Ok, this probably falls under things that I think are interesting, but am not sure if anyone else does.
Over here at least the United States is considered to have the following features compared to the UK:
- lower taxes
- reduced public services
- higher salaries
- lower cost of living
Now, I suspect that some of this is quite variable, in particular some things will be dependent on the exchange rate and others on location, and personal income. But, I thought I’d investigate the extent to which the first would be true for me if instead of living in Blighty, I lived in America.
I’m assuming that the exchange rate is £1 = $2, and that I would have had exactly the same income in the US as I enjoyed in the UK last year. Since Americans have state taxes as well as federal taxes, I needed to pick a state.
I live in a not very fashionable or exciting city somewhere vaguely near in the middle of the country. So, I reckon a comparable place would be a fly-over state, and since my alter ego in the US is rocketc who last year lived in Wisconsin (he’s since moved to Colorado), I’ve decided to pick Wisconsin. I hear it has good beer, so that’s a bonus.
I used the 1040 to estimate the federal income tax. I stuck just to my salaried income, and assumed that I would have made the same level of contributions to a 401(k) as I actually made to my work pension. This gave me a federal income tax of approximately $7,500 (so about £3,750). The FICA (like NI) contribution was calculated as about $2,250 (£1,125), and the Wisconsin state income tax as $2,800 (£1,400).
My actual UK income tax last year was around £4,500 ($9,000) and my NI (like FICA) contributions were around £2,400 ($4,800).
People quick at arithmetic will note that my tax burden would indeed be lower in the US (as represented by Wisconsin) than the UK. It turns out to be approximately £50, or $100, lower.
Now my big caveat is that my UK taxes include access to very comprehensive health care provided by the NHS and I’m not sure what a typical health insurance premium would be. If anyone could give me a vague figure for an HMO plan in WI I think that would make a reasonable comparison.
I have to be completely honest and say that if I was offered an extra £50 a month to live in Wisconsin, I’m pretty sure I would turn it down. America, nice country, but I prefer to live on the right (hand) side of the Atlantic. But still, I thought it was interesting.
- would you move for a lower cost of living?
- baby boomer with no pension: find out your current position
- planning for retirement: pensions vs buy to let part 2