[matteotom]

$300k income, MFJ, $46k 401k contribution, $8k HSA contribution

After standard deduction ($29k), AGI is about $217k. That's the 24% bracket (barely), which adds up to $34,337 + 0.24*$16000 ~= $38,200 federal income tax

$38,200/$300k = 12.7%

You can get even lower with itemized deductions: mortgage interest (might be over $40k) plus SALT ($10k) plus a few donations ($5k) => AGI of $191k => federal tax rate of under 11%

Of course, this is just federal income tax. Most people also pay FICA (medicare+social security) and state and local tax.

[throwaway2037]

That is impressive. Thanks for the very thoughtful answer. Many times before, I have seen utterly bullshit tax minimisation claims on HN, but rarely an answer as good as this one!

Deeper question: Now that you provided a reasonably scenario where a household earning 300K USD combined income can "only" pay 12+% in federal taxes: Does this make sense from a policy perspective? My point: Should it be higher? It seems hard to pay for what a highly developed nation needs to pay for where 300K USD households are paying such measly federal taxes. (To be clear: I very well understand this is one component of total tax burden, but still a worthy discussion.)

[lotsofpulp]

It really isn’t worth discussing just federal tax liability in the US, due to how complicated the various taxing jurisdictions are and how diffuse various governing expenses are throughout those jurisdictions.

Especially when comparing to effective tax rates in countries with universal healthcare and different defined benefit pension schemes. For example, health insurance premiums in the US are a tax, due to the myriad restrictions on how premiums can be priced. Just not collected by the government, but it definitely is young and healthy subsidizing poor and sick.

Also, note that most of the reduction in tax liability is due to setting money aside for later use, so it is akin to deferring taxes, rather than just reducing taxes.

Another way to make sense of policy is that the federal US spend is 60% on defined benefit pensions for old people and healthcare for old or poor people, 17% on military, 13% on interest, and the remaining 10% for the rest of the federal government’s operations.

https://fiscaldata.treasury.gov/americas-finance-guide/feder...

[matteotom]

You also need to consider Fica (social security and medicare) and state and local taxes. Personally, my partner and I made about $470k last year and (filing MFJ) our combined rate will end up being about 28% ($80k federal tax, $30k CA state tax, $20k fica).

Which IMO should be higher! But also I'd want that to include universal healthcare (my employer and I pay combined about $20k/year or another 4% between premiums and deductible+copays) and generally a better social safety net.