Why are income taxes so high in America compared to other countries?

I swear I'm not a freeloader, but I just got my first big boy job and I'm looking at my paystub and I'm shocked how much goes to taxes. I'm making about $68,000 a year and between federal, state, and all these random deductions, I'm losing like 30% of my paycheck! I've been talking to my friend who moved to Singapore and he says he pays way less in taxes over there. Even my cousin in the UK claims they get so much more for their tax money (free healthcare, etc). So what gives? Why are we paying so much in America when it feels like we get less in return? Are we actually taxed higher than other developed countries or is that just how it feels? And is there anything I can do to reduce my tax burden legally? I'm not trying to avoid paying my fair share, just wondering if I'm missing some obvious deductions or credits that could help.

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19 comments

Lydia Bailey

•8M

The perception that US taxes are extremely high is pretty common, especially when you first enter the workforce, but the reality is more complicated. When you compare the US to other developed nations, our overall tax burden (federal + state + local) actually tends to be lower than most European countries. However, what makes US taxes feel higher is that we don't see the direct benefits as clearly as people in countries with comprehensive social services like universal healthcare. Your 30% effective tax rate includes several things - federal income tax, state tax, Social Security, and Medicare. For a $68k salary, that's actually pretty standard. You're probably in the 22% federal bracket, but remember that's your marginal rate, not what you pay on your entire income. Some ways to legally reduce your tax burden: max out your 401(k) contributions if your employer offers one, contribute to an IRA, look into HSA accounts if you have a high-deductible health plan, and keep track of any potential deductions like student loan interest or education expenses.

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Lydia Bailey

•8M

The billionaire tax situation relates to how capital gains are taxed at lower rates than ordinary income. When most of someone's income comes from investments rather than wages, they can end up with a lower effective rate. That's a policy choice our tax system makes, and it's definitely controversial. Regarding a 30% effective rate, yes, that's fairly normal for a $72k salary when you add up everything. You can do a quick calculation by looking at your gross income and total withholdings on your paystub. For federal taxes specifically, the IRS withholding calculator can help you determine if you're on track: https://www.irs.gov/individuals/tax-withholding-estimator. If you feel like you're paying too much, you might consider adjusting your W-4 allowances.

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Alice Coleman

•8M

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•8M

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Jackson Carter

•8M

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Jackson Carter

•8M

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•8M

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Julia Hall

•8M

American taxes are actually not that high compared to other countries, but our system is WAY more complicated. I work in international finance and have friends in multiple countries. Here's what I've observed: - US effective tax rates are generally lower than most European countries - BUT we have more complicated filing requirements (many countries have simple or automatic filing) - Our tax code has tons of exemptions, deductions, credits making it confusing - We don't directly "see" the benefits like healthcare or education that many European countries get - US has more state/local tax variation than many other countries The perception problem is real - taxes feel more painful when the process is complex AND when you don't immediately see what you're getting in return.

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Julia Hall

•8M

I'm not optimistic about major simplification happening anytime soon. There are too many special interests benefiting from various parts of the tax code. Every tax break has a constituency fighting to keep it, and politicians use the tax code to deliver benefits to their supporters. Plus, the tax preparation industry actively lobbies against simplification - companies like Intuit (TurboTax) have a financial interest in keeping taxes complicated so people need their services. Other countries have shown it's possible to make taxes simpler, but it would require political will that seems lacking in our current environment.

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Tony Brooks

•8M

Since the 2017 tax law changes, the standard deduction got much higher ($13,850 for single filers in 2023). Unless you have a mortgage with significant interest, pay high state/local taxes, have major medical expenses, or give a lot to charity, standard deduction is usually better for most people making around $75k. I've done both, and honestly, for my situation ($83k income), the standard deduction has been the better option the last few years. Save yourself the headache of tracking everything unless you know you're close to exceeding the standard deduction threshold.

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