Oh, Death & Taxes, such a common phrase. So terrible, so pervasive are taxes in the American mind that we compare them with death. Our perception of taxes and the IRS ranges from annoyance at best to anger, even activism at worst. We love to hate taxes, that’s for sure. Why wouldn’t we hate taxes? Taxes, especially the income tax, cost us money and sometimes we’re not sure where that money goes. The income tax brackets may shift with each new administration, as new presidents claim to make the tax code more fair, but in the end nobody is convinced they’re getting a fair deal on taxation.
But Take a Look at Europe!
But as someone who has paid taxes in the UK, I’m wondering what Americans are whining about.
Our income tax brackets are fairer than ever if you’ve looked around the globe, where in some countries like Austria or Belgium the income tax rate is 50%, according to Wikipedia. In Norway, it’s over 54% for some taxpayers. That’s over half your income going to the government. In Sweden it’s almost 57%. In the US, the even the highest of the income tax brackets doesn’t reach this level, and you have to be making quite a lot of money ($400,000) to reach our highest bracket of 39.6%
How About the UK
In the UK once you hit around the $50,000 annual income level, your tax rate is 20%. If you’re making that much in the US your rate is 25%. In fact, you only have to be making $36,250 per year (taxable income, that is) and you’ve made it into that bracket.
What is Takes to Get Taxed at the 40% Rate
In the UK, once you hit around $150,000 taxable income you’re looking at handing over 40% of your income to the Queen in the UK. Yup, their income tax brackets over there jump from 20% to 40% pretty quickly and you don’t even have to be super rich to get taxed at 40%. To get taxed around that rate in the US, you’re at the top of the income tax brackets which means your taxable income is over $400,000 and your rate is 39.6%. That’s our highest tax bracket. It stops there. But wait that’s not even the highest of the income tax brackets in the UK. They have a 45% rate for people making over $231,000 (roughly, since it depends on the pounds to dollar conversion rate). If your taxable income is over that amount you’re looking at almost half your income going out the door and into the tax coffers.
Some Data to Back This Up
The Organization for Economic Cooperation and Development collects information on taxation, among other things. They have a list of tax rates over the years for the countries they study (the developed world, basically). The United States is usually a the bottom of the list, which rates how heavily taxed the citizens of each country have been throughout the years. Yes, we are consistently at the bottom! So, with some perspective on the matter of how our income tax brackets are organized, perhaps it’s not so bad….?