European and American Tax Perspectives

Great Debates
1

Based on a discussion here:

This thread

I wasn’t asking whether Europeans would be ok with the American system, cause I know they oppose it (from lurking and reading threads by Europeans here), my question is do they like their current levels or seek something leaning more towards “socialism” or higher taxes than currently?

As far as the US goes, I believe lowering taxes without lowering spending, like Bush is doing is actually creating a greater burden, all that debt has negative effects now and especially in the future, making more of our national budget be used to pay debt, and eventually requiring higher taxes for less services because of debt.

But I think some Europeans underestimate US tax levels by looking at only the Federal level. Everyone in the US has to pay Federal Income, Federal Social Security and Medicare, etc (which is listed seperately), State Income tax (maybe), State Property Tax, State Sales tax, local income tax (maybe), local sales tax.

Our system obscures how much we pay I think because of this. I live in a big city Denver, which does have local income tax and sales tax.

I went back to college for 2004, so I don’t have any example total tax for that year, but looking at 2001, medicare and SS tax together are almost exactly equal to my income tax withheld. After filing my return, Medicare and SS are surely higher.

7.7% SS and Medicare
9.4% Federal Income (this isn’t the tax rate itsef, since that is after deductions)
3.2% State
Miniscule local

2.5% Sales Tax State
3.5% Sales Tax City
1.2% Sales Tax Other (cultural facilties district, etc)

If 75 of my spending is taxed that gives:

5.4% Sales Tax

25.7%

So you can see Federal Tax levels aren’t the whole story, for 2001 I was in the lowest bracket so anyone else, would have a higher level except people without a city tax.

That is just for some perspective on the whole of taxation in the US.

I think its important to know this, as if the US had say a 50% federal tax we would have a higher tax than that in total because of state and local.

I’m not sure what this debate was about, I would be it in IMHO cause it is about perspectives on tax. I used to be a libertarian so I still have that voice in my head saying “tax is evil, tax is evil.” I wonder how the federal (i.e. local state and federal powers) system affects peoples opinions of tax here.

2

The irish tax levels can be found at http://www.finfacts.com/taxfacts.htm#incometax

I pay 20% on the first €29,400 and 42% on the balance.

When credits are taken into account 18% of my monthly wage was taken as tax last month.

I get a year tax relief on my rent which I get in the form of a cheque for ~€280 and can claim tax back on medical visits over sometime like €300 a year.

We pay VAT value added tax on most goods. Unlike the US however the price shown is the price +tax. We never have to calculate tax in shops etc.

http://www.mazars.ie/initial/cms/php/workflow.php?queryType=3&item=news&itemId=123

3

British tax Rates from the depths of my memory:

Income Taxes (for single bloke):

0-£4800 ish - Nil

£4,800 - £35,000 ish 23%

£35,000+ 40%

National Insurance (in theory this is for the welfare state and health - in reality it just goes in the pot with everything else)

10% on everything over about £50 pwk.

Sales tax:

17.5%, not levied on food, childrens clothes and books and newspapers.

There are specific taxes on things like alcohol, petrol and tobacco - which is why they’re so expensive, also it is £150 a year per car on the road and £110 pa for a TV licence.

Local Taxes:

Council tax is based on the notional price of your house and varies depending on the political complexion of the council where you live - for instance I live in the cheapest place in the country - If I lived 30 yards further down the road I’d pay another £1000 pa.

There are also all kinds of penny ante taxes - eg £5 on an airline ticket

Also all property sales over about £100,000 attract a tax of 4%, and there’s a tax levied on property handed over in a will if te value of the estate is more than about £250,000 (which everyone’s is if they own a home and have a life insurance policy).

It is reckoned that we work for the governement until the 1st of July - only after tha do we keep the money we earn.

4

I think the real issue is visible vs. hidden taxes and centralized vs. distributed.

If each American were presented with one big tax bill for which we had to write a check once a year, there would be a revolution. Instead, we get the equivalent of the death by a thousand cuts. This enables various government entities to incrementally add to the tax burden without much scrutiny - and to waste money on absurd, fraudulent and porky things.

5

Many thanks for considerately complying with my request, MindWanderer.

6

On to the actual perspective question.

Brainglutton asked what level of taxation I would consider to low. George Washington’s 1% tax is the minimum I could see, and that is for a frontier land where the government really can’t help their citizens much anyway. Federal tax at a time like that should only support those things that can help an entire nation centrally. Today my minimum would be 10% or 8% if we keep state taxes at the levels they are today, with the exception of Property taxes which need some serious relief.

Americans, Europeans? Is there any level of taxation which you feel would be wrong for the government to collect, I mean an actual percent not a calculation.

Every time I think of people who favor more taxes and more programs I really wonder where they want to stop, so my second question is beyond universal healthcare, welfare, military, police, school and other commonly accepted functions, what else would you spend your tax money on?

Just so everyone is clear, I’d characterize myself as a very moderate libertarian, in the past I would say Republican but they have completely fallen off those princibles today. There isn’t really a name for my position from what I’ve seen. Low, but not too low tax, some safety net, but not huge safety net, and I would educate people more about fiscal responsibility and money management in the schools. Small to medium sized military, judiciary remains the same, and I would have a budgetary policy like colorado has which limits the extent that they can run a deficit (except in time of war which is irrelevant to states obviously). And to avoid abuse of the war clause, I would prevent the president from having a de facto war without congresses’ consent.

7

Just a small (7.65%) nitpick: A US employer also contributes that same amount. The Federal government takes 7.65% from your paycheck and the employer pays the same amount - hence FICA taxes are 15.3% for those earning under +/- $90K.

(Whether you consider that additional 7.65% contribution as a business employment tax that is worked into the cost of the finished product - or an artificial supression of your individual wages is entirely up to you).

8

You need to define all of these much more specifically before you could hope to come to any definite figure. What does ‘universal healthcare’ really include? IVF? Post-car-crash plastic surgery? How about schooling - what should be obligatory, and what should be axed? And that’s avoiding the tricky subjects of police & military…

It’s wrong and silly to try to state an overall figure of one’s income that should be taken in tax. Firstly, as has been pointed out, none of us really know what we pay, so we don’t know what we’re comparing. Secondly, determining a flat percentage against income is, in itself, an idealogical statement. Thirdly, Opal will explain.

9

I just think that it is very easy to come up with a continual slippery slope of tax increases. Thats how it happened in the U.S., and at one point in time, the top tax bracket in the US was I believe 91%.

I don’t care who you are, 91% is absurd. It only ended in 1963. This is marginal tax, but tax at that level acts as a devaluer of innovation, why start a company if you know once you suceed at a certain level 91% of it will be taken away. Taking the risks you would under normal taxes is no longer advisable for that level of top tax rate.

Tax cite

10

The same reason you’d start a company knowing that once you succeed at a certain level, 40% of it will be taken away, or 15%, or 1%. They’re just numbers, and so is that “certain level” where it kicks in. If the 91% tax rate only applied to personal income over $500 trillion a year, would anyone really care about it?

Personally, there is no percentage of taxes I feel is “too much” - what matters is how my lifestyle is affected by paying those taxes. I’d be happy to pay 100% of my income in taxes if it meant I’d able to get all the goods and services I enjoy today, and more, for free. By the same token, I wouldn’t want to pay 0% of my income in taxes, because that would mean