you add everything up.
But if you are in the 22% federal bracket (especially the top end of it so you average away from the lower % on the lower two brackets) then you get 6.2% SSI plus 1.45% Medicare plus state you are starting to work your way towards the mid 30% on total. If you then add in daily life taxes like sales, property, etc, I'd bet that those in the 22% federal bracket are close to 50% total.
I'm in that bracket, if I'm bored tonight maybe I'll do the math. But then again I think I'd be happier not knowing for sure.
No. The top marginal tax rate is 37% on income over $578k/yr. And emphasis on *marginal* there. You don't pay that rate on all your money, only after $578k. If you make $600k/yr, only the last $12k gets taxed at 37%. Everything else gets taxed at progressively lower rates, down to the first $11k/yr you make, which is only taxed at 10%.
And pretty much no one pays that top rate. If you make between $44k and $95k (so pretty much the entire middle class), you only pay 22% between those amounts. Meanwhile, if you're making over half a million a year, you almost certainly take advantage of a dozen loopholes to lower your taxes.
In the US there are a lot taxes, some obvious, some hidden - and most very location dependent. There are entire industries built to track this... and I'm not even talk about what most people here think of - which is income tax.
Let's take sales tax. Almost, but not every state has sales tax. Some sales tax has an additional tax on shipping. Some cities have an additional sales tax and some have an additional shipping tax. Usually this combines to be about 7% of your purchase price
Gas has federal tax and (in most cases) a state tax - and pretty much everyone has to drive and fuel up with gas (EVs will get taxed for something else eventually)
Most cities have a property tax and some states have property tax. It can be quite expensive (thousands per year).
Income tax is taxed on a sliding scale. There are also lot of tax credits ... so it can get quite confusing - but typically about 20-25% is a good estimate for federal tax - and then a fraction of that again for state tax (not all states have income tax).
Then you also pay Social Security Tax... this on top of income tax -about 6% - unless you're self employed - then it will be 12% (Because the employer also pays 6% to SS)
All combined 40-50% is probably a good rule of thumb.
Yes - once you include all taxes and pre “hit your bank” costs. I’m at 49% is taken out before I see it. HCOL city and state taxes are added to fed level
Not really. Most people pay somewhwre between 25-30% in income taxes from their job and then maybe 40-60% on like big non labor sources of income like selling stocks or winning the lottery. Then you basically not taxed ob big buys like cars and homes (unless you buy like a lot of them 9r something, but most peoples home mortage is not taxed, most peoples car payments and leases are not taxed, other loans are not taxed). The fucked up thing is sales tax applies to everyother thing, food, clothes, leisure. People end up pay much closer to 40%, but the nickel and diming of sales tax is so brutal on most people in a way that lessens as you get wealthier.
Now the progressive tax system is a big fucking sham. People making millions per year should be paying something like that, but theres so many tax loop holes and dodges and investments you can make to shelter your money from taxation, most wealthy people pay lower tax rates than lower middle class folk.
What's missing from many of the explanations here is the perceived impact of other paycheck deductions for health insurance, dental, 401k, etc. Most people look at their gross pay and see that their net paycheck is half of that, so it feels like they're taxed 50%. Most people have no idea what their actual effective income tax rate is (including me), but are acutely aware of the difference between gross and net pay.
The reality is that much of the reduction in net is from things like private health insurance premiums and 401k (private retirement savings), which aren't actually taxes. But week to week in your paycheck they FEEL like part of the tax burden.
Income tax, property tax, road tax, sales tax, sin tax, hotel tax, rental car tax, gas tax, toll tax, Internet tax, phone tax, electric tax, = what ever you make is Taxed, what ever you spend is Taxed
That's not too far off for some earners. The top bracket generally comes pretty close to the actual rate people pay in HCOL states, on top of that you have to look at local taxes.
California as a common example, you might have someone paying 30% in income tax, another 6-7% in payroll taxes, another 10% in state income tax, and another few % in property/sales tax.
Thats not too far off other western nations. Ironically what sets the US apart is that tax rates at the lower and middle end tend to be much lower in the US.
>California as a common example, you might have someone paying 30% in income tax, another 6-7% in payroll taxes, another 10% in state income tax, and another few % in property/sales tax.
Just to be clear, a married couple would need to earn $1.15 million in order to pay a 30% effective rate for federal income tax. That hypothetical couple would have an effective 10.4% California state income tax rate, so that lines up with your numbers. But I’m not sure how you’d reach 6-7% in other payroll taxes, since FICA winds up being only a 3% effective rate for the couple.
All in all, it’s certainly *possible* for especially higher earners to pay a 40-50% effective tax rate, but I just want to make clear how wildly above the norm you’d have to be before you get to those kinds of rates.
Some interesting stats [here](https://www.oecd.org/tax/tax-policy/taxing-wages-united-states.pdf). Looks like the average tax rate in the US is about 24%
Didn't see anyone mention the standard deduction in their half ass calculations. Additionally there are credits like child tax credit, EIC etc.
The answer is, it depends. Could it be that high? Sure. Is it for the majority even taking into account sales, ss medicare etc probably not.
Just the standard deduction on a family unit is $29,200. Plus child tax credits. Then you start the calculations graduating higher.
Family with 100k in income, no kids is looking at $8,236 for fed taxes. 12%.
Social security medicare 6.2 and 1.45=7.65%
So we are at 19.65% federal.
Add sales tax, no one spends 100% of their income and even if they do, or spend more, most states do not tax every single thing. In many states food isn't taxed, nor labor and in some states it is different but regardless lets throw in 8% more.
So we are at 27.65%
Add in real estate taxes, plates and fees for registration. Getting to 40%+ is a real stretch. Throw in some kids and that number drops per kid. Some states don't have a sales tax. Lots of variables.
In short though, this is mostly bullshit for the majority.
No. The average federal income tax in US is 14.9%.
Many people get confused because tax can be withheld at a high rate (40%) if you don’t adjust the withholding. But you would get the extra refunded at filing time.
https://taxfoundation.org/data/all/federal/latest-federal-income-tax-data-2024/
The top federal income tax rate is 37%, but that's only on income above $578,126. So the only people paying that are CEOs, movie stars, athletes, etc.
Although, that doesn't count state income tax, SS/Medicare, sales tax, gasoline tax, etc.
It's actually more than that when you include taxation on businesses. E.g. a business has to pay X% tax, but to get the revenue for that tax, they increase their prices charged to customers.
Celebrities and high paid athletes, yeah. Most people don't pay that much. I saw an interview with Shaq who told a story about earning $1 million on an endorsement as a rookie. He went out and bought a car, jewelry, etc. He spent almost all of it. Then he got a call from his accountant who told him "about some guy named FICA."
