In my view one of the big problems is that capital gains are taxed less than income from working and they are a proportional tax. The result of that is that once you get to the 0.1 % taxation becomes regressive because a bigger chunk of your income comes from capital gains.
Might be more sensible to give smallish tax breaks for CGT to ordinary workers and reform the taxation of worker share options no more crippling tax bills for worthless options.
Id also encourage listed companies to offer UK style share saves to all workers to allow those lower down the food chain to actually get some equity.
Good question. For the United States, I reference: https://www.investopedia.com/articles/personal-finance/10151...
If you hold one year or more:
Filing Status: Single
0% rate: Up to $40,000
15% rate: $40,000 to to $441,450
20% rate: Over $441,450
In the above, personally, I would like to remove the brackets for 15% and 20%. My point: For anyone beyond middle class, tax capital gains as regular income.
Taxing cgt as income has some negative aspects.
And almost 1/2 mill a year income is not what id call "middle class"
I live in Uruguay, South America - my taxes include healthcare and retirement.
It's definitely not ideal and it's crippling my chance of ever owning a home, but it does pay for a lot of social services way beyond what the U.S. provides - key differences being state provided healthcare and education up to and including the university level.
In the US - your effective income tax rate could be as low as ~24% on $60k. There is nowhere it would be higher than ~33%.
So your tax rate is AT LEAST 22% higher - and all you're getting is "free" education and healthcare.
=FV(0.075, 40, -13200, 0).
That's $3M by the time you would retire if you invested the difference in taxes in a total market index fund and got average returns. Adjusted for inflation - that's $822k. You could reliably drawdown the equivalent of ~$3.5k per month forever. That's 50% more than you make after taxes now...
And in the US - you would already be getting $3k+ from social security... Plus you'd have free healthcare via Medicare...
Individually, you are unquestionably better off with the lower tax rate in the US. Unless you went to Princeton to study underwater basketweaving without a scholarship. Even if you had ridiculously expensive chronic conditions - there's plans you can get cheaper than $13k per year.
And as a whole you are also worse off.
The cost of "free" education is estimated at $47Bn in the US. That would increase taxes by about 1.1%.
The cost of "free" healthcare is estimated at an additional $1.6Tn. If evenly distributed - that would increase everyone's taxes by about 43%.
That means your tax rate would be as low as ~31% or as high as ~41% -- depending on which state you lived in.
Do you feel the healthcare and national pension are high quality ("good value")?
Who is this for? The “rich” or for everyone else?
An effective rate of 50-55% is obscene. I would relocate for anything approaching 40%.
In California - if you don't have a ton of mortgage interest deductions and you count state income tax - you're above 39.5% on $400k. If you count both sides of payroll tax, you're in the mid 40s. And even if you own a home, if you count property tax, you could be close to or above 50%.
The median state income tax is about half of California's at $400k - and property taxes here are somewhat low. Most places - you're gonna be above 40%.
1) Where do you live?
2) Are you in the top 1%?
3) In your location, what is the effective income tax rate for top 1%?
That would depend on how you classify 1%.
The effective tax rate for an individual earning $400k would be around 31%.
Like I said, even approaching 40% is obscene. 50-55% is absolute thievery. I would relocate from Texas if my effective tax was even close to 40%.
The top 1% in the US is ~400K USD.
Real question for OP (and others): What do you think is a reasonable effective income tax rate? (Please do not confuse effective and nominal tax rates!) In my view: "All in" should be about 50-55%. When I say "all in" I mean absolutely everything -- federal, state, local, national pension, national health (if applicable), yada yada yada. That would mean top 1% still have net income (after taxes) of more than 200K USD.
If you look at highly developed economies, it seems hard to provide a healthy social safety net without 50% effective income tax rate on top 1%.
In Hongkong, the top effective tax rate is about 15%. The social safety net is appalling. The number of poor, working, elderly people (collecting cardboard in the street to sell by the kilo to recyclers) is heartbreaking. You would not use the public health system, nor the public school system; nor depend upon the national pension, nor unemployment benefits. One bright spot: The public housing system has served well the working class and below. (I joke that 15% only gets you a good metro system and airport.) Hongkong feels like a semi-feudalistic society.