So I have had plenty of discussions over the past few weeks
with Americans concerning the differences between the tax systems in the UK vs.
the US. Most of the time Americans assume that in the UK we pay exorbitant taxes
to fund our NHS and that we are a completely socialist state, probably a
consequence of the right wing media on the west side of the pond. Now overall,
and for most people, the tax systems are almost equal in their takings from citizens.
And I have always been a proponent of the UK tax system. Today I find myself
even more inclined to support the UK system after receiving and closely
examining my first US pay check and tax breakdown. I can only speak of my
personal experiences and so I will do my best to outline the scenarios I have
encountered and the relevant taxes owed and paid.
In the United Kingdom I worked approx. 40 hours per week,
earning on average £6/hr. This brought my gross weekly income to £240, or an
average yearly income of £12,480. For the fiscal year 2012-2013 the UK allows
the first £8,105 of your income to be tax free and any earnings over this threshold
fall into a 20% taxable bracket. You are also required to pay 12% of your
weekly earnings above £146 in National Insurance. So for my scenario, my £240 pay
check was deducted £16.82 for Income Tax and a further £11.28 for National Insurance,
meaning I took home £211.90/week. This made an effective tax rate of 11.7%.
What truly makes me angry is that far too many people are
willing to criticise this system without first examining the taxable income and
deductions taken from someone earning a similar amount of money in the U.S.
In the United States (and according to my latest pay check)
I work an average of 20 hours per week, earning an average of $3.37/hr. And the
company very kindly declares my tips for me (for this period $172.50/week) this
brings my gross weekly income to $239.90, or an average yearly income of
$12,474.80. Accounting for the 7 different tax deductions that amount to $40.71
my pay check of $239.90/week turns into a take-home wage of £199.19/week. This
makes an effective tax rate of 16.9%.
Difference is, I get free healthcare in the UK, I get free prescriptions,
and University tuition is never more than £9,000/yr. All in a country that taxes
the working class citizens who fall close to the poverty line 5.2% less.
