Well, this used to be true, but the current trend in Europe is that the middle class gets less and less from the state ( "soilidarity has to go to the poorest") and pay more and more taxes ( "fairness") . Just an example : in Belgium, if your employer wants to pay you 2000 EUR a month, he will pay about 3000 EUR of social charges and taxes. In addition, you will pay something like 500 EUR withholding tax. Your consumption will support VAT at a rate of 21%, and there is a wealth of direct and indirect taxes that will grind your money . However, your gross salary will be too high to qualify you for state support for about everything , be it childcare, support for studies or for the elderly. Cost of living is 10 to 15% above neighbouring countries. Politicians like to distribute gifts to those with lower salaries , or to the unemployed ( free electricity, free childcare, free public transport, wathever ) and make it pay by those you have the privilige to earn enough.

Yeah, you should pay a little more attention to what cdnred is saying. Taxation in the US isn't simple in the best of cases. You've got an idea of our taxation that doesn't mirror reality well. I could give details as upper-middle class, but "anecdotes aren't data" and all that.
You're not being hyperbolic, so forgive me if this seems a little out of hand, but keep in mind that the most lax economic regulation in the US history was at the same time we had robber barons and corporations building cities and paying their employees with private currency which couldn't be freely exchanged for federal funds. That they happened at the same time is not a coincidence.

Regulation isn't evil. Regulation isn't even inefficient. What we've presently got, though, could perhaps be called both.

No, you can take 1$ salary and pay only 15% or less on the capital gains no matter how many billions of $ those are, that's not just "my beliefs", thats just how it works. Now you can go educate yourself about your own tax system and maybe tell "OneFiercePuppy" about it, too.
I'm not sure why you guys are not getting it, what is so complicated about paying income tax, social security, medicare and whatnot on 1$, and only 15 capital gains tax on your 500 Million capital gains? If you earn 500 million I'm pretty sure you'd be in a higher bracket than 15% if you don't funnel that income through company stock options.

So yeah, gonna apologize for all of this. I simply posted a little rant because my family gets offended when I have opinions that aren't theirs, aaand it kinda blew up.



Sorry.

Way to straw man.

It isn't taxes themselves as much as the fact those taxes go to more wasteful and mismanaged government programs than anyone can count. Oh, and to the ever-expanding military-industrial complex, and wars of questionable constitutionality.

Hope this helps.

Actually it's more like 45% + 24%... Anyway it's a lot :(
Huge estates and villas for our politicians! That's the one!

And don't even complain about fuel. Fuel in Europe is like twice as expensive as in the US. And incomes are nowhere near that. An average romanian worker can buy like 4-5 full gas tanks each month (meaning the average income is around 500 dollars/month). A full tank of fuel costs me around $110 (60l with around $1.9/l):(.

OK, you're posting from Germany but you could well know how US taxes work. Let's talk taxes.

I make a little over 200k a year as a single guy with no kids. That puts me in the uppermost "we want all your moneys" bracket that the US has to offer, making me eligible for the AMT. Since that puts me in about the top tenth of a percent of the world's income, I'm going to assume you don't make as much as I do, and probably haven't had to worry about higher tiers of taxes in the US.

On your tax return, you've got a section called "Income" where you indicate how much money you've taken in. On the *simpler* tax return that you can file, it's broken into 15 line items, but of greatest interest here is that "Wages, salaries, tips, etc" and "capital gain" are separate items which combine into a total income. You take a dollar salary and a million in capital gains from selling stock options? You've made a million and one dollars, and you're taxed on it appropriately (the modifying attribute being short-term or long-term gains, not wage salary).

I don't even know why I feed trolls. You don't know the basics of the US tax system, and you're wrong on all counts in your assertion that taking a low "income" in any way lowers your tax bracket on other income sources. But, you know, just be louder and angry. Maybe someone will think you're right.

