I am assuming a single person who is an employee earns no other income and whose only potential deduction is state income tax and who is covered by private health insurance (relevant in Aus). I chose California - one of the highest taxed U.S. states as the point of comparison. Low tax U.S. states will look better. I also include FICA taxes in the U.S. calculation and Medicare in the Australian case. Apart from a blip around $US35k California's taxes are higher until we get to incomes above $125k. I only went as high as $150k because above that level the U.S. system starts to phase out exemptions and deductions. The top Australian tax rate is 46.5%. The U.S. Federal top rate is 35%, California, 10.3%, and FICA is 1.45% at those top rates. So eventually the two lines converge again. From my experience though there are more tax-reducing loopholes in Australia that high income individuals can use as there is no alternative minimum tax.
8 comments:
Congratulations on the progress! I am so glad that you don't need take the option as what your academic colleague expected as a norm. Snork Maiden indeed brought you a way out and made things better over the weekend?!
Your current situation is what I dreaded about. Jacqui has stronger preference in locality and also want a housewife life style. So it was really clear to me that it quite unlikely that I will make her dream come true soon by being a professor.
Best of luck in everything!
I did some projections and looks like Snork Maiden's salary will cover about 90% of our living costs initially. So I will cover extras like travel and building longer term wealth. And she'll be having probably 20% of pay going into a superannuation (retirement account) as well (these high rates are normal in the Australian public sector). I think some traders do badly because they are under such pressure to make money to live on. We're still waiting for the official job offer letter before making any other moves. I'll be a househusband :) As well as trading and continuing with some academic stuff or consulting. Possibly working with her on her projects.
Very nice comparison on tax rates! I have a cousin in Australia. Is the public service and social benefits better in Australia, since Australia does not waste so much money in defense?
It is sweet that you can live almost on one income. It seems that you can do some serious wealth building there with trading or another job. Jacqui and I are in the same boat (just boarded). Our current plan is to do some catch-up on retirement savings first, then she can stay home, not trading, but shopping maybe.
I think less pressure certainly help a trader to clear his emotion for better decision-making. Reminiscence of a Stock Operator described it very well. By the way, excellent post on soul searching. I had some similar exciting and guilty time indulging myself in stock trading a few years back. I could not live with the struggle, and decided to invest in my engineering technical skills instead of trading skills. Trading was more like an exciting game to me, without real fulfillment such as that from building a real system.
There is free medical care in Aus though private insurance is encouraged and 30% of the population has it. There is no social security as known in the US. The age pension is means tested and very low by comparison. Employers must contribute at least 9% on top of salary to a superannuation fund. So Australia has compulsory retirement saving. Unemployment benefits are also low compared to the US. The overall government share of the economy is similar to the US but Aus runs perpetual budget surpluses. As the national debt is more or less paid off they are now piling the money up in the "Future Fund" which at first is aimed at funding currently unfunded retirement pensions for federal government workers. Australia is in other words in an extremely strong fiscal position going forward. I believe the top tax rates will fall over time rather than rise as they are likely to do in the US.
thats awesome that they have a constant surplus! did the AU politicians go to college or something? ;-)
I'm really jealous now!
so you're not going to get a job? just trade for a living?
At least at the beginning. Will look at academic, government, and business opportunities and see if there is something I'd like to do, but I'm not lining up a job at first. Snork Maiden's salary will cover costs more or less and I have $US250k saved outside retirement accounts. So there is a huge cushion to explore options.
The parliamentary system means the government gets to implement the budget it proposes with some modification from the senate but nothing like what goes on in the US.
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