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Ask HN: How does payroll work in US?

2 points by brtkdotse ↗ HN
I’m trying to do a TCO type analysis of income, taxes and what you get for your money in Sweden and US and it strikes me I have no clue how payroll and taxes work.

In Sweden, a decent salary is 50 kSEK (salaries are negotiated per-month rather than per-year). That is pre-income-tax, post-social-taxes.

Company cost per month: 50kSEK salary + 16 kSEK payroll tax + 5 kSEK private pension (optional but 99% of all employers offer this) Employee income: 50 kSEK - 15kSEK (tax) State gets: 15kSEK (income tax) + 16kSEK (payroll tax)

The above is a bit simplified, but accurate. Major benefits are 30 days off, 400 days parental leave, free health care, free college.

How would the company cost/employee income/state income look in the US?

6 comments

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sushshshsh
Not able to give a very precise answer but it usually looks like this:

Employee Salary: $100,000 Taxes Payable by Employee: Federal, State, Local, Payroll (Social Security, Medicare, other Local taxes like NY Family Leave)

Taxes Payable by Employer: Social Security, Medicare, other Local payroll taxes

Depending on your state, city, income level, married status, children, and type of worker you are (W2, 1099)... these variables will affect how the actual rate is calculated.

So suffice it to say that the income tax calculation alone is complicated enough (to perpetuate the accounting industry of course) and the matter gets extremely complicated when looking at LLC income, Corporation income, Capital Gains income which every Robinhood trader now has and of course compliance with business regulations which is so infinitely complicated that you can almost never be proactive in facing them and instead can only react to a fine when you receive it.

EDIT: A single man working in NYC making 100k will have an effective tax rate closing in on 40%, typically 22% federal, 7% state, 3% local nyc, 7.5% payroll

verdverm
There's a Yonkers tax in NYC, 9% last time I saw, for people who work in the city (Manhattan and maybe more?)
sushshshsh
Not sure of the specifics because I directly engage in not putting myself in this situation where I would be required to pay this tax ;)

I believe I've heard that anyone leasing or owning a dwelling anywhere in NYC would pay 3-6% of their yearly income depending on how much they make to NYC. On top of their rent/property tax of course :)

That is why many of us choose to live in Jersey City or Nassau/Suffolk county, where in exchange for a longer commute (no problem thanks to COVID-19 now) you pay less taxes and get a bit more air to breathe and less garbage on the streets.

As for living in Yonkers and paying the Yonkers local tax, well, I am not sure why anyone would live in Yonkers ;)

Spooky23
It depends on your circumstances.

If you own your home, generally speaking, by the time you factor property taxes, the NYC income taxes aren’t as crazy as they seem. Property taxes are 2.5-4x higher in surrounding areas.

The ROI depends on your specifics. Even in low tax locales like the South, people get surprised by things like food sales taxes and HOAs that are responsible for things like sewers.

brtkdotse
Right, so the employee will pocket 60k out of the 100k the employer pays? Are there any other costs for the employer?
sushshshsh
Oh got it, if it is a W2 job then in addition to the 40% paid by the employee, the employer needs to pay 7.5% to the government in addition to what the employer pays the employee. Most companies are paying people W2 so that is mandatory, but a few are paying them 1099 so it is not required in that case to pay that 7.5%.

And also for big corporations employers will pay health insurance benefits ranging 10k-20k per year per employee. But that isn't exactly as mandatory as the 7.5% tax I mentioned above. But for software engineers and white collar workers, that 10-20k is basically mandatory de facto, not but not de jure.