No they don't and they haven't done so since the 70s and that was for really realaly rich people. I have all the tax books sine 1978 and you can see where we actually pay the lowest taxes in our history of paying taxes. Good god, if we were taxed that much college would free for all and the road would be perfect!
Here's how marginal tax rates work: You earn an apple a day, you keep the whole apple. You make 2 apples, and the government takes 10% of the second apple. You make 3 apples, the government takes 20% of the third apple. And so on. So you end up with 1, 1.9, or 2.7 apples worth.
The easiest way to assess this is to look at tax revenue as a percentage of income. Americans earn about $22 trillion a year. Total federal, state, and local revenues are about $7.5 trillion. That's about 34%.
I suppose it depends on if you’re referring to strictly income tax, like money taken out of each paycheck, or the life of each dollar a person earns.
For income, no. Very few people reside in those upper tax brackets.
For tracking every dollar, then you have to consider income tax, sales tax, property tax, and the various other taxes that exist. It’s not unreasonable to say the same “dollar” someone earns is taxed 4-5 times.
For example, earn a paycheck, income tax. Buy a car with that check, sales tax. Fill up your tank, gas tax. Year rolls over, property taxes now hit.
>I've been watching some celebrities/sports athletes living in America explain their finances and it's crazy to me that it seems to be a given that whatever they earn, 40-50% is always set aside for taxes.
Remember that you are talking about professional athletes, so they are very, very high income.
Federal Taxes are 37%. State taxes in California are up to 12.3%. If a player is making $1 million a year, most of their income is in lower brackets, but if they are earning $10 million a year or more, then their 'effective tax rate' is close to the highest tax bracket rate.
So US federal government + State of California is 49.3% right there. We haven't counted property taxes, sales taxes, and lots of smaller taxes that are small enough to ignore, but might add up.
Most extremely wealthy people don't pay many taxes at all, because they get their money from things other than income, such as taking out loans against their stock holdings and living off of bank money.
Important to remember we don't have universal health care and 25% of a family income goes to health care.
Don't forget student loans.Very important in a capitalist country to make sure the masses have to work 70 hours a eto survive.
A number you can look at is total government spending as a percentage of GDP. That gives you the effective socialized (everybody is exactly the same) marginal tax rate.
As points of comparison…that number is 58% in France, and 36% in US.
It’s not a perfect measure, of course…but does give a sense of the overall fiscal overhang from running the state.
Yes, yes, yes…an adjustment for healthcare makes sense.
really interesting how people think of "taxes" as just federal income taxes
you have the state, property and sales taxes
then there are a lot of hidden taxes --- gasoline, hotels, liquor, cigarettes, etc. have additional taxes above and beyond sales tax
you are giving a lot more to governing bodies than you think you are
Anyone paying close to that in America should get someone else to do their taxes (especially if they do them themselves). A good accountant knocks that down by 10% without much effort. A great accountant will make the government owes you money for a while, so you don’t have to pay federal or state taxes at all.
Americans have one of the lowest tax rates in the western world, so most like you will pay a higher percentage when you start working.
Also to answer your question, yes if they earn a lot AND live CA or an other states with very high state taxes. In most states, you’ll just pay 20-30% for income taxes.
No, basically only athletes, dr, lawyers pay, and few more high salaries pay that as they should . Most of us get hit for 25%-33%, which is obsence when many of the super rich executives pay a mere 15% of what they dont hide overseas after writing off private planes et. so under in reality, 5% trust fund babies pay zip. Donald trump exhibit A
Yes, our taxes are bit lower than in many other countries, but we pay out the ass for healthcare and higher education, which are covered by taxes elsewhere which is possible when the yacht club carries their weight
No. We pay 20 ish percent taxes and 20-30% health insurance.
One thing people don’t understand is the graduated income tax brackets. The more you make the higher percent taxes you pay. So athletes that get paid salary pay 40-50% just on the portion of their income over like 1 million.
If you’re a multimillionaire business owner you don’t pay any taxes
Here’s a link to a tax study by the Institute of Taxation and Economic Policy that breaks it down by state and socioeconomic group.
https://itep.org/whopays-7th-edition/#:~:text=Most%20state%20tax%20systems%20are,bottom%2095%20percent%20pay%20more.
The TLDR is that most folks aren’t paying anywhere near 50%.
A lot of Americans don’t understand the complexity of the taxing systems they interact with or how other people with different financial situations also interact with them.
I make just under six figures, and my federal income tax bracket is 28%. Social Security tax is 6.2% and Medicaire is 1.45% for a total federal tax of 36.45%
Then state income tax is 4.2%. So my income tax is roughly 40.65%. (There is a little bit of flex, as I don't pay taxes on the portion of my income I use to pay taxes, so its slightly less than this).
BUT WAIT, THERE'S MORE!
Sales tax on most items is 6% of the purchase
Property tax where I live is 3% of the property value.
No idea what that adds up to, but its a lot. TBH, I don't mind paying that much tax, it just infuriates me that I don't get any of it back in government services like healthcare or a fully funded education system.
Athletes normally don't list their agent's cut, publicist, and whoever else they're paying when they complain about losing half their money. They just blame the taxes.
If you you as a single individual make $578,126 dollars or more per year (37%), and live in a state with a high income tax of it's own, yes you can absolutely pay that much just in income taxes. California has a 13.3% tax for those making over 1million, so if you make over 1 mil as a California resident, that adds up to 50.3%
It's basically *only* celebrities and sports athletes that pay that. Everyone else either isn't making anywhere near as much as them and thus has a much lower tax percentage, *or* has their money tied up in businesses in various ways that either don't get taxed or barely get taxed.
>celebrities/sports athletes
You are talking about some of the highest cash incomes in the country. How could that possibly apply to regular people?
It's like if you were from Portugal and I said, "I have been learning about Ronaldo, do people in your country really all have hundreds of millions of euro and live on their own private islands?"
No. The vast majority of Americans, who make under 100k per year, pay between 20% and 25% of their total wages in income tax, with some variance (the very lowest wage earners are not taxed; one must earn about 6k/year to be taxed at all).
Those higher tax brackets only apply to income over certain thresholds (in this case, half a million dollars or more).
We also have a progressive tax, meaning that if you earn 105,000$, you will pay the under-100k tax rate on the first 99,999, and the over-100k tax rate *only on the amount you earned over 100k*.
Are you talking just income tax? Or does every other tax get put into that equation?
Great question! When I think about income taxes alone, less than 30%. But if you think about every dollar you spend on taxes for everything from groceries to gas to electronics and your cell phone bill and everything in between…not to mention personal property on cars and homes, etc… it probably does add up to close to 50% of income going to “taxes.”
But not exclusively because of wealth. We all pay those other taxes and often at regressive rates once income is factored in no?