Ok I can only assume you don't actually have any long term capital gains, or why can you read everywhere that capital gains are not taxed with rates above 15%? And why do all these big corporation officials pay themselves only 1$ salary? Altruism?
Even with AMT it would not get above 22%, which is still much lower than what these officials would have to pay with a proper salary.
You're the troll, buddy.

Alright, by popular demand I'll rant a bit more on this topic now that I've had some rest and my mind is a bit fresher.

It's a bit (well, a lot, if you really get into it) complicated than that. Common stock or restricted stock that's simply granted is counted as ordinary W-2 income and is taxed at whatever a person's marginal tax rate is; it is taxed when it is granted, even if it is not sold at that time (if someone doesn't have the cash on hand to cover this then they'll do what's known as a "sell to cover", where just enough of the stock is automatically sold to cover the tax burden on the rest of it). If more of the stock is then sold at a later date then any change in the stock value is counted as a capital gain or loss which is then taxed as such, either at short-term or long-term rates (depending on how long the stock was held). It can also be a little bit more complicated since often stock granted as part of a compensation package is on a vesting schedule (meaning the stock can't be sold until a certain date), and in such a case the stock isn't counted as income until it actually vests.

Then you also have stock options, which is not actually money in a person's pocket, but just the option to buy the stock at a certain price (good for a certain amount of time). If the option is offered as an incentive stock option then no tax is paid upon exercising the option, and only capital gains tax is applied when the stock is then later sold. However, there are some strategies out there for using such stock in a way other than simply selling it. For instance, one that I've heard of is using the exercised options as collateral for a low-interest loan, which is then what is used as individuals income; there are then additional tax options when the loan is repaid that can offset some of the tax burden of whatever income is used to pay off the loan. The overall result being the overall tax burden is significantly less.

The general rule with taxes in the US is that the greater your income and the more diverse your economic activities then the more options there are for reducing your tax burden.

You are correct that Medicare and other healthcare costs account for a large percentage of the federal budget (defense, healthcare, and social security are the three largest areas of federal spending). However, you need to be a bit careful when considering military spending, as costs for many active military operations aren't actually included in the defense budget, but instead are funded through special congressional spending bills that aren't counted as any part of the overall federal budget. For instance, up until 2011 the costs for operations in Afghanistan and Iraq weren't reflected in the defense budget, and the costs of these operations to date are estimated to be close to $4 trillion.

Specific responses I wanted to make aside, in my earlier posts I mentioned several times just how Byzantine the US tax system is, so I should probably say a bit on just why that is. Over the last century (federal taxation of individual citizens didn't really get going until the 16th amendment was ratified in 1913) the tax code has become increasingly complicated due to taxes not simply being used as a way to provide government funding, but as a means of trying to influence social and economic behavior. So-called "sin taxes" are the most obvious example of this, where a particular good the government wants to discourage the use of is taxed much more heavily than other goods. When it comes to complication of the tax code, what you'll see is differential tax rates, tax deductions, and tax credits for specific industries, types of financial transactions, types of legal entities, and so forth. It's the culmination of thousands of instances where politicians at the time decided that a certain type of activity needed to be encouraged or discouraged, and so some small change was made to the tax code to do this. And these changes rarely go away. The end result is a tax code that's over 16,000 pages (seriously) worth of different rates, deductions, credits, exceptions, etc. And there are people out there that can use all of that to min-max a tax return like you wouldn't believe. Of course, these people charge for their services, and just how much they can min-max a return depends on the extent and diversity of economic activity they're working with. So guess who's able to make the most of the complexity of the tax code to lower their tax burden?

As for why the US tax code remains in the ridiculous state its in is basically due to two reasons. The first is that taxation is complicated matter, and rewriting the tax code from scratch (which is pretty much what's necessary) is even more complicated. It's not a matter of needing more or less taxes, or more or less spending, it's a matter of needing both handled better. But when was the last time you saw a complicated and nuanced discussion take place in public politics? Rather, all we get is a lot of noise, and politicians who, being politicians, are all too eager to address a complicated matter and provide an answer that is clear, simple, and wrong. The second major reason that we don't see any major changes is because the people in the best position to push for such changes are the ones who benefit the most from the current state of the US tax code. Ultimately that's pretty much what it comes down to- most of those who are getting the short end of the stick with the current US tax system don't understand it well enough to take any concerted action on it, and most those who do have a good have a good enough understanding of it and are in a position to do sometime about it like it just the way it is.

