Taxes
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25-03-2017, 11:22 PM
RE: Taxes
One of the problems with the rates we have now is the people at the top don't pay the 39.6% rate on a lot of their income. A lot of their income is long term capital gains that gets taxed at 20%. So the top household on your chart doesn't really pay $10.6 million of taxes on their income above $467K. They pay less than $6 million. They also don't pay any social security or medicare taxes on any of that income. That's another 15.3% tax break they get over the people in the lower brackets. Even without deductions people at the top have a smaller net tax rate than people in the lower brackets.

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25-03-2017, 11:32 PM
RE: Taxes
Just finished my Canadian taxes. I still have to file in the US.

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26-03-2017, 03:47 AM (This post was last modified: 26-03-2017 03:50 AM by ukatheist.)
RE: Taxes
Ok, as a tax inspector I guess I'm well placed to answer this from a UK perspective.

Income Tax:
The vast majority of income tax in the UK is collected through 'Pay As You Earn', or PAYE for short. Everyone has a personal allowance of around 11k, which they can earn free of tax. This can be increased slightly via certain additional allowances, such as blind persons allowance, or certain employment related expenses such as an obligation to launder a work uniform, or reduced if someone has untaxed income, or benefits in kind such as a company car. It is also tapered for high earners to increase their effective tax rate. The employer deducts income tax from the employee wages each time they are paid, based on their amount of allowance and this is paid immediately to the treasury.

People with income that isn't taxed under PAYE, such as self-employed people, complete an annual tax return. Tax is paid in two installments, based on the previous years earnings, and a third balancing payment if their income has increased. Quarterly reporting is currently being introduced.

Tax rates are:
Basic rate (taxable income i.e. after allowances) 20%
Higher rate (taxable income over 33k) 40%
Additional rate (taxable income over 150k) 45%.

There are various special rates for interest/dividends with further allowances. Plus, in addition to taxes, working age people pay national insurance which goes towards social security and the NHS, roughly an additional 12% under PAYE or 9% for self employed (who aren't entitled to as many social security benefits as those on PAYE), on income up to about 45k, then 2% on income above that.
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26-03-2017, 04:07 AM
RE: Taxes
Capital gains tax: People and that make gains of over around £11k in a year pay 10% if they pay income tax at the basic rate, or 20% if they pay at a higher rate on gains except second homes, where higher rates apply.

VAT (Value Added Tax) - my speciality: Sales tax. Paid by the purchaser on most goods and services - standard rate is 20% but can also be 5% or zero. Zero applies to insurance, education, finance etc plus 'basic foods' - this includes, bizarrely' chocolate cake, but not chocolate biscuits, and veg crisps but not potato crisps. This is why we end up having major legal cases as to whether a jaffa cake is a cake or a biscuit, or whether pringles are crisps.

We also have inheritance taxes, environmental taxes, and a vast array of duties.

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26-03-2017, 07:19 AM
RE: Taxes
(25-03-2017 11:22 PM)Popeyes Pappy Wrote:  One of the problems with the rates we have now is the people at the top don't pay the 39.6% rate on a lot of their income. A lot of their income is long term capital gains that gets taxed at 20%. So the top household on your chart doesn't really pay $10.6 million of taxes on their income above $467K. They pay less than $6 million. They also don't pay any social security or medicare taxes on any of that income. That's another 15.3% tax break they get over the people in the lower brackets. Even without deductions people at the top have a smaller net tax rate than people in the lower brackets.

Yes you’re right. I’m starting small with simply the tax brackets, I’m hoping to get to all your points as well.

Did you notice what I did with not just the % but also the $ brackets? The first $25,000 is taxed at only 8% as opposed to the existing 10% for the first $18,550. The next bracket only pays 14% up to $75,000 where the vast majority of households fall into, that effective tax rate goes up a smidgen from 18.3% to 19.0%. After that the top 5% of the population picks up the difference.

What do you think? We can play with the numbers all day but what I have done is shifted more of the tax burden to the higher income earners without, imo, making it draconian. The one that will scream the loudest, I would think, will be that 1 household making $27,000,000 because they will now pay an additional $2,300,000 in taxes, a 21.5% increase. Hard to feel too sorry for them though, they still are taking home $14,255,000!

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26-03-2017, 07:37 AM (This post was last modified: 26-03-2017 07:42 AM by Full Circle.)
RE: Taxes
(26-03-2017 03:47 AM)ukatheist Wrote:  Ok, as a tax inspector I guess I'm well placed to answer this from a UK perspective.