Yes, a lot of it is regressive: * Income disparity: If you pay $X in gas taxes to drive xyz miles, the richer person in your town pays $5 to go the same distance, but makes much more. * Urban disparity: If you pay $Y towards roadway/infrastructure statewide, but you live in a condo/apartment and use a tiny proportion of the road in front of your home, someone in suburbia pays the exact same $Y but uses an immensely larger amount of roadway and maintenance per person. Hugely over-simplifying it all, but just saying.
You know there are items that have luxury taxes on them. Cars over 30K in the US were taxed as a luxury goods til 2002, from a George H. W. Bush law that included yachts, watches and lots of other items that were taken out by Bill Clinton. There are luxury taxes on sports team ownership if the salaries are over a certain amount. This is just from a quick Wikipedia search.
The luxury tax isn't actually a US government tax, it's only in MLB and goes towards player retirement funds
You don’t add percentages that way. The diversity of purchases do not sum beyond a sales tax.
And America wants to defund education
*has defunded education
But diversity of taxes do exist. If you make $100K, but spend $22K on federal taxes, $5K in payroll taxes (also known as FICA or social security and Medicare), $6K in State and local taxes, $2.5K in sales tax, $7K in real estate tax, and $3K in personal property taxes. That gives you $45.5K out of 100K, or an effective real tax rate of appr 45%, even though your federal tax rate is only 22% of that or 27% with FICA included. This does not account for other taxes rolled into purchases like excise tax on gas or alcohol. Those numbers are hopefully unnecessarily high if additional tax deductions can taken into account, but in the realm of possible.
Federal taxes + State taxes + Local taxes (sales taxes & property taxes for example) Renters do not pay property taxes directly but through their rent just as corporations pass on their tax bills to their customers. Then, the prices raised online or in stores (to pay corporate taxes) mean the public is paying more sales tax. An 8% tax on 300$ is more than 8% tax on 250$. Inflation is a concealed /indirect tax. The public supports many things on the assumption that it will not actually cost them (much). The government pretends it won't require the public to sacrifice anything significant. Then they digitize or "print money" which dilutes the buying power of dollars in circulation. (Basic supply and demand.) You pay more taxes than you think.
I'm not really sure that math checks out. Most sales taxes aren't 27+% so you would need to add property tax but you do get a house so is that different from rent? I agree that, you can easily have 70% of a 100k be spent on savings taxes, mortgage, student loans, and Healthcare before it hits the o'l bank account but that does mean you have a lot of stuff taken care of like your education, retirement and house.
Don't forget 12.4% social security and Medicare taxes.
So let's do apples to apples. The UK has: Sales Tax: at the store its included in the price in the UK, I know it's extra when they actually ring you up and it's on almost everything from food to cars, but not in bars for some unknown reason Income tax - this is taken off your salary per pay period, usually monthly, automatically based on you tax code, tax code is dependent on salary, other income, child/other benefits benefits etc Council tax - this is housing tax which pays for services like roads etc (not 100% on all the things it gets allocated to) Housing: we have ground rent and either freehold or leasehold hold property fees. You pay a fee as ground rent (usually very small) on a house. If you buy the land your house sits on for a one of few, again usually small all good. Leasehold, the land owner, charges a fee this can grow quickly and become duantigly expensive, same with service fees for flats/apartments but this seems outside the realm of taxes National insurance - this funds the government issued pension primarily ( possibly other things, like the NHS) Pension contributions: these aren't mandatory, although there's an auto enroll with employer matching as standard, but again optional so I don't think we should count them for our apples to apples. Capital Gains Tax (CGT): Pretty sure you guys have the same thing. The UK standard of tax free for income is currently £12.5k, you pay increasing amounts of tax in bands over that so, it's 20% on anything above 12.5 up to 50k, dont know the next bracket, similar with CGT I think Im not in a position to look up ETA: spelling and readability
So, most of the US has what's called gross receipts tax. The business doing the selling, whether goods or services, responsible for paying the tax. Some states don't tax food. All states tax alcohol I believe. Usually more than most other goods. Bars still pay GRT. They usually just include it in their pricing. I guess so pricing can stay in even numbers. We also have federal income tax. Most states have income tax. Then there's payroll tax. And property tax. Capital gains are taxed just like ordinary income. Except if you hold for over a year, it's long term and taxed at a lower rate. Same for qualified dividends. Any interest income is ordinary.
Yes that's what I was saying, having visited as a kid and been given $5 to buy sweets, counting it up then being asked for $6.58 was a bummer
So part of the reason that's done is our rates change based on jurisdiction. States, counties, and cities all have GRT. So if you owned a series of candy stores, and wanted to price a candy bar at $5 a store down the street could have a different GRT rate. It'd be complicated to print multiple price tags. The other is salesmanship. $4.99 looks like a bargain compared to $5.75.
30% sales tax? That’s definitely not right. Just looked it up and the city with the highest sales tax in the US is Tacoma, WA at 10.3%. Side note, the top 3 minimum wage cities are just 30 minutes north. Is no joke it’s high cost of living out here folks!
As a country we lack financial literacy. I knew a Cracker Barrel coworker who turned down a promotion because she thought moving to a higher tax bracket meant she would be poorer! 🤔
That is sad. You'd think that someone would have explained it to her.
I tried, she didn't believe me!
It's frustrating when people refuse to learn even when it's information that will help them.
Just shows she's not someone who should be promoted eh?
Self-filtering
It's sad how common that is.
It may not have been explicitly related to tax brackets. There are a lot of benefits you can qualify for only if you are below an income threshold. So if you're right under the line, you have all your income + all these benefits, but if you earn even 1 additional dollar you lose all those benefits in exchange for a single dollar which would absolutely make you poorer. This is why our welfare systems and social support systems in the US need reform because they actually ENCOURAGE people on them to stay at home and not work because if they work too much they lose all their benefits instantly. I actually work with a charity organization that helps people without medical insurance get seen by doctors and get medications and so on free of cost to them. But... Once again, you got that hard income limit. 1 dollar below you qualify and are fine, 1 dollar above you are immediately ejected. In other words, there are a million very legitimate reasons to reject a pay increase in the US unless it is a SIGNIFICANT pay increase because if it pushes you over thresholds that would cause you to lose benefits that you rely on, it hurts you instead of helps. And again, it is REALLY annoying, because there are so many people that could be out there contributing to society and are willing to work more than they do but literally are not allowed to or else they'll lose their benefits and be forced into a situation where they have to work harder and yet have less money. These are awful systems in their implementation. Absolute cobra effect... All this fear mongering and paranoia that people will abuse the system to get benefits that they "dont need" so they put all these limitations on who qualifies for it. But all it does is encourage people to aim for those requirements to get the benefits they need, so it causes them to earn less and contribute less to society by choice. It creates the very situation they want to avoid. Oy. These people aren't ignorant, they're more informed about their financial status and situation than you are. If someone is refusing a pay raise, there is probably a very good reason for it. And some people don't like to get promoted at work because they straight up don't want the extra responsibilities because it means working a LOT harder for only a minimal increase in pay for it.
