Hacker News new | ask | show | jobs
by eruci 1865 days ago
50% tax? Where do you file taxes?
5 comments

50% effective at $72k/yr. I genuinely cannot figure out the geography for this.
Candyland, maybe. There's no jurisdiction in the world that I am aware of where you can both 1) be a remote developer, 2) pay a 50% effective rate on $6k/mo. Even marginal rate is pushing it for that low of an income.
You are forgetting about self employment taxes, which is around 15.3%. Then you have to pay federal AND state taxes on top of that, which is probably another 25-30%.

If you are a self-employed contractor and you don't have a lot of deductible expenses, you can easily end up paying 40-45% of your paycheck towards taxes.

You also have to account for all of the other expenses that you have to cover without any company help, such as life insurance, disability insurance, health insurance, etc. Plus, you don't really get "paid time off", "sick time", or anything like 401k matching.

Essentially, if you are a contractor who wants to make $100, you need to be actually charging your clients $200.

Let me introduce you to Eastern Europe then. Lots of smart and well educated people, western-like culture, big taxes and fees (50% sounds right), and the rate sounds right for a capable developer, especially if he is a quasi-employee, as this sounds. Remote work is an option, but the US companies that do that often skip EU altogether and hire in "cheaper" places (India comes to mind).
10%-20% federal, 0-10% state, 15% FICA, 3-5% other (varies, includes things like medicare). It adds up.
The top US bracket of 37% + 13.3% in CA (for example) will get you roughly there. NYC has an even higher tax rate.

Of course, this doesn't take into account that it's a progressive tax, etc., but I regularly take home only about 50-60% of what I make, after benefits.

Yeah but is someone making $6k a month in the top bracket in these places?
No, but as a contractor you have to pay the full payroll tax (15%) + all the other SS / medicare costs (usually comes to about 2-3%), plus income tax (progressive and varies, but for this bracket is probably federal 15-20%, and up to 10% state). So, add it all up, and it's ~40-45%. Then they have to cover their own health insurance, which again, depends on state, but could be 400-700/mo. So yeah, it's easy to end up with half your money gone with each pay check.
There are cities which take their own cut and then you can also have school income taxes. I wonder if any counties have an income tax.
$6k/mo ($72k/yr) is a marginal tax rate of ~13% in the US. Combined w/ FICA (self-employed), you'd be looking at ~25%.

Also, no benefits being deducted in this case.

ok but he's only making $72,000 a year pre-tax. He's not even close to being in the top tax bracket in the US.
They're self employed, so 12% FICA, 25% fed 10% state would be my very rough guess.
At 72k it would be ~13% fed (and also much lower in any state I can think of).
Says 22% here: https://www.nerdwallet.com/article/taxes/federal-income-tax-...

Certainly with the way brackets work they're only paying 22% on anything between ~40K and 72K.

13% is the "marginal" rate (i.e. the percentage that you would actually pay on 72k, after applying the various brackets)
You don't seem to understand how the progressive taxation works. In U.S. you pay 0 tax on first ~20k income, 15% on the next 35k, 22% on next 40k and so on (random numbers). The 22% is what you pay on anything above 55k in this example. But for the first 55k you pay only 20k * 0% + 35k * 15%=5250, e.g. 9.5%
Not sure how you missed the second sentence, or why you would use made up numbers in your response when I provided the brackets.

In the U.S., as a single filer, you pay 10% on your first $9,875, 12% from $9,876 to $40,125 and 22% from $40,126 to $85,525.

It does end up at 13% of $72K, assuming the $10K standard deduction. Since only the initial percentage was posted, no one would have any way of knowing if it was coming from the total calculation or anywhere else.

> no one would have any way of knowing if it was coming from the total calculation

Ah, sorry, I thought the tilde made it clear that "13%" was the approximate result of a calculation.

Federal + FICA for self-employed is barely 30% for that income and state is going to be well under 10%. Flat tax states will be 3-5% (or 0%) and even California is barely 5% effective rate.
Here in BC, Canada, by the time everything is settled I take home around 60%.