Comment by markvdb | Hacker News Reader

Comment by markvdb | Hacker News Reader

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Slightly off topic:

Something funny is happening in my native Belgium. Some people drop their fifth formal working day to become bicycle couriers, Uber drivers or whatnot in the "sharing economy". The reason is taxation regimes.

80% or 100% gross wage as a median income employee will hardly make any difference in net wage around there. A friend for example recently got a promotion from an entry level job (with tax discounts) to something more in line with her qualifications (without tax discounts). 600€ gross salary increase translated to 155€ net salary increase. All the rest got eaten by tax and social contributions increases.

Belgium combines high formal job taxes combine with a low tax scheme meant to formalise "sharing economy" jobs. These enjoy super low 10% taxation up to 500€ per month. Many people actually do the math. They switch to 80% formal jobs hardly losing any income. Some actually increase their income by becoming pizza couriers or Uber drivers in their 20% time...

UPDATED: corrected the net wage delta from 100 to 155€.

A gross to net calculation of a gross salary of 4000€ to 4600€ adds 250€ net in Belgium btw. 100€ is an exaggeration.

Triggered by your comment, I triple checked with the person in question. The difference was ~155€ net from 2000€ gross to 2600€ gross. I updated my original message accordingly.

Can you elaborate further? I'd be quite interested.

In the Netherlands the tax rate is 36% and then caps out at 52%. There's no scenario in which you will net less than 48% on an increase.

But, if you look at it from a more holistic perspective, there's not just taxes on wages. When you earn little you get rent and healthcare insurance subsidies. You lose these once you earn more, so there are income ranges where extra income leads not only to a tax rate of 36 to 52%, but also a loss of subsidies which can be the equivalent of a tax rate. The marginal net income can therefore be < 30 cents per euro earned.

But that isn't necessarily tax related. Further, there's some non-tax consequences that are left out of the story. (e.g. social housing subsidy is only possible for social homes, which you typically don't want to live in if you don't have to).

I'd be interested how it works in Belgium.

A few points make the difference bigger:

- Gross to net includes 13.07% employee side social security contributions. The state somewhat lowers those for the lowest income earners. This increases the gap.

- Progressive taxation. Under 24k gross, you pay 40%. Up to 41k, you pay 45%.

- A large part of the bottom 25% tax bracket is actually 0% (~9k tax free base).

- Local taxation (usually about 7%, but 0% in the richest enclaves) gets tacked onto the tax amount.

- Regional taxes are also progressive.

[0] https://financeinfo.be/belastingen/belastingschijven/

I did some calculations because it seemed strange to me.

  Gross | Gross New | Net Delta  | Total taxation
  2000   €2600         €155         31.00%
  3000   €3600         €262         38.00%
  4000   €4600         €253         42.00%

It is possible to pay more for an increase on the lower levels, but you will still pay a lower tax rate overall. Yes, taxes are high in Belgium but to add some nuance, you get a lot in return. (Free healthcare, free university education, pensions, social services, no capital gains tax)

Interesting, did you take these from a calculator? I'd love to see a graph of the marginal tax rate from 1k till say 6k.

Because here it seems from 2k, 3k or 4k, an extra 600 is taxed consistently by more than 50%, and sometimes even 75%. That's a very high marginal tax rate. I wonder if that's cherrypicking something and the x600 to x000 range looks better.

I also wonder what the taxes break down into, I think it's always good to separate pure taxes (going to the government for the public good) from various social safety net contributions (some of which go to a general fund for the public good, but some are also individually-accrued benefits by paying a monthly premium, e.g. unemployment insurance of your particular salary).

When making cross-country comparisons, I find there's a ton of apples to oranges comparisons like this, where taxes and other things aren't properly separated and just lumped together.

Another example: in some countries healthcare is arranged as a benefit on-top of gross income. In others healthcare is subsidised by 80% by the government, and paid for through a tax on gross income. It could very well be that compensation in both these countries is the same, but that the former looks like you're earning more because you get paid out more of your gross income.

For any earnings over 41.060€ gross per year, net is approximately 1/3 of gross:

- 13.07% employee side social security contribution. The ~35% of gross salary employer side social security contribution comes on top of this, so is not included.

- ~53.5% taxation. This includes national and local tax, but excludes regional tax.

Note that from about the top tax bracket, you receive no extra health, unemployment or pension rights in return:

- Health care is universal.

- Unemployment compensation is not limited in time. It has recently become degressive with time though, and it's capped at a relatively low maximum.

- Pensions are repartition based as opposed to individual capitalisation based, meaning current employees pay for current pensioners. They're also capped at a fairly low maximum.

Confirmed this is correct with an online calculator. Strange, you'd expect it to go up with a lower wage and not down!

EDIT: Ah, i figured it out:

  Gross | Gross New | Net Delta  | Total taxation
  2000   €2600         €155         31.00%
  3000   €3600         €262         38.00%
  4000   €4600         €253         42.00%

It is possible to pay more for an increase on the lower levels, but you will still pay a lower tax rate overall. Yes, taxes are high in Belgium but to add some nuance, you get a lot in return. (Free healthcare, free university education, pensions, social services, no capital gains tax)

wow, that taxation is horrendous. And I thought German wasn't too good (compared to whatever paradise I had in mind in scandinavia, france or whatever). To clarify: i don't really mean high taxation is the problem (I'm pro high taxation). I just think someone who earns 60% of the median income shouldn't pay nearly 50% taxes [numbers not representative, those come now]. If I can trust this calculator[1] then someone who earns 24k€ in Belgium has to pay around 40% in taxes (Germany: 30%). That's really tough. And here I am sitting in Germany waiting for my opportunity to protest that the marginal tax rate is over 50% for people above the average income (income class 1, single, between 3800 to 4500€/month I'd have to pay taxes of over 50€ per 100€ raise) but if you get above a certain threshold (especially after you don't have to pay any additional taxes for healthcare) you're good... as I said, compared to what low income earners in belgium have to pay in taxes, I now see that my complaints are negligible.

[1] https://www.icalculator.info/belgium.html

His friend is only paying 30% also:

  Gross | Gross New | Net Delta  | Total taxation
  2000   €2600         €155         31.00%
  3000   €3600         €262         38.00%
  4000   €4600         €253         42.00%

It is possible to pay more for an increase on the lower levels, but you will still pay a lower tax rate overall.

Wow, I can’t believe there’s such a harsh and early tax, I must surely be missing something? Why would anyone care about doing a good job? In Sweden you get to keep at least 450 of those 600.

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