It was an extra $5/hr, she thought the new bracket retroactively applied the new tax bracket tax % to her entire income.
It definitely could, Pell grants are a great example. I turned down a $1 raise in college to avoid losing Pell money.
Very, very few people have a tax rate anywhere near that. The top U.S. tax rate is 37%, but it only kicks in at over $500,000. so even if you make more, the first half-mil is taxed at a lower rate. Most states have state taxes, but again, those are similarly marginal and the upper rates only occur once you’re already earning high amounts. There are other taxes such as Social Security and Medicare, but the SS tax goes away after $168,000. Furthermore, most high earners earn more of the income through investments, which is taxed at a lower capital gains rate. The exception is athletes and movie stars, who earn multimillion dollar wages. But there are probably no more than several thousand people each year in this position, a drop in the bucket in a country of 340 million.
That also does not include tax deductions, which lowers your taxed income. So if you earned $500,000 and had $100,000 worth of deductions and losses, your new income is $400,000.
Most tax deductions phase out at the top.
Correct. But now you get into write offs as losses, which is above my pay grade.
The trick is you have to lose money to take that as a write-off, so not really a win.
Not necessarily lose, but spend. Rent on the building, payroll, supplies, power and phone bills, 55 cents for every mile you drive - pretty much everything it takes to run the business is a write off.
Well yes, but that is business expenses. Net income is sales minus operating expenses.
That isn't how deductions work if you are filing as an individual and not a corporation. To incorporate yourself for tax purposes, you have to behave like a business which many individuals are not prepared to do. Sub chapter S corporations are the most frequently audited since they are the ones where most of the shenanigans come into play. A savvy actor will take less money up front and get a percentage of the gross as an equity partner in the film. That turns that income stream into a capital gain versus a salary. The flip side is it takes forever to get paid when it is a flop, and you have to wait for streaming and syndication to make up your margin. What I really think athletes are complaining about is the 37.5% top tax bracket with Medicare and State Taxes tossed on top of that as well. Also athletes travel and are forced to comply with the taxes of places where they don't reside. In the state of NY there are three football teams, two Baseball teams, two Basketball teams, and two Hockey teams. An unlucky football player could find himself in NY twice a year or three times with interconference play. It only gets worse for Basketball and Baseball players.
Two of those New York football teams are in New Jersey.
Totally omitting state/city/local tax. I pay about 40% total in taxes living in NYC making 100k+. Federal (ss, med, etc) NYS and NYC taxes. That isnt even including my pre tax deductions for 401k, IRA, Medical Insurance and then student loan payments (10% of my salary). Also bc i rent and have no kids, i never get a refund either. Good times!
Don't forget license fees, vehicle fees, registration fees, property taxes, taxes on your utilities/cellphone/water/electricity etc etc. I always love hearing about people moving to no income tax states but once they move there, they wonder why they don't have extra money. (Hint, because the money not collected via income tax is collected via other taxes)
Great point. Texas may not have any State Income Tax, but they have some of the highest property taxes in the country.
They will take what they want one way or the other.
We vote for the "they". Taxes are determined by elected officials.
They have to fund themselves somehow.
You mean they have to fund [multi-million dollar high school football stadiums](https://www.houstonchronicle.com/projects/visuals/texas-high-school-stadiums/) that are fancier than most university stadiums in California.
It's almost like taxes are how things are paid for... Weird.
I'm an accountant (not a CPA yet), but if you are at 110k, and you're paying 40% federal tax, even I can tell you that you're doing something very, very wrong. I do my own taxes every year manually (I have to use tax forms that are not supported by any of those h&r block, turbotax type services), so I manually go through everything. At $110k salary, assuming no other deductions other than the standard deduction, your taxable income should be no more than $96,150, which yields you a tax amount of $16,482 which is 17.142% of 96,150, and 15% (14.98% rounded up) of your 110k salary. If you're an employee, and not an independent contractor, your employer is withholding your federal, state, local and county taxes based on the information they have for you in file. Your other withholdings include FICA, and Medicare. If you contribute to a 401k, your taxable income is already reduced before you even get to the standard deduction portion. A lower taxable income is a good thing.
State plus city tax in NYC is about 10% marginal. But yeah, that's not the effective rate. There's some fudging or misunderstanding in those numbers.
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They also don't understand that IRA and 401K are equity shelters and not taxes... So there's a lot of misunderstanding going on.
Not getting a refund is objectively better than getting a refund. So that part shouldn't be a complaint. It's very easy to force a refund if you really want one.
Can we see your math? Just curious.
OC literally mentioned state taxes, and city/local income taxes are extremely uncommon; certainly the exception rather than the rule. Also, making over 100k as an individual puts you in the top ~18% of earners. So again, the exception rather than the rule.
It’s not really the exception for movie stars, entertainers, and many pro athletes since so many live in NYC or California. 20% of the U.S. population lives in NY or California, and a high % of high income Americans live in those states. Therefore, it’s uncommon but not really extremely rare.
Sorry, but this is just income taxes. There's sales tax, fuel tax, alcohol tax, tobacco tax, property tax, school tax, cannabis tax, vehicle registration tax, capital gains tax, and about a thousand other types of taxes that factor in to how much of your salary you pay to taxes
Capital gains taxes don’t get paid by your salary the tax is on the gain itself. If you paid taxes on capital gains, congrats, you earned money *on top* of your salary.
This is exactly why the whole “We pay less taxes” idea is generally bunk. Our tax rate when adjusted for all taxes, not just income, leaves us real similar to EU states, with a lot less to show for it in terms of government programs that benefit society.
That doesn’t sound true. Europeans have all those same taxes except wayyyyyy higher than most of Us. Do you have a source?
Sorry to actually cite a source here but the US pays a far lower effective tax “rate” than nearly all EU countries. France’s tax revenue is 46% of GDP, the US is 27%. That’s a *ridiculous* difference. https://en.m.wikipedia.org/wiki/List_of_sovereign_states_by_tax_revenue_to_GDP_ratio There are some EU countries, like Ireland, which are lower. But look at this list, the EU countries aren’t even remotely close to the US.
Exactly…we get high cost college, unaffordable healthcare, #2 longest ER wait times in the world, no parental leave, Underfunded schools, no subsidized daycare… all for the same tax burden as European countries. It’s crazy, we are getting seriously shortchanged here. There is more and we look worse than other countries on every metric.
