I suppose it might be possible to pay more than half your income in tax if you were, say, spending ten to twenty thousand pounds a year on cigarettes and strong spirits?
Can you explain how you got this figure?
https://www.gov.uk/income-tax-rates says that the rate at 100K is 40% and 45% at 150K
Once you get to £100,000/year gross salary, the tax-free allowance starts to taper away. At £100,000/year, your tax free allowance is ~£12,000; at £125,000/year, your tax free allowance is £0.
Suppose now you got a pay rise from £100,000 to £125,000. At £100,000, your take home pay was ~£66,500; at £125,000, your take home pay is ~£76,000. Your overall tax rate was ~33.5%, now ~39%. But comparing this year's payslips with last year's, you'll notice that of the £25,000 increase in the headline figure, ~£9,500 has actually made its way into your bank account. And 9500/25000=0.38. That's where the 62% figure comes from.
In practice, since the max tax rate is 45%, and employee's NI is around 1% at that point, your overall tax rate never gets past 46%. (For example, suppose you earn £1m via PAYE: net salary is ~£541,000. Overall tax rate therefore 45.9%.)
You can get approximate figures for this stuff out using https://listentotaxman.com/. If you want proper advice, you can pay an accountant.
Nitpick 2: The employer also pays 13.7% NI on top of that million-pound salary, so the actual tax wedge on the employer's £1.137m outlay is 52.4% (and would approach 53.4% at multi-million salary levels).
There is National Insurance (which is a flat 2% above ~40k).
There is the tapering of the personal allowance, which amounts to another 20% between £100k and ~£125k.
There is the stealth income tax of Employer's national insurance, which is spun as a tax on the employer, but all employers realise that they need to pay this extra ~13%, so obviously they factor that into salaries.
There is the withdrawal of child benefit for people who earn over 50k, which, again is an effective income tax on high earners with children.
Finally, there are things like the withdrawal of pension relief, which effectively increases your tax by making you pay tax on pension contributions that you wouldn't have had to pay tax on if you earnt less.
All of these can combine to an effective income tax rate of over 50%, by which I mean of the money that leaves your employer's account at the end of each month, more of it goes to the inland revenue than goes to you.
2. Sales tax: on all consumption.
3. Gas tax, utilities surcharge. Special taxes, parcel taxes etc
4. Hideous thing we have now that is toll charges. I guess it’s like a congestion charge. Which essentially means that if people have to come into Silicon Valley to work, they have to pay the toll trolls under the bridges, as it were..
It’s one thing for google employees to pay this, but imagine lower income and minimum wage labour folks shelling out money. This means that it’s effectively discrimination against jobs and businesses that can’t hire employees to pay them a liveable wage.
Often the companies are blamed, but is it really them or is it the tax hungry govt? It seems like a good distraction and make scapegoats out of workers in well paid sectors. It’s almost as if companies like google and the rest of FAANG have a complicit cozy arrangement with the govt. the more they hire, the more ka-Ching for the tax collectors.
In fact, my rule of thumb when someone is paraded as a villain..be it google or tech bros or seniors or prop 13..or anyone else, I always follow the money. More often than not, all roads lead to Sacramento. And there are a few scapegoats up front and they are mere distractions.
How can the govt bloat and red tape and inefficiencies be blamed on tech/white colour working class who pay most of the states taxes? How is it possible that public schools don’t have swimming pools and adequate funds for programs when the millions of dollars in property taxes goes to the common state budget pot to be redistributed. Modesto schools are awesome even though they don’t nearly contribute as much as they receive and don’t have the density of Bay Area cities..and yet, high earning areas are blamed for creating inequalities. It’s just odd. If you just follow the money, it’s all pretty clear that all the usual suspects just happen to be convenient scapegoats.
5. Lack of good public transport means car, insurance, gas, registration, repairs etc. it adds up.
6. Then insurance which is actually part of your salary and because we don’t have universal health care, it’s technically wages every month.
Not to mention the latest head tax in Mountain View with most of it paid by google.
One of my neighbors ..to the contempt and disdain of other non techie folks/retirees..proclaimed that after both the adults earning close to half a million, they barely live pay check to pay check with very little savings after buying a new home with their two kids in public school. Remarkable but that’s almost believable if they were leading a comfortable no scarcity life.
You can be on welfare at 45k in Oakland with 7 kids and 2 adults when you are poor and you have services and food stamps and welfare and subsidized housing. There is no where to go below. But when you are upper middle class and you have to pay for everything and what you work for is to maintain a standard of life, then 20k/month isn’t enough for a family of 4.
Most tech employees are on the receiving end of scorn and contempt and envy in the Bay Area. Sometimes even within their own places of employment by transplants from east coast who have California COLA sticker shock or young people just out of school who don’t have families. There is a lot of derision here when one is ambitious and wants to be upward mobile. It’s really strange to me as someone witnessing all this Silicon Valley upheaval as an outsider.
This isn’t my circus as I am not working in SV but it’s really odd. I don’t know what to make of it or see the sense in it. I want to believe that everyone is justified in how they feel from their perspective, but it’s hard to understand how some feel like the most productive class in SV should be the most taxed and exploited. The beauty or tragedy of it is that a large majority of their own believe that the tech working class is undeserving of their status and needs to be taxed more. Not my monkeys, not my circus..but still..its like bizarro world. Only in California. Fascinating.