Income Tax:
The vast majority of income tax in the UK is collected through 'Pay As You Earn', or PAYE for short. Everyone has a personal allowance of around 11k, which they can earn free of tax. This can be increased slightly via certain additional allowances, such as blind persons allowance, or certain employment related expenses such as an obligation to launder a work uniform, or reduced if someone has untaxed income, or benefits in kind such as a company car. It is also tapered for high earners to increase their effective tax rate. The employer deducts income tax from the employee wages each time they are paid, based on their amount of allowance and this is paid immediately to the treasury.

People with income that isn't taxed under PAYE, such as self-employed people, complete an annual tax return. Tax is paid in two installments, based on the previous years earnings, and a third balancing payment if their income has increased. Quarterly reporting is currently being introduced.

Tax rates are:
Basic rate (taxable income i.e. after allowances) 20%
Higher rate (taxable income over 33k) 40%
Additional rate (taxable income over 150k) 45%.

There are various special rates for interest/dividends with further allowances. Plus, in addition to taxes, working age people pay national insurance which goes towards social security and the NHS, roughly an additional 12% under PAYE or 9% for self employed (who aren't entitled to as many social security benefits as those on PAYE), on income up to about 45k, then 2% on income above that.

This is great info!

One of the things that immediately strikes me is how quickly it becomes convoluted. Same thing happens here. If taxes were only a % of all income for simplicity without any exceptions I wouldn’t need a tax accountant.

That you only have 3 tax brackets is interesting.
The VAT at 20% is eye opening. We have a sales tax in the State of Florida of 7.5%. I think if you told the populace it was going up to 20% there would be rioting. VAT is a double-edged sword, you can’t get around it easily but it penalizes consumption. I wonder to what degree?

The tables I created take ONLY Federal taxes into account.
We here in the US also have to pay Social Security which is 12.4% (half paid by you and half by your employer) Taxes on SS are capped, meaning that after a certain income you stop paying in (currently $118,500 but being raised to $127,000 this year). I have an issue with capping it, imo it shouldn’t be capped at all.

and Medicare which is 2.9% (half deducted from your wage, the other half paid in by your employer). But this last one is then tweaked at the higher ranges https://www.irs.gov/businesses/small-bus...dicare-tax.

It would be interesting to compare side-by-side what different wages would pay in taxes between the two countries.

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
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26-03-2017, 08:29 AM
RE: Taxes
(26-03-2017 07:37 AM)Full Circle Wrote:  We here in the US also have to pay Social Security which is 12.4% (half paid by you and half by your employer)

Employers pay just under 14% for social security (in addition to the employee contribution).

Quote:It would be interesting to compare side-by-side what different wages would pay in taxes between the two countries.

I can work this out from the UK perspective - say respective minimum wages at 40 hours per week, x 52 weeks (the UK min wage is £7.50, or £15600 annual on those terms), then say 50k USD, 100k USD, 500k USD and £1m USD?

Might need a couple of days to get the time to sit and work it all out, but it'll be interesting (for me anyway, I'm a tax geek).
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26-03-2017, 08:35 AM
RE: Taxes
(26-03-2017 08:29 AM)ukatheist Wrote:  
(26-03-2017 07:37 AM)Full Circle Wrote:  We here in the US also have to pay Social Security which is 12.4% (half paid by you and half by your employer)

Employers pay just under 14% for social security (in addition to the employee contribution).

Quote:It would be interesting to compare side-by-side what different wages would pay in taxes between the two countries.

I can work this out from the UK perspective - say respective minimum wages at 40 hours per week, x 52 weeks (the UK min wage is £7.50, or £15600 annual on those terms), then say 50k USD, 100k USD, 500k USD and £1m USD?

Might need a couple of days to get the time to sit and work it all out, but it'll be interesting (for me anyway, I'm a tax geek).

Can we use as a basis my already created spread sheet?

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
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26-03-2017, 09:05 AM
RE: Taxes
Ha, yes forgot that was there. Sorry!

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26-03-2017, 09:26 AM
RE: Taxes
(25-03-2017 10:34 PM)earmuffs Wrote:  Well if the healthcare debacle is anything to go on, hopefully he'll just get rid of the tax system and be unable to get a replacement through.
At least that way without the need to pay taxes you could afford to go to the doctor.

You pay ~$56US ($80 Maori) to see your GP, I pay $20. Tongue

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