Taxes R US
Taxes are the enemy. Right? It’s not what you make in business but what you keep. I think you’ll agree with that.
So some interesting research has just come to light about taxes in the United States.
Unlike what they know of tax systems in countries across Europe, Europeans need to understand that there are many different types of taxes in the USA. Federal taxes are pretty uniform across the USA, but State taxes and local sales taxes can vary dramatically.
And it comes as no surprise to me looking at this latest analysis that it’s California, Hawaii, Maryland and Oregon taking the biggest bite out of earnings after taxes.
Now all Mount Bonnell clients, and prospective clients, should sit up and take notice of this latest research. As it can help focus the mind in terms of where you set up your business and from where you do business in the US. No point in having your American Dream come true just so that the tax man can turn that dream into a heavily taxed nightmare.
Go Banking Rates analyzed tax data from across America and how much money is left for Americans after tax when earning either a $50,000 or $200,000 annual salary.
According to the GoBankingRates estimates those people earning $200,000 a year are in the top 10 percent of U.S. earners. Those earning $50,000 are closer to the average American take home pay –the average U.S. salary being around $56,516.
So what they found was that the US average taxpayer with a $50,000 salary takes home around $39,129 per year – or just $3,261 per month. The US national average income after taxes for someone with a $200,000 salary is $136,700, or $11,392 a month.
And looking at this new data the fact is that wherever you fall on the spectrum, the reality of take home pay will vary greatly depending on which state you live in.
Take California, for example, the Golden State has a notorious progressive tax rate ranging from 1 – 13.3 percent depending on how much you earn. Simply put it is one of the highest taxed states in the Union. More worryingly still Californians take home less as their salaries grow. Yes, really! A Californian earning $50,000 keeps $38,778 after taxes, only slightly less than the national average. Californians making $200,000 keep $127,819. This is the second-lowest take home for that salary bracket in the nation. This is definitely something to think about when contemplating California as a business start up.
So too with Hawaii, which has a tax rate ranging from 1.4 -11 percent, with the third-lowest US take home rates for those earning $50,000 at just $37,431. By comparison, in Hawaii a $200,000 salary gets you $130,553 after taxes, that’s nearly $7,000 below the national average!
Still out West, Oregon has a tax rate between 5-9.9 percent. Surprisingly, however, Oregon has the lowest take home pay for earners in both categories! Yes, that’s right, a $50,000 salary ends up with $37,345 after taxes, while a $200,000 salary serves up $127,720 in take home pay. That said it is to be remembered that Oregon offsets these high income taxes by being one of just five states that doesn’t have any sales tax. But the question is whether you want to be taxed at source or on what you spend? I know for me I like to think I know best how to spend my own money and I’m sure that goes for most Mount Bonnell clients.
The same is true on the East Coast too though with Maryland’s taxes ranges from 2-5.75 per cent. Maryland has the second-lowest take home pay for people making $50,000 a year, there you get to keep just $37,401. Higher earners there are also on the lower-end of the take home salary spectrum with a mere $129,952.
Okay, this all sounds gloomy so now here’s some good news.
Eight states have zero income tax. Yes, that’s right, zero.
These magnificent eight are: Wyoming, Washington, Florida, Tennessee, South Dakota, New Hampshire, Nevada and Texas.
What this means in reality is that residents of these States take home around $40,963 per year when making $50,000 annually, and a whooping $145,962 for those with a $200,000 salary.
So for Texas, where Mount Bonnell has its US HQ, the Lone Star State is one of the best places to do business in the nation. Take-home pay for a $50,000 earner comes in at $40,963. One of the nine states with no income tax, Texans bring home more than $1,800 than the average national taxpayer at that income level – $145,962 when earning a $200,000 salary.
Compare that again with the average figures nationally: a $50,000 salary equivalent to $39,129 take home per year – or just $3,261 per month. The US national average income after taxes for someone with a $200,000 salary is $136,700, or $11,392 a month.
There’s also places like Alaska, which doesn’t have an income tax, but it does have a state unemployment insurance tax. This levy brings Alaska into ninth place nationally when it comes to take home salaries of $40,765 and $145,764 respectively.
Remember that States without an income tax often need to generate revenues in other ways. So, for example, Washington State has a 9.18 percent sales tax, which is the fourth highest in the nation.
So the moral of this tale is take advice. Book a consultation with Mount Bonnell and let the good folks here plug you into not just understanding the myriad tax system on the other side of the Pond but on the most tax efficient ways to do business there so you hold on to your hard earned cash.
Talk soon.
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