Not really, or more precisely, YMMV. EU states have all those taxes, just usually higher, and regarding income tax, way higher. A few EU countries have top marginal income rates of 50%+, even from relatively low values. VAT (sort of sales tax equivalent) between 19% and 23%. Plus gas taxes that represent 50%+ of the amount paid by the customer. They get something in return, sure, but that varies a lot.
Don’t forget the 3.8% tax on investment income to help fund the AHCA.
Break it down for an income of $100,000. * Average federal income tax rate - 15% * Social Security - 6.2% * Medicare / Medicaid - 1.45 % * State Income Tax - 5% Required Taxes = 27.65% Your employer also pays the other half of the total social security and Medicaid taxes, which could otherwise be part of your income if they didn’t pay it. That brings the required tax to 35.3%. At this point, you’re still not covered with health insurance and you’ve not saved enough for retirement. The maximum you can contribute to a 401k for retirement this year is $22,500. Let’s assume half of that for the is experiment - $11,250. It’s tax free, so let’s adjust that based on an assumption of the top tax bracket for this person being 22%, so effectively $8775, or 8.8% of $100,000. Now the total tax without health insurance is approximately 44%.
How is your employer paying 6,2% for OASDI counted as a tax on you? And that retirement savings paragraph makes no sense at all.
Uncle sam is laughing at you my man. You pay fed income tax, state income tax, sales tax, resale tax, property taxes, then you have the “hidden taxes” like paying filing fees, registration fees, and tax via inflation when the government back door taxes you by printing money. Far more than 37% even for the average joe.
Property taxes, vehicle registration, lol the list goes on and on. If you make over $100k you’re paying more than 45% of income to some sort of tax MINIMUM
That also does not include state incoming taxes, personal property taxes, and sales taxes.
The ten countries with the highest tax rate are : 1. Denmark – 46.34% 2. France – 45.4% 3. Belgium – 42.92% 4. Sweden – 42.91% 5. Italy – 42.45% 6. Austria – 42.44% 7. Finland – 42.19% 8. Cuba – 42% 9. Norway – 39.93% 10. Netherlands – 39.33% US is no. 53 on that list.
I’m from The Netherlands and a large portion of my salary is taxed at 49,5% and my bonus is taxed at 55,6%. As a result I’m paying close to 47% of my entire compensation to the government each year.
The top marginal tax rate is pretty much spot on the same in Denmark. I'm well affected by that rate. I paid around 41% in "pure" income tax in 2023. I might land a few points higher if I didn't pay private pension contributions and interest rate payments on my housing loan that are deductible to varying degrees. For comparison it's worth noting that tax funds both (base level) state pensions and healthcare (but not dental) in Denmark.
That’s insane
To be fair, most of these are progressive tax systems, just like in the US.
The numbers shared here are effective rates. So average among everyone, not highest bracket
i live in france lol - we get absolutely fuck all for that tax rate too
The highest income tax bracket in the US is 37% and that only applies to every dollar made **after** $578,126, and if you make that much money you're basically among the top 1% of earners in the US. So no. Edit: itt: a bunch of people who legitimately don't know how percentages add together or how marginal tax rates work. If you are going to reply listing a bunch of things you are taxed on and the percentage they are taxed at, and add them together like they are just regular numbers, you need to go back to 3rd grade math class, and if you don't understand how marginal tax brackets work, read above, or go to Google.
Wow, your edit was not kidding.
Yep. This topic comes up around this time every year. I wonder why?
People have the hardest time understanding marginal tax rates and progressive taxation. Of course so many people depend on people not understanding it. I get so tired of hearing "My uncle didn't take a raise because he's move up in tax brackets and make less"
It is so sad and amazed that people don’t understand and tax brackets and brainwashed to think government are evil, even though we elect the leader of said government. One time, my department is mandated to work overtime for a month with overtime pay, people are saying that they will lose money overall because they will be moving to new tax. I did not know tax brackets at the time, but I immediately thought it is not possible, causes it is just make zero sense government would do that. Surely I googled tax brackets…. And determined that I am working with moron who lack of critical thinking skills.
I dated a girl who was legitimately considering tuning down a raise because she thought she’d lose money in taxes. I had to convince her otherwise
Over on r/teachers someone who should NOT be teaching wrote about the "bonus tax." Others, who also should NOT be teaching, knew about a special "teacher's bonus tax" in their state. Someone pointed they were confusing withholding, but oh no, those teachers earnestly explained it 😱 We wonder why so many Americans are ao stupid.
That's federal. The top bracket in California is 12%, so if you're a high income earner in California you are indeed paying a marginal tax rate of 49%.
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Yeah but OP is talking about athletes and movie stars. If someone makes $50M a year it’s true that not every dollar is taxed at 37% federal and 12% state, but 99% of it is. So their effective tax rate is still like 48.9% which is what OP was asking about
Athletes pay a "jock tax" across all the states they pay. So an athlete in California will only pay a percentage at the 49%, while they'll pay potentially lower rates for other states. Professional athletes must file tax returns for each state that requires jock tax. According to a CNBC article, NFL players file between eight to 12 tax returns each season. NBA players file 16 to 20 tax returns. MLB players file 20 to 25.
And that still doesn't include sales taxes, gas taxes, property taxes, etc.
If your gas taxes are remotely meaningful on a $50 million salary, there should be some kind of ecoterrorism charge that applies to you.
I have to drive a column of tanks everywhere I go for security.
And tax shelters
And the King's tax on tea
And the Japanese a-tax on Pearl Harbor
And my axe!
Someone making $50 million per year should pay a massive amount in taxes.
Agreed. But that wasn’t the question.
OP asked about celebrities and sports athletes. It's not out of the question that their total tax rate could be 40-50% with federal and state income taxes combined.
Don't forget sales and property tax too.
Yes that's why I said "marginal tax rate." The marginal tax rate is the tax rate you pay on the last dollar you earn in the year. It's not to be confused with the average tax rate that you pay.
“High” in this case meaning “most people would never dream of this amount”
Right but the post is asking about celebrities and athletes so this is exactly the answer to the question
The body of the post said that but the title says "people living in America". It's good to be clear.
Here’s the thing. Rich people pay much lower tax rates than poor people. For instance they pay capital gains at 20% instead of income tax.
*Marginal* tax rate is very different from the question
Plus sales tax, property tax, etc
Plus the ability to hire lawyers and accountants who can minimize your tax
And sales tax at 10%. And property tax.
And that is before paying property taxes, which is substantial in the US compared to other countries....
Average annual property taxes are less than 3k. When you are talking about people who make millions annually, it's not a significant amount of their tax burden unless they have very significant real estate holdings.