So instead all we get is continuous noise about how we're taxed too much, about how some of us aren't taxed enough, how certain people need to pay their fair share, how those same people are already paying more than their fair share, how we desperately need tax reform and after much shouting congress has finally struck a deal, and now the tax code is over 17,000 pages with lots of loopholes and we desperately need more tax reform.

Right, I think I'm going to wrap it up there and go pour myself a scotch.

I'd assume you can read that because you can read all sorts of wrong things on the internet. Short-term capital gains can be taxed up to 35% in some circumstances, same as income. Of course, you'd know that if you spent two minutes on, say, Wikipedia but then you'd have to accept that you're championing a lost cause. Long-term capital gains are taxed lower, of course, (though in some cases as high as 25%) but that's a discussion on tax strategies, not tax laws. Again, you'd know that if you considered that the US uses a system where gains can be offset by losses to provide a net total income number for tax calculations.
You know why you know about big C*Os taking a dollar for salary? Because it makes press. Don't underestimate the dollar value of appearances. It makes them seem like they're less overpaid, because they can show that they made "only a dollar" for a year. Of course, benefits packages don't count as salary. Which, yet again, you'd know if you paid any attention at all to anything more than headlines.

What you're not getting, what you're not listening to, is that money in your pocket after adjustments is still just that - money in your pocket. And it's taxed as such.

Also: anyone who makes a decent amount of money** in the US doesn't pay more than 17 or 18%, AMT or not. If you do, you need to get a competent CPA and start shifting your assets around a little. But, you know, you'd know that, too, if you'd done any research.

**unless you make a lot of money due to the representation of an agent, like sports figures or musicians, in which case you get a whole different set of rules to play by, but that's contract law, not tax law, precisely.

Dude it is not that complicated, these guys pay themselves through stocks to pay only 15 to 20% on their salary instead of 39%.

Rant mode on:On other sides of the world people are starving to death. So quit complaining... all of us. It's like a pissing contest, whose country sucks more. Well guess what, there are far worse places then even the one I'm in. Yes i agree it's a lot to pay 39% of 200k/year. But what about 60% of 10k/year, or even less, because that's how incomes are in some of our countries. Life is not fair, but we should make the best of what we have imho.
Rant mode off

Like all things regarding taxes in the US it's anything but simple. First off the 20% rate is only for long-term capital gains. This rate applies to money made due to the appreciation of a stock's value when the stock is sold, and also requires that the stock be held for over a year before being sold. If stock is simply granted (restricted stock) then it's taxed as ordinary income (and capital gains may also be assessed if the stock then increase in value between being issued and being sold). Stock options are a bit different, and incentive stock options (ISOs) don't incur any income tax when they're exercised, so these can end up only having capital gains apply. However, stock options require the stock to increase in value beyond the strike price for them to be worth anything, so there's the risk of them becoming worthless if the company's stock does poorly. Also, if the options are sold within one year of being granted then they're treated by the IRS as non-qualified stock options (NQSEs) and ordinary income tax must be paid on the difference between the strike price and the market price when the options are exercised. The advantage of options, in terms of tax, is that no tax is assessed when they're exercised (provided they're not NQSEs), and the person who then owns the stock has more control over when they then sell those options, and can use that to lower their tax burden. So ultimately being paid in stock does provide an advantage to executives when it comes to lowering their taxes, but it's quite a bit more complicated than just a straight up lower rate if they're paid in stock.

There are also advantages to companies for paying their executives in stock, ranging from tax deductions for the company to the compensation showing up differently on their financial statements.

At the moment the taxes here are:

€0 - €19646 - 37%
€19645 - €33363 - 42%
€33363 - €55991 42%
€55001 - infinity - 52%