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How Much Net From Gross?

Mon Oct 08, 2012 12:01 am

A lot of discussions are held on these forums about tax reforms and the like. Numbers are seldomly provided. Europe is generally considered a ''socialist welfare paradise'', and the USA the ''capitalist heaven''.

My friende works for a big architecture firm in Manhattan but after finishing her current projects wants to move to Europe. She just talked to her ''tax guy'' (I suppose that's the technical term in New York) and learned that she pays about 28% on her gross annual income in taxes and social securites. After talking to a ''Steuerberater'', the German equivalent of an American ''tax guy'', she learned that she'd pay 32% on the same annual income in the state of Hamburg. That is nominally.

However, her annual income in Germany will be about 8% lower than that in New York which will reduce her spending on taxes and social securities to 30%. The cost of living, accounting for a better lifestyle (bigger apartment than her Manhattan shoe box, better health benefits, much better 401k equivalent, less work hours, paid overtime, about 10x the vacation days etc.) are about 16% lower. That already accounts for a car including all pertaining payments, which she doesn't own in New York.

At the end of the day, she has 5,5% less disposable income in Germany but 16% lower cost of living and significantly more free time.

I am actually very surprised by this. I thought especially in Germany things would look much ''worse''. So all BS aside. How many % of your gross income do you pay on taxes (fed, state, payroll, income etc.) and social security (health care, unemployment, 401k, etc.). I would love to hear from people from countries outside the EU and USA too  
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DeltaMD90
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RE: How Much Net From Gross?

Mon Oct 08, 2012 12:09 am

I think I'm around about 25-30%. I don't really mind too much except for the fact the government pisses away a lot of it
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kiwiinoz
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RE: How Much Net From Gross?

Mon Oct 08, 2012 12:52 am

I pay 5.7% tax.....and lovin it
 
cmf
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RE: How Much Net From Gross?

Mon Oct 08, 2012 1:04 am

I have not looked at it since I was in Germany some 20 years ago. I was very surprised when I found out I was paying much more tax in Germany than I was in Sweden, and had much less buying power. Much of the buying power shortages was cost of rent but medical and pension costs was also involved.
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Rara
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RE: How Much Net From Gross?

Mon Oct 08, 2012 11:21 am

On my income, I effectively pay 17% taxes and 21% for insurances, meaning that about 62% of what I earn actually make it to my bank account.
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fr8mech
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RE: How Much Net From Gross?

Mon Oct 08, 2012 2:22 pm

After taking out my 401K, my health insurance and my contribution to my HSA (all of which reduce my 'gross'), I come away with 30.17% of my gross going to one tax or another.

15.7% to the FED
5.5% to the State
4.7% FICA
1.6% Medicare
2.6% to the City

As I recall, FICA and Medicare come off the gross before deductions which would bring those to 4% and 1.4%, respectively.

I usually write a check to federal government on 4/15 and get a pittance back from the state.
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NoUFO
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RE: How Much Net From Gross?

Mon Oct 08, 2012 3:06 pm

Quoting something (Thread starter):
about 10x the vacation days

Well, that's a bit off. Unless she now gets only three or four days of paid vacation. The legal minimum in Germany is 20 days. She will probably get 25 or 30. Then there are several public holidays, but still ... "10 times the vacation days" is probably way off.

Quoting something (Thread starter):
paid overtime

That would be generous!

Quoting something (Thread starter):
That already accounts for a car

If she is going to live and work in Hamburg, she can simply use public transport and save the expenses. Unless perhaps she comes with a family and her shopping list gets longer.
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rabenschlag
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RE: How Much Net From Gross?

Mon Oct 08, 2012 3:47 pm

I pay 17.7% in income tax and 4.6 % for private healthcare insurance (50% of my costs is covered by the insurance, the other 50% is paid by my employer).
Residence: Germany
Occupation: Full-time state-servant with graduate degree.
Days off: 30 + public holidays

Many things to complain about, definitely not taxes.
 
ozglobal
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RE: How Much Net From Gross?

Mon Oct 08, 2012 5:01 pm

As confirmed by all of the above examples:

Americans, who perceived themselves to be be MUCH lower taxed that Europeans, are usually NOT:

What is more:

1/ In France and Germany, once you pay your Income Tax and "Social Charges", you're covered massively for Health (much more than in the US even on most private cover), you're covered for a government pension, and you've payed all public services and education
2/ In the US, you usually need to add a lot of private health cover for the same coverage and you have to pay a fortune for education
3/ In France and Germany you have 6-8 weeks of annual leave vs 2-3 in the US (4 for the luckiest)

4/ As a result, certain measures of 'quality of life', buying power, leisure, work-life balance, access to education and health care, are better in many (not all) European cities.