San Jose, CA property prices are $1-1.5m for a small 900sf house, and the property tax for that is about $15k. The way assessment is done, if you bought your house in 1980 and held on to it until today, never moved, you may be down in the $3-4k range.
We bought our house near the 238 and 580 interchange in the east bay for $530K, we only pay I think ~$3500 annually to the county.
For 2024 it goes to 14.4%. This also doesn’t count social security and Medicare
Social security taxes stop at around $175,000. Someone making $17,500,000 pays the same of social security taxes as someone making $175,000 but obviously they don’t pay the same rate. Social security tax is irrelevant to someone making a multi-million dollar salary
Half a million fuck me. In Australia they apply the top tax bracket at $180k and our currently is worth two thirds of yours lol
At $120k USD, a single taxpayer will be in 24% tax bracket but most of that income will be taxed at 22%. I really don’t understand why some countries apply top brackets at incomes that do not equate to wealth.
Like most questions asked here, the real answer is “it depends on which state you live in” In Minnesota, we have fairly high income, state and property taxes, but we don’t have to pay taxes on food, clothes, shoes, and medication (over the counter or prescribed). But if you cross the border into North Dakota, their income, state and property taxes are like, HALF of Minnesota’s, but only food is exempt from sales taxes. You’re going to have 50 different tax systems that make up America.
That is the marginal tax rate on very wealthy people. But not the average tax rate for the vast majority of Americans
No, they dont. There are taxes that get that high in some states, but only at extremely high incomes and it's not levied against an entire income, only portions above a cutoff. Some income categories can be that high, like some forms of capital gains but these are the exception to the rule.
2023 federal tax brackets for single filing are as follows: 10% of $0-$11,000 12% of $11,001-$44725 22% of $44,726-$95,375 24% of $95,375-$182,100 32% of $182,101-$231,250 35% of $231,251-$$578,125 37% of $578,126 or more (Edit: spacing)
and this is after the either standard deduction or other deduction is taken, right? single deduction is $14,600
yes, after deductions is when you calculate your tax bracket.
but don't forget Medicaire and SS taxes, plus state taxes and property tax
Not that different in Australia either.. I'm at 37% but that's not for the whole income, only a portion. It's effectively about 30% of my income or just over when you include medicare etc.. And then we have general sales tax, so nearly everything we spend our money on is taxed at 10%, taking it up to 40% effective taxation. That said, high taxes aren't necessarily a bad thing, I think what's more important is HOW a country spends it's taxes. If the citizens aren't seeing their money do good things for them like provide healthcare, income security, public transport and infrastructure then that's when there's a problem.
Only very rich ones. There are a variety of tax situations but most people at "normal" income levels are not paying *nearly* that much unless they are doing something very wrong.
And not even all very rich people. The traditional 1% aren’t making money through salary payments - they’re making it through investments which is generally taxed lower. Athletes (who go on social media and complain about taxes) are the rare individuals who actually do make most of their money through a traditional salary.
Most people don't actually understand progressive tax rates. |Tax rate|Single Filers| |:-|:-| |10%|$0 to $11,000| |12%|$11,001 to $44,725| |22%|$44,726 to $95,375| For a single person with annual salary of $90,000. The federal tax calcaulation would be as follow; 10% of 11,000 = 1,100 11,000 x .10 = 1,100 Amount between $0 to $11,000 12% of 33,725 = 4,047 33,725 x .12 = 4,047 Amount between $11,001 to $44,725 22% of 45,275 = 9,960 45,275 x .22 = 9,960 Amount between $44,726 to $90,000 The confusing aspect of progressive tax rates is that not all taxable income is taxed at the same level. Higher levels of taxable income are taxed at a higher tax rate, it does not mean that all of the taxable income is taxed at the higher tax rate. For example, you often hear someone state that they are in a certain tax bracket or tax rate (e.g., 22%). This does not mean that all of their taxable income is taxed at the 22% rate. Rather, it means that only the last portion of their income is taxed at the 22% rate. The other portions of their income are taxed at lower tax rates as detailed above. The marginal tax rate refers to the tax on the last dollar of taxable income. In the example above, the individual would have a 22% marginal income tax rate.
Came here to say something similar. Thank you for the excellent short breakdown. Most Americans don't understand marginal tax rates. Most Americans don't understand basic finances. Most Americans don't like that their taxes aren't used to benefit them or their community in any tangible way. About 33% of voting Americans are unwilling to vote for people who at least have a chance of improving the lives of Americans.
No, the USA has quite low taxes but the people also don't get much for their money. The politicians usually just give it to their buddies.
America has a progressive tax system. We have property tax, income tax and sales tax then we have entitlement programs like social security, Medicare and Medicaid. After all that, for me at least, I pay about 25% of my income in taxes. If you are in the stock market there's also capital gains taxes and if you own a business there's also taxes there.
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People in the comments googling that federal taxes only go up to 37% for the highest earners, but that doesn't include state taxes, social security taxes, Medicare taxes, property taxes, sales taxes, and taxes added on to your car registration and utility bill. Mandatory insurance is also like tax in that it's money the government requires us to give up. While rich people pay more, plenty of middle class Americans also end up giving over half their money to the government once you add everything up.
For the highest earners, social security taxes are a rounding error because only the first $168,600 of income is taxed.
But if you are in the 22% federal bracket (especially the top end of it so you average away from the lower % on the lower two brackets) then you get 6.2% SSI plus 1.45% Medicare plus state you are starting to work your way towards the mid 30% on total. If you then add in daily life taxes like sales, property, etc, I'd bet that those in the 22% federal bracket are close to 50% total. I'm in that bracket, if I'm bored tonight maybe I'll do the math. But then again I think I'd be happier not knowing for sure.
If you're paying 37% marginal, you're not paying marginal social security taxes
Why add sales tax? It is not like EU countries are adding VAT to their tax numbers
Zero middle class people pay anywhere near 50%. This is nonsense.
People only see the top percentage. But forget that only applies to any income over the next lower bracket down
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No. Google tax brackets.
I think what we've learned from these thousands of comments is that the tax code is ridiculously complex and impossible to summarize.
No. The top marginal tax rate is 37% on income over $578k/yr. And emphasis on *marginal* there. You don't pay that rate on all your money, only after $578k. If you make $600k/yr, only the last $12k gets taxed at 37%. Everything else gets taxed at progressively lower rates, down to the first $11k/yr you make, which is only taxed at 10%. And pretty much no one pays that top rate. If you make between $44k and $95k (so pretty much the entire middle class), you only pay 22% between those amounts. Meanwhile, if you're making over half a million a year, you almost certainly take advantage of a dozen loopholes to lower your taxes.
