This doesn’t make sense to me unless it moves you into a lower tax bracket or something. Eg. If you made $100k and were taxed at 30%, you’d get paid net $70k. If you took a 20% gross pay cut, you’d get paid $80k gross and $56k net. 56k is 20% less than 70k.
In the Austrian tax system you are not taxed in one bracket. The first 15k are free next 5k at 15%, next 10k at 25% and so on. So your average tax rate will always be lower than your marginal rate, thus removing 20% gross will never remove 20% net. Actual values depend on your income of course.
In the UK we have the tax free allowances, but we start to lose them as we earn more. For instance, around £100k in earnings they start to tax your personal allowance so you are effectively taxed at 60%. You then move into 45% tax and then start to lose pension allowances at £250k.
First world problems, but these are all cliffs where it makes sense to keep your income down. Losing 20% off the top line will reduce your income by closer to 10% if my math is correct.
We have a problem in the UK with higher earners dropping out of the workforce partly because of the tax incentives. I personally choose not to work as an employee in the UK because I would be paying more than 50% in tax.
That is horrible. Basically repeating the mistakes the government makes with people on benefits in the tax code. I don't understand how you can design any financial incentive systems with discontinuities such that you actually earn less by working more. That is a totally unforced error. I agree that people on 100k a year maybe don't need some kind of allowance but then just add another bracket at 85k that erodes it away instead of pretending that the people at 99k still really depend on it.
The child benefit threshold makes it pretty bad for most mid to high household incomes too, effectively a 60% marginal tax rate between £50k and £60k if you have a student loan
Yes, basically every country works like that. I don't know why people talk about "moving a higher braket" like it's a discontinuity in the amount of tax you pay. It's always a _marginal_ tax rate.
There's very few countries in the world with tax systems like that - even Estonia I believe has some tax free threshold, such that the first $x of your income is not taxed (then a flat rate of 20%). Sure, if your income was massively above that threshold then a 20% cut is pre-tax income would be pretty close to a 20% cut in take-home income, but I'd think for most here on HN it wouldn't be anything like that much (though probably not as low as 10%).
As a resident in Estonia, I believe you're talking about the basic exemption of 6000 euros [0]. The rest is as you said.
Also if you're married, this amount is combined between spouses. And for some things like 3rd pillar unemployment funds, tuition fees and donations, we get paid 20% back regardless of our income previous year. Some years I got around 500-1000 euros as a tax return, but when I checked this month (for 2022), it was 0, as I didn't have any of these exceptions last year.
