Our tax burdens are not the lowest by any means. My total tax rate partially due to living in California (although it is mostly Federal) is ~40%. There are plenty of countries in Europe that would be happy to tax me less.
My buddy in Singapore pays about 8% all told and he's in the same income range.
The temptation to become an expat gets stronger as I earn more money.
My sin is not being a fat cat living off capital gains. I have to actually earn my income, so I get fucked.
How do you manage to get an effective 40% tax rate in California? I could see that as a marginal rate on the last few dollars, but you'd have to make in the millions to get there for your overall tax rate.
For example, if you make $100k and take only the standard deduction, you'll pay $19k in federal taxes (19%) and $6k in California taxes (6%), for 25% total. If you include payroll taxes, that's another ~7.5%, so 32.5%. Of course, many people take much larger deductions than the standard deduction, so pay considerably less.
Unless he's a multi-millionaire who has one of the worst tax preparers in history, he doesn't have a 40% tax rate.
The reason why he thinks his tax rate is 40% is because he's making the mistake that common among financial illiterates, which is confusing the maximum tax rate with the marginal (i.e., actual) tax rate.
The highest Federal tax rate is currently 35%. That bracket applies to people who earn $379,150 or more. But if you earn $379,151, that means that only one of the many dollars you earned is actually taxed at the 35% rate.
Similarly, the highest California tax bracket is currently 11%, for people who earn a million bucks a year or more. But again, only the income that's above $1 million is taxed at that rate. Your first $47,000 in income is going to be taxed at the rate of 0 percent to 10 percent.
And that doesn't even factor in deductions. So even if your income is a million bucks a year, it doesn't mean that your combined state and federal tax rate is 40%.
This is true, yet often when it is brought up as you have done it is a straw man. The OP has in his mind that taxes collected are excessive. If you show him that rates are progressive, he won't decide that enough money is being collected after all. He is only using the tax rate as a rhetorical point -- he points elsewhere for proof that too much is collected.
Edit: should clarify I prepare taxes among other things. I'm NOT saying the brackets aren't progressive, just that this guy isn't saying, "gee, if only we progressed up to 35% things would be fine."
Most people in the middle and upper middle class complain that their taxes are too high in hopes that benevolent, democratically elected lawmakers will lower them. But it's a fact that Americans enjoy an effective tax rate that is quite low by both international and historical standards.
Of course, we're about to learn the consequences of that as we slowly decimate our educational system and national infrastructure, but that's probably a separate discussion.
Total tax burden includes sales tax that you pay on what you spend, property tax, gas tax, payroll taxes, taxes on utility bills, dog license fees, etc. I don't think 40% is completely far fetched.
Not sure how exactly one would calculate this, though, other than looking at taxes as percentage of GDP and maybe trying to fit yourself in there somehow based on your tax bracket as a ratio to other people. But with an average total tax burden of 26.9% (http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenu...), 40% for someone in an upper bracket doesn't sound so crazy.
Lumping all fees and duties together is not what people normally assume. Usually, just the income tax is compared, as it is present in most economies of the world.
Here in Norway an income tax bracket of 50% for a well-off middle class family is fairly normal. On top of that, sales tax is 25%, gas is mostly made of taxes (about 2.5 times what you'd pay in the US) etc.
Still somehow there's less bitching about taxes (or gas price) per capita than you hear from overseas :)
I hear a lot of bitching about food and gas prices for example here in Finland. Also very few people DON'T have a problem with some sort of bureaucrat, for example idiotic and incoherent health inspectors, bureaucrats deciding who gets subsidized etc.
The best way to deal with bureaucrats here is to catch them making a mistake and then using that to make them sign the papers. (Usually this involves following their orders until there is some kind of incoherence in them, and thus is costly if those orders involve eg. building/renovating something that is fine as is).
For some reason the favorite explanation nowdays is that the EU is in fault here, even though this crap has been going on before the EU existed.
He is probably forgetting to subtract what he contributes to 401k and medical and dental plans. If I simply look at what gets deposited in my bank, and what my salary is, it comes out close to the 40% number.
As a Singaporean, all I can say is that once you become more aware of how the incumbent government generates most of its revenue, you will be rendered speechless. Americans often exaggerate and say that their nation is turning into a corporate state - come to Singapore, and you will realize that the state is administered exactly like a corporation.
You really don't need a car to live in Singapore. Most of the time, driving will take you longer than getting on the metro. Remember that Singapore is an extremely small country and you can easily commute to anywhere on the island with a pushbike (even in the rain, most offices have showers).
Renting or buying property is the expensive part of living in Singapore. However, it is quite inexpensive to get a live-in maid/nanny.
That being said, it's also a little unfair to use it as a standard reference point, given that it's a small city-state which also happens to be the best-placed trading port in the world. Singapore is an outlier - when you can take the cream off an inordinate amount of trade pouring past, you don't need as much income tax.
I actually think the problem with perceptions of taxes in the US is not that we are taxed too much, but rather that many people feel they are taxed too much relative to the value they get from paying the taxes. If everyone had free, universal healthcare, I'd guess people would feel better about paying their taxes. The fact that a large portion goes to funding a largely unseen war machine doesn't help.
The other issue, of course, is that many people don't seem to realize that they benefit from the taxes they pay - a classic example being the tax credit for owning a home.
My buddy in Singapore pays about 8% all told and he's in the same income range.
The temptation to become an expat gets stronger as I earn more money.
My sin is not being a fat cat living off capital gains. I have to actually earn my income, so I get fucked.