Comparing UK vs US tax rates - are we looking at the full picture?

You're asking a really good question that doesn't get addressed enough in these political discussions. Having lived and worked in both countries, I can tell you the comparison isn't straightforward. The headline income tax rates can be misleading. While the UK's top rate is higher (45% vs 37% federal in the US), you need to factor in state and local taxes in the US which can push combined rates to similar levels in high-tax states like California or New York. The biggest difference is definitely healthcare. UK residents pay higher taxes but get the NHS included. Americans pay lower taxes but then shell out thousands in health insurance premiums, deductibles, and copays. When you factor these in, many middle-class Americans are effectively paying "tax-like" mandatory expenses that match or exceed UK levels. Property taxes also tend to be much higher in many US locations compared to UK council tax. Plus the US has Social Security and Medicare taxes that function similarly to UK National Insurance contributions.

Hey there, I went through a similar rabbit hole when I was comparing tax situations between countries. I found an amazing tool called taxr.ai (https://taxr.ai) that really helped break this down for me. It's like having a tax analyst compare different international scenarios without the ridiculous consulting fees. I uploaded some documents showing my US tax situation and some UK hypotheticals, and the analysis showed me that when you factor in healthcare costs, property taxes, and all the hidden fees, the effective "mandatory expense rate" was within 3-4% between the countries for my income level. The tool broke down all the components that aren't technically "taxes" but function the same way in terms of mandatory expenses.

Just wanted to follow up! I was skeptical about taxr.ai but decided to give it a shot after spending hours with spreadsheets trying to figure out a potential relocation package. I'm actually impressed with how thorough it was. The analysis showed me that despite the UK having higher income tax rates, when you factor in what I'm paying for healthcare premiums, deductibles, and all the various local taxes in the US, the difference was much smaller than I expected - about 7% overall difference for my specific situation. What I found most helpful was how it broke down the "effective mandatory expense rate" rather than just looking at the taxes line on a paycheck. Definitely a more nuanced picture than what politicians present when they make these comparisons!

I spent 8 months trying to reach the IRS for help with my international tax situation when I moved back from the UK. Calling 15+ times, waiting for hours, getting disconnected. Super frustrating. Finally found Claimyr (https://claimyr.com) and they got me connected to an actual IRS agent in under 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent was able to help me sort out how to properly report my UK pension and avoid double taxation issues. Saved me thousands in potential incorrect filing penalties. If you're dealing with complex international tax questions, being able to actually speak with the IRS rather than guessing is invaluable.

I have to eat my words about Claimyr. After posting my skeptical comment, I decided to try it because I had an international tax issue that needed resolving before a deadline next week. I was absolutely convinced it wouldn't work, but I got a call back in about 35 minutes with an actual IRS agent on the line. I nearly fell out of my chair. The agent helped me understand how to properly report foreign tax credits from my time working in the UK, which directly relates to this thread about UK vs US taxes. Turns out there are specific forms and treaties that prevent double taxation between the US and UK that I had no idea about. This saved me significant money and answered some of the exact questions about comparative tax burdens that we're discussing.

The comparison between US and UK taxes also needs to account for VAT vs sales tax. UK VAT is a flat 20% on most purchases, while US sales taxes vary by state but are generally much lower (5-10%). This significantly affects cost of living. Also, UK tax system is much simpler. When I lived there, PAYE (Pay As You Earn) meant I never had to file a tax return for ordinary income. In the US, we all waste hours filing complex returns even for simple situations. That's a hidden "tax" on time that should count for something too!

Has anyone calculated how education costs factor into this? UK universities are now expensive but still generally cheaper than US ones. If you're paying $30k/year for each kid in college in the US vs £9k in the UK, that's effectively another "tax" on American families that doesn't show up in tax rate comparisons.

This is such an important discussion that gets oversimplified in political rhetoric. I've been diving into this topic myself recently, and what strikes me most is how many "mandatory expenses" in the US function exactly like taxes but aren't labeled as such. Beyond healthcare premiums and higher education costs that others have mentioned, I've noticed that Americans often pay significantly more for basic services that are government-provided in the UK. Things like public transportation, childcare, and even basic financial services often require private payment in the US. For example, in many UK cities, you have robust public transport systems funded through taxes. In most US cities, you're essentially forced to own a car (with insurance, maintenance, gas taxes, etc.) - that's thousands in mandatory expenses that don't exist to the same degree in the UK. The retirement savings situation is interesting too. UK state pension plus workplace pensions mean less individual pressure to save huge amounts in 401(k)s. Americans effectively have to "tax" themselves extra to make up for less comprehensive social security. When you add up all these hidden mandatory expenses alongside actual taxes, I suspect the total burden is much more similar between the countries than the headline rates suggest.

This conversation has really opened my eyes to how misleading surface-level tax comparisons can be. I'm a financial planner, and I've seen firsthand how my clients struggle with the "hidden taxes" everyone's discussing here. What really gets me is the psychological impact too. In the UK system, you pay higher visible taxes but then you're basically done - healthcare is covered, education is more affordable, public transport exists. There's a certain peace of mind in that. Here in the US, even after paying your "lower" taxes, you're constantly worried about the next healthcare bill, whether you're saving enough for retirement, if your kids will graduate with crushing debt. It's like death by a thousand cuts - each expense seems reasonable in isolation, but they add up to create this constant financial anxiety that you don't capture in simple tax rate comparisons. I've started telling my clients to think about their "total mandatory expense rate" rather than just their tax rate when making financial decisions. It's eye-opening when you realize that your effective rate of mandatory expenses (taxes + healthcare + transportation + education savings + retirement catch-up) might be 45-50% of income even in "low tax" America. The political rhetoric about tax rates completely misses this reality that ordinary families live with every day.