if you're a surgeon or lawyer (or any other kind of high end services professional) living in SF and making any kind of significant money, most of your earnings are probably not coming on a W2 in the form of a salary. you're probably a partner or a shareholder in a business and get a dividend or a distribution from the business as a K-1 or a 1099-DIV/INT, and your effective tax rate is going to be way, way lower than 50%, probably closer to 20% or below.
because you own part of the businesses a huge amount of your expenses are either deductible or simply covered by the business, which then deducts it from its earnings (which are probably getting passed through to you directly). lunch and some dinners, ambiguous trips to major cities, car lease, laptops, phones, christmas gifts, etc. also, a lot of people just straight up buy shit for their house on the business dime like nice TVs, furniture, etc. field audit? move it to the office.
sales (you call it VAT .. okay) tax is probably high, but it's optional, you don't have to actually buy anything. also, you can buy stuff in cheaper places, especially if you and own a second home in a lower tax area (which many people do).
Dividends and other distributions are taxed at normal income tax rates. You are likely thinking of long term capital gains taxes, which are something else entirely.
no, i'm not. distributions are taxed at 'normal' rates, but if you are receiving non-w2 income, the amount of things you can deduct from that income are far and away more varied and comprehensive.
If you're a partner, you're either getting profit distributions that are taxed at ordinary income rates, or you're getting dividends that are taxed lower, but the corporation paid 35% tax on profits (plus state), which makes it much worse than just ordinary income rates.
The only real ways I'm aware of to get taxes much lower is capital gains, or perhaps real estate where depreciation "losses" defer a lot of taxes on your income.
But neither of those would really be available for partners in a law firm or medical practice.
So again, please elaborate on how partners get taxed at 20%?
because you own part of the businesses a huge amount of your expenses are either deductible or simply covered by the business, which then deducts it from its earnings (which are probably getting passed through to you directly). lunch and some dinners, ambiguous trips to major cities, car lease, laptops, phones, christmas gifts, etc. also, a lot of people just straight up buy shit for their house on the business dime like nice TVs, furniture, etc. field audit? move it to the office.
sales (you call it VAT .. okay) tax is probably high, but it's optional, you don't have to actually buy anything. also, you can buy stuff in cheaper places, especially if you and own a second home in a lower tax area (which many people do).