I just read a claim that this is so; that European countries tax at a 70% income tax rate. Seems like a false claim to me. Anybody across the pond like to set things straight for me? Thanks.
I’m certain there is no European country where the top marginal income tax rate is as high as 70%. There are lots of countries (including Ireland and the UK) with a marginal rate in excess of 50%. However, this is the marginal rate; it does not mean that anyone pays 50% of their income in tax. A relatively high earner in Ireland might pay around 30%, when all the tax bands and credits are taken into account.
Edited: If you count the employer contribution, this would bring the total headline rate in Ireland to 62%.
I will just add that the top marginal rate in Canada (including provincial taxes which, for me at least. are somewhat larger than the federal tax) does push 50%. And 47% of the provincial budget is for medicare, plus a small part of the federal tax.
That doesn’t appear to be true. At least according to this.
LOL. Sure, I vote for 70% tax every election; doesn’t everyone in Europe?
False in the UK. Unless they are claiming that a high-earner tax band applies to everyone and everywhere?
Definitely not just income taxes. But total taxes - possibly.
Let’s take France - first, country-wide taxes:
Income tax: 30% starting at 27K Euro, 41% starting at 71K Euro (top rate 45% starting at 152K)
Cap. Gains Tax: whopping 34.5% (plus 2 to 6% for larger amounts, 50K Euro and higher)
Various Social Security Taxes: employee’s portion is between 18% and 23% of salary.
Wealth Tax: (on 1.3M+ Euro) 0.5% to 1.5%. Note: this is on your total assets, not on income.
RE tax: 0.2% to 1.7% of the value of the house. Usually around 1% for primary home.
For those not owning real estate, there is renters’ tax.
Value Added Tax: 5.5% on food/books, 10% on tickets to sports/cultural events and a whopping 20% on almost everything else.
So if your gross is 100K, after SS withholding let’s say 80K, after income taxes maybe 55K, after RE taxes 48K, and after VAT around 44K. If you have any substantial assets (I wonder if a paid-off house counts), or if a significant portion of of your income comes from cap gains, probably 5-10K euro less - so 35K to 39K.
And that’s just country-wide taxes. There are also local taxes. Not sure what they come to.
So - 70% is possible, as the upper limit. Even for a reasonably low (100K Euro) gross income.
For a single person employee, the top UK rate of income tax is 45%, for earnings over £150,000. Everyone gets the first £11,500 free of income tax, the next £22,000 is taxed at 20%, and the band up to 150K is 40% There’s National Insurance on top of that, but that’s a bit too complicated for this time of night. Essentially no-one earning is paying anything like 70% of their income through payroll taxes.
There are some complications for low-earners though. There are various in-work benefits for low-earners, but the tapering off of those benefits as eg number of hours worked increases, can lead to - effectively - very high marginal tax rates.
The highest marginal tax rate in the US is well over 45% if you count both federal and state tax.
Whatever the tax rate may be, the second part of the OP “…because of healthcare” is certainly wrong. There is no evidence that healthcare systems funded out of general taxation lead to out-of-control spending and consequent high tax rates. European countries spend less than half what the U.S. spends on healthcare, yet enjoy higher life expectancy.
(see the bar graph a short way down the article)
And yet the top Federal rate alone was 70% when Reagan took office.
If you’re going to count capital gains taxes as a separate tax, then you’re double-dipping to count both income taxes and capital gains taxes. Income from capital gains isn’t simultaneously subject to income taxes and capital gains taxes.
No, but cap gains (at least at lower levels) are taxed higher.
The contention was that Europe has a 70% tax rate just to support health care. Seems patently false.
If that was true, and since there are government expenditures other than for healthcare, you’d need a 100% tax to support it all.
Careful there. Americans are used to something which would be unacceptable in other countries: double taxation for the same concept. In those countries in which the tax for one concept (say, real estate, or income) is assessed at the national level, there will not be another one for the same concept at the local or regional level, and if a tax is collected at the local level it will not be collected at the regional or national level, and one that’s managed by the region won’t be touched by either of the other two. Any local taxes over what you already listed for France will be things like the “water fee”, which isn’t a tax, it’s your locally-managed utilities. I know people who call anything collected by any level of government a “tax”, but they’re misspeaking.
Well, I would just point out that you have applied income tax and capital gains tax to the same income; that’s not right. The calculation also assumes that the taxpayer is single, lives alone, pays no alimony, has no dependants and doesn’t have a home mortgage, all of which is possible but would make our hypothetical taxpayers somewhat unusual. You have failed to claim any of the available deductions in respect of earned income, which typically amount to something like 10% of earned income.
The employee’s social security charges in France typically max out at 8%; the higher rates you quote are generally payable only by those who reside in France but don’t pay income tax there, so can’t be applied along with French income tax rates.
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Well, I would just point out that you have applied income tax and capital gains tax to the same income; that’s not right. The calculation also assumes that the taxpayer is single, lives alone, pays no alimony, has no dependants and doesn’t have a home mortgage, all of which is possible but would make our hypothetical taxpayers somewhat unusual. You have failed to claim any of the available deductions in respect of earned income, which typically amount to something like 10% of earned income.
The employee’s social security charges in France typically max out at 8%; the higher rates you quote are generally payable only by those who reside in France but don’t pay income tax there, so can’t be applied along with French income tax rates.
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According to this, an average French worker pays 57.5% of their salaries to the state in various kinds of taxes (which, if you note, is about what I calculated above).
Since that is the average, and I am sure the lower-paid ones pay less, there are quite a few who pay more. 70%? Could be.
The average US taxpayer pays 31% of income in state & local and federal income plus SSI and Medicare. You should probably count the other half of SSI and Medicare that the corporations pay in your name (and add it to income in the denominator). This doesn’t count local property and sales taxes which you should do of comparing to total taxes for a European. That will vary all over the place. In addition to be fair if you’re talking about a tax to support health care, you should count both parts of health insurance premiums as a “tax” again adding the employer portion to income in the denominator. It’s possible the unemployment tax that corporations pay on your behalf should be counted similarly.
Why? Employers pay huge $ into Social Security for the employee in France, but I didn’t count that as the employee’s tax burden.