My Australian friend in NY, senior exec with 3 children, figured he is paying more in taxes and private health than he ever paid during the 5 years he lived in Paris.

So it just goes to show that stereotypes can be far from the reality.

[Edited 2012-10-08 10:02:07]
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casinterest
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RE: How Much Net From Gross?

Mon Oct 08, 2012 5:41 pm

Quoting fr8mech (Reply 5):
15.7% to the FED

How did yours get so high?
Even when I was Dual Income No Kids, my effective rate was not higher than 14%.

My effective rate in 2011 was
6% FED
5% state
4.2%FICA
1.35% Medicare.

3%county/city propert tax

for about 19.55% tax on Gross after 401K, healthcare, and Medical insurance deductions.
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fr8mech
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RE: How Much Net From Gross?

Tue Oct 09, 2012 4:09 pm

Quoting casinterest (Reply 9):
How did yours get so high?

You tell me. Apparently, we're in the 53% of the 1%. Or are we in the 53% of the 99%? Either way, we write an additional check every April 15th.

I just looked at the wife's paycheck and combined the 2. The results:

Total in tax, as a percentage of gross (less 401K, Health Insurance and HSA contribution): 28.6%

FED: 14.1%
State: 5.3%
City: 3.1%

FICA & Medicare unchanged except for rounding errors.
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casinterest
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RE: How Much Net From Gross?

Tue Oct 09, 2012 4:56 pm

Quoting fr8mech (Reply 10):
You tell me. Apparently, we're in the 53% of the 1%. Or are we in the 53% of the 99%? Either way, we write an additional check every April 15th.

Do you still have kids or a mortgage? Capital Gains /loss to offset?
Perhaps your combined incomes outdo 140K which eliminates the Child Tax credit?

http://en.wikipedia.org/wiki/Income_tax_in_the_United_States

According to this , and the effective income tax tables, you are in the highest quintile for effective taxes with a combined
14.1+6.3(fica,medicare) =20.4 %

'
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fr8mech
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RE: How Much Net From Gross?

Tue Oct 09, 2012 6:24 pm

Quoting casinterest (Reply 11):
Do you still have kids or a mortgage? Capital Gains /loss to offset?
Perhaps your combined incomes outdo 140K which eliminates the Child Tax credit?

I was being facetious. I know why I pay what I pay. I do have a mortgage. I have some cap gains w/no offset. I have kids but the wife and I make too much for the credit.

My biggest deductions are actually my charitable deductions. Cash and non-cash. So long as you don't count the 401K, off the top.
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casinterest
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RE: How Much Net From Gross?

Tue Oct 09, 2012 7:26 pm

Quoting fr8mech (Reply 12):
My biggest deductions are actually my charitable deductions. Cash and non-cash. So long as you don't count the 401K, off the top.

The 401K, HSA, and Medical contributions come off the gross before effective is calculated. So those are valid.

But for most folks, the Personal excemptions (3800 per household memember) , the ittemized or standard defuction (5950 per person or 11900 for married) , mortgage credit and child tax credit are the biggest deductions.

So if you take the Median Household Income in the US, 44,389 and apply the standard deduction to a household of 4.4 (Married 2.4 kids) people. You come up with 44389 -11900-16720= ~15,600 of taxable income which is under the 10% tax rule which means they pay 1,560 in federal taxes prior to the Child Tax credit, which at 2.4 kids takes them to .....a number at or below 0 depending on a few other items. With this calculation it is easy to see how the ~47% pay no taxes.
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fr8mech
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RE: How Much Net From Gross?

Tue Oct 09, 2012 8:26 pm

Quoting casinterest (Reply 13):
With this calculation it is easy to see how the ~47% pay no taxes.

Which is why we need to come up with a better system. But, that is a topic for another thread.
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casinterest
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RE: How Much Net From Gross?

Tue Oct 09, 2012 8:39 pm

Quoting fr8mech (Reply 14):
Which is why we need to come up with a better system. But, that is a topic for another thread.

But what would be a better system? Eventually those parents have the kids grow up and leave the nest, and they go on to produce more kids that contribute to society. The ~47% is not a static group. It is dynamic and changes based on income, work situations ,and children.
But you are right, it belongs in a thread outside this one. However it points out how the Marginal Tax rates are not close to the effective tax rates.
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