Every time someone bloviates about “free” healthcare in another country, I encourage them to compare tax burdens. I can buy a lot of healthcare and college with the difference.
I had thought that, not having paid much attention between the two countries as Death and Taxes are inescapable no matter where I'm working.
The numbers don't stack up as you think...
Income Tax (residents) Australians are taxed at a tiered individual income tax rate that ranges from 0% to 45%.
Americans are taxed at a tiered individual rates between 10% and 37%. Unlike Australia there is no initial tax free threshold.
Additionally, most American states also impose a personal income tax which varies between states. Typically the state tax rates are under 10%.
American Income taxes are generally (but not always) higher for ordinary and low income people. High income tends to work out much the same.
Social Security Tax RateAustralians are not taxed separately for Social Security.
Americans have additional social security taxes, which is payable by both the individual (6.2%) and their employer (6.2%). There is a cap on the maximum wage that is subject to this tax each year.
Americans pay a tax that Australians don't.
Income Tax SummaryGenerally, the US offers much lower income tax rates, when you add up the various taxes on income there may be a small margin in favour of America for high income earners, but for ordinary or low income earners there is usually a disadvantage.
Government Provided HealthAustralians are taxed for a medicare levy on all of their income, unless they are under low income rate thresholds.
The medicare levy rate is currently 2% of taxable income.
High income earners are also charged a medicare levy surcharge, unless they have appropriate private health care coverage. The rate of medicare levy surcharge is between 1 and 1.5% depending on the individual’s taxable income level.
In Australia many medical services and public hospital services are provided free for all Australians under the medicare system. This is what the medicare levy and medicare levy surcharge tax levies pays for.
Military don't pay Medicare for themselves (part of the job package) but do pay for spouse and dependants.
America also charges a medicare tax on all individual income.
The rate is currently 1.45%, plus employers are required to withhold an extra 0.9% medicare tax when an individual’s wage exceeds $200,000 in a year.
Unlike Australia, the US does not provide universal health care for its citizens. In the US each individual is responsible for funding their own health care. This means that instead of the medicare taxes going towards a general public funding pool for universal healthcare, they go towards your Medicare Hospital Insurance for when you are a senior. Medicaid is available to help support low income earners.
Again, slight advantage to American high income earners.
No advantage, and usually real disadvantage to ordinary or low income earners in America.
Depending on where you are in the salary stakes, advantage to Australia.
Health Insurance Australians can choose to pay for private health insurance, which covers private health care as well as services (elective, non-life threatening) that aren’t covered by medicare. High income earners will be exempt from the additional medicare levy surcharge if they take out private health insurance with adequate hospital coverage.
Americans are individually responsible for health insurance (most employers do provide health insurance coverage) in order to get their health care services covered, or partially covered, by their insurance provider.
Medicaid is available to assist low income earners to access free or reduced cost health care.
Advantage Australia.
Sales TaxAustralians pay the same sales tax (Goods and Services Tax - GST) across the country, and it is in the asking price of an item. GST is a federal tax charged at 10% on most goods and services. Basic essentials are exempt.
American sales taxes apply on most goods and services, and these are levied by the various state governments. These taxes range from 0 to 13.5%.
In low tax states, advantage to Americans, most other states the advantage goes to Australians.
Income from your retirement fund - terminology Superannuation = 401(k) Australians are taxed on superannuation income streams and lump sums is taxed differently depending on whether you have reached the preservation age (60 years old), and the type of super income stream that is paid.
Australians over preservation age (60yo) a retirement benefit from your superannuation fund is tax free, and there is a 15% income tax deduction.
The Australian Old Age Pension forms part of taxable income, however if you have no other income then your pension won’t exceed the tax free threshold.
Americans with income stream from any 401(k) plan, social security or pension are taxed depending on your income sources and overall level of income. There is no preservation age so no real (Federal) tax breaks.
Advantage to Australians.
