No my main point is that people on here are reading into Rabois’ comments on quality of life issues at face value and not recognizing that his move out of state at this moment in time has to do with avoiding taxes on his IPO gains and not much else.
I moved out of state BEFORE an IPO on options gained while working in CA that I then purchased as a resident outside of CA. This does not work as others are describing it. CA did and will come after anyone who earned options while in the state.
You had ISOs or NSOs either granted or vested or both while in CA and those count as income earned in CA. CA will tax that income, even if you don't realize the gains until after you leave the state.
A VC is investing in a company, like any other stock investment. There is no earned income.
In summary, for normal people, taxes in the US come at federal, state and local levels.
1. Federal:
a) Income tax of 10% on income over around $12k (single) or $24k (married) up to 37% on income over $518k (single) to $622k (married). Capital gains tax is at the same rate for assets held less than a year but up to only 20% for assets held more than one year.
b) FICA, a wage tax. You pay for 7.65% for social security and medicare/medicaid on all wages up to around $133k and 0% above that.
2) State. This varies widely. Some states have no income tax, some states have income tax rates of as high as 13.3% (California). Most are around 5%. Each state has different deductions and rules. Capital gains is usually included in this. Most states (but not all) also levy a sales tax of around 4% to 8% on retail transactions.
3) Local. Most local taxes are in the form of property tax on real estate. The rates vary from around 0.5% to 2% of property value. Some towns levy a separate sales tax on top of a state one (if it exists). The real estate and sales taxes are used to fund schools, police, fire, etc. Many municipalities also levy fees for water, trash, etc. Some cities also have an income tax (for example NYC).
To give you an idea of just how complex it is, the US has approximately 11,000 different sales tax jurisdictions. And it's not just a matter of rates. What is taxed and in what context varies. For example, in NYC, food from groceries is not subject to sales tax. But food from restaurants is. Unless, I think the restaurant has no more than some minimum of seats and you orders your food to go. Some sales taxes can also vary by date (i.e. sales tax during summer, but otherwise none). There are also occasional sales tax "holidays" where no sales tax is charged.
Unsurprisingly, tax lawyers and accountants make good money in the USA :-)
San Francisco is not allowed to have a city income tax due to state law. It wouldn’t matter much anyways: it’s a huge commuter town (daytime population is double or more the resident population), so the base to tax is relatively small. The real untapped taxable value in the city is land wealth. Until Prop 13 allows the city to tax land equitably, it will be forced to try harebrained tax schemes on employers or sales.
Small nitpicks: The Medicare / Medicaid portion of FICA is 1.45% and uncapped, and increases by .9% over $200k.
FICA is also paid equally by the employer (.9% ACA add-on excluded), so it’s only an accounting gimmick that prevents it from being a 15% tax on income.