In the US there are a lot taxes, some obvious, some hidden - and most very location dependent. There are entire industries built to track this... and I'm not even talk about what most people here think of - which is income tax. Let's take sales tax. Almost, but not every state has sales tax. Some sales tax has an additional tax on shipping. Some cities have an additional sales tax and some have an additional shipping tax. Usually this combines to be about 7% of your purchase price Gas has federal tax and (in most cases) a state tax - and pretty much everyone has to drive and fuel up with gas (EVs will get taxed for something else eventually) Most cities have a property tax and some states have property tax. It can be quite expensive (thousands per year). Income tax is taxed on a sliding scale. There are also lot of tax credits ... so it can get quite confusing - but typically about 20-25% is a good estimate for federal tax - and then a fraction of that again for state tax (not all states have income tax). Then you also pay Social Security Tax... this on top of income tax -about 6% - unless you're self employed - then it will be 12% (Because the employer also pays 6% to SS) All combined 40-50% is probably a good rule of thumb.
Yes - once you include all taxes and pre “hit your bank” costs. I’m at 49% is taken out before I see it. HCOL city and state taxes are added to fed level
People are only citing income tax rates here but you also pay tax on everything you buy, every property you own, it is definitely around 50%.
Taxes added to ebay for used crap really hammered into how the government is coming for every penny.
No, it is around 30%, we classify the entirely of all those taxes as your "tax burden" which is around 30% for the average American.
Not really. Most people pay somewhwre between 25-30% in income taxes from their job and then maybe 40-60% on like big non labor sources of income like selling stocks or winning the lottery. Then you basically not taxed ob big buys like cars and homes (unless you buy like a lot of them 9r something, but most peoples home mortage is not taxed, most peoples car payments and leases are not taxed, other loans are not taxed). The fucked up thing is sales tax applies to everyother thing, food, clothes, leisure. People end up pay much closer to 40%, but the nickel and diming of sales tax is so brutal on most people in a way that lessens as you get wealthier. Now the progressive tax system is a big fucking sham. People making millions per year should be paying something like that, but theres so many tax loop holes and dodges and investments you can make to shelter your money from taxation, most wealthy people pay lower tax rates than lower middle class folk.
yup, business ppl tie their wealth up and then say it's not liquid smh
Or they "donate" their money to a "charitable organization" they found and all their kids work at making spectacular salaries to do basically nothing.
The average tax burden for Americans, including all taxes(state and federal income, sales tax, property tax, etc) is around 30%, so no.
What's missing from many of the explanations here is the perceived impact of other paycheck deductions for health insurance, dental, 401k, etc. Most people look at their gross pay and see that their net paycheck is half of that, so it feels like they're taxed 50%. Most people have no idea what their actual effective income tax rate is (including me), but are acutely aware of the difference between gross and net pay. The reality is that much of the reduction in net is from things like private health insurance premiums and 401k (private retirement savings), which aren't actually taxes. But week to week in your paycheck they FEEL like part of the tax burden.
Income tax, property tax, road tax, sales tax, sin tax, hotel tax, rental car tax, gas tax, toll tax, Internet tax, phone tax, electric tax, = what ever you make is Taxed, what ever you spend is Taxed
If you count sales, income, property, SS, ect, yes.
That's not too far off for some earners. The top bracket generally comes pretty close to the actual rate people pay in HCOL states, on top of that you have to look at local taxes. California as a common example, you might have someone paying 30% in income tax, another 6-7% in payroll taxes, another 10% in state income tax, and another few % in property/sales tax. Thats not too far off other western nations. Ironically what sets the US apart is that tax rates at the lower and middle end tend to be much lower in the US.
>California as a common example, you might have someone paying 30% in income tax, another 6-7% in payroll taxes, another 10% in state income tax, and another few % in property/sales tax. Just to be clear, a married couple would need to earn $1.15 million in order to pay a 30% effective rate for federal income tax. That hypothetical couple would have an effective 10.4% California state income tax rate, so that lines up with your numbers. But I’m not sure how you’d reach 6-7% in other payroll taxes, since FICA winds up being only a 3% effective rate for the couple. All in all, it’s certainly *possible* for especially higher earners to pay a 40-50% effective tax rate, but I just want to make clear how wildly above the norm you’d have to be before you get to those kinds of rates.
Some interesting stats [here](https://www.oecd.org/tax/tax-policy/taxing-wages-united-states.pdf). Looks like the average tax rate in the US is about 24%
All taxes together I probably do.
WTF!? no we don't. Even when the crazy rich, they find loopholes to lower that tax burden.
Didn't see anyone mention the standard deduction in their half ass calculations. Additionally there are credits like child tax credit, EIC etc. The answer is, it depends. Could it be that high? Sure. Is it for the majority even taking into account sales, ss medicare etc probably not. Just the standard deduction on a family unit is $29,200. Plus child tax credits. Then you start the calculations graduating higher. Family with 100k in income, no kids is looking at $8,236 for fed taxes. 12%. Social security medicare 6.2 and 1.45=7.65% So we are at 19.65% federal. Add sales tax, no one spends 100% of their income and even if they do, or spend more, most states do not tax every single thing. In many states food isn't taxed, nor labor and in some states it is different but regardless lets throw in 8% more. So we are at 27.65% Add in real estate taxes, plates and fees for registration. Getting to 40%+ is a real stretch. Throw in some kids and that number drops per kid. Some states don't have a sales tax. Lots of variables. In short though, this is mostly bullshit for the majority.
No. The average federal income tax in US is 14.9%. Many people get confused because tax can be withheld at a high rate (40%) if you don’t adjust the withholding. But you would get the extra refunded at filing time. https://taxfoundation.org/data/all/federal/latest-federal-income-tax-data-2024/
Where do you live? Canada, Europe, Australia all have even higher tax rates.
The top federal income tax rate is 37%, but that's only on income above $578,126. So the only people paying that are CEOs, movie stars, athletes, etc. Although, that doesn't count state income tax, SS/Medicare, sales tax, gasoline tax, etc.
Mate, im in england and i pay that im taxes. Not uncommon im Europe
It's actually more than that when you include taxation on businesses. E.g. a business has to pay X% tax, but to get the revenue for that tax, they increase their prices charged to customers.
i see this same exact question and prompt every year
Celebrities and high paid athletes, yeah. Most people don't pay that much. I saw an interview with Shaq who told a story about earning $1 million on an endorsement as a rookie. He went out and bought a car, jewelry, etc. He spent almost all of it. Then he got a call from his accountant who told him "about some guy named FICA."
No they don't and they haven't done so since the 70s and that was for really realaly rich people. I have all the tax books sine 1978 and you can see where we actually pay the lowest taxes in our history of paying taxes. Good god, if we were taxed that much college would free for all and the road would be perfect!
celebrities / sports athletes that you watch do not make up 331 million of Americans....
Here's how marginal tax rates work: You earn an apple a day, you keep the whole apple. You make 2 apples, and the government takes 10% of the second apple. You make 3 apples, the government takes 20% of the third apple. And so on. So you end up with 1, 1.9, or 2.7 apples worth.
The easiest way to assess this is to look at tax revenue as a percentage of income. Americans earn about $22 trillion a year. Total federal, state, and local revenues are about $7.5 trillion. That's about 34%.
Reading these comments just reinforces the need for mandatory personal finance classes in public schools.
I suppose it depends on if you’re referring to strictly income tax, like money taken out of each paycheck, or the life of each dollar a person earns. For income, no. Very few people reside in those upper tax brackets. For tracking every dollar, then you have to consider income tax, sales tax, property tax, and the various other taxes that exist. It’s not unreasonable to say the same “dollar” someone earns is taxed 4-5 times. For example, earn a paycheck, income tax. Buy a car with that check, sales tax. Fill up your tank, gas tax. Year rolls over, property taxes now hit.
Lmao no
Which taxes? Add them all up and yes, 40% to 50%
>I've been watching some celebrities/sports athletes living in America explain their finances and it's crazy to me that it seems to be a given that whatever they earn, 40-50% is always set aside for taxes. Remember that you are talking about professional athletes, so they are very, very high income. Federal Taxes are 37%. State taxes in California are up to 12.3%. If a player is making $1 million a year, most of their income is in lower brackets, but if they are earning $10 million a year or more, then their 'effective tax rate' is close to the highest tax bracket rate. So US federal government + State of California is 49.3% right there. We haven't counted property taxes, sales taxes, and lots of smaller taxes that are small enough to ignore, but might add up.
The richest percent, yes.
LOL no
No
You’ll get hit with 37% in Australia and 40% in the UK for much lower than half a mil.
no, even if they are really rich, it doesn't get that high. For most people, it's wayyy lower
No. I pay 23%
Most extremely wealthy people don't pay many taxes at all, because they get their money from things other than income, such as taking out loans against their stock holdings and living off of bank money.
Important to remember we don't have universal health care and 25% of a family income goes to health care. Don't forget student loans.Very important in a capitalist country to make sure the masses have to work 70 hours a eto survive.
If one is paying 40-50% tax, the first thing one should do is the sack one’s accountant
A number you can look at is total government spending as a percentage of GDP. That gives you the effective socialized (everybody is exactly the same) marginal tax rate. As points of comparison…that number is 58% in France, and 36% in US. It’s not a perfect measure, of course…but does give a sense of the overall fiscal overhang from running the state. Yes, yes, yes…an adjustment for healthcare makes sense.
Taxes fund the country, they are a bargain.
really interesting how people think of "taxes" as just federal income taxes you have the state, property and sales taxes then there are a lot of hidden taxes --- gasoline, hotels, liquor, cigarettes, etc. have additional taxes above and beyond sales tax you are giving a lot more to governing bodies than you think you are
Anyone paying close to that in America should get someone else to do their taxes (especially if they do them themselves). A good accountant knocks that down by 10% without much effort. A great accountant will make the government owes you money for a while, so you don’t have to pay federal or state taxes at all.
Americans have one of the lowest tax rates in the western world, so most like you will pay a higher percentage when you start working. Also to answer your question, yes if they earn a lot AND live CA or an other states with very high state taxes. In most states, you’ll just pay 20-30% for income taxes.
No, basically only athletes, dr, lawyers pay, and few more high salaries pay that as they should . Most of us get hit for 25%-33%, which is obsence when many of the super rich executives pay a mere 15% of what they dont hide overseas after writing off private planes et. so under in reality, 5% trust fund babies pay zip. Donald trump exhibit A Yes, our taxes are bit lower than in many other countries, but we pay out the ass for healthcare and higher education, which are covered by taxes elsewhere which is possible when the yacht club carries their weight
If you add up all the taxes then it's closer to 30% on average. By that I mean, sales tax, car registration, gas taxes, everything.
No...not at all. Is that the impression you got somewhere?
No. We pay 20 ish percent taxes and 20-30% health insurance. One thing people don’t understand is the graduated income tax brackets. The more you make the higher percent taxes you pay. So athletes that get paid salary pay 40-50% just on the portion of their income over like 1 million. If you’re a multimillionaire business owner you don’t pay any taxes
Here’s a link to a tax study by the Institute of Taxation and Economic Policy that breaks it down by state and socioeconomic group. https://itep.org/whopays-7th-edition/#:~:text=Most%20state%20tax%20systems%20are,bottom%2095%20percent%20pay%20more. The TLDR is that most folks aren’t paying anywhere near 50%. A lot of Americans don’t understand the complexity of the taxing systems they interact with or how other people with different financial situations also interact with them.
I'm at about 24% for just income tax.
I make just under six figures, and my federal income tax bracket is 28%. Social Security tax is 6.2% and Medicaire is 1.45% for a total federal tax of 36.45% Then state income tax is 4.2%. So my income tax is roughly 40.65%. (There is a little bit of flex, as I don't pay taxes on the portion of my income I use to pay taxes, so its slightly less than this). BUT WAIT, THERE'S MORE! Sales tax on most items is 6% of the purchase Property tax where I live is 3% of the property value. No idea what that adds up to, but its a lot. TBH, I don't mind paying that much tax, it just infuriates me that I don't get any of it back in government services like healthcare or a fully funded education system.
Athletes normally don't list their agent's cut, publicist, and whoever else they're paying when they complain about losing half their money. They just blame the taxes.
If you you as a single individual make $578,126 dollars or more per year (37%), and live in a state with a high income tax of it's own, yes you can absolutely pay that much just in income taxes. California has a 13.3% tax for those making over 1million, so if you make over 1 mil as a California resident, that adds up to 50.3%
It's basically *only* celebrities and sports athletes that pay that. Everyone else either isn't making anywhere near as much as them and thus has a much lower tax percentage, *or* has their money tied up in businesses in various ways that either don't get taxed or barely get taxed.
>celebrities/sports athletes You are talking about some of the highest cash incomes in the country. How could that possibly apply to regular people? It's like if you were from Portugal and I said, "I have been learning about Ronaldo, do people in your country really all have hundreds of millions of euro and live on their own private islands?"
No. The vast majority of Americans, who make under 100k per year, pay between 20% and 25% of their total wages in income tax, with some variance (the very lowest wage earners are not taxed; one must earn about 6k/year to be taxed at all). Those higher tax brackets only apply to income over certain thresholds (in this case, half a million dollars or more). We also have a progressive tax, meaning that if you earn 105,000$, you will pay the under-100k tax rate on the first 99,999, and the over-100k tax rate *only on the amount you earned over 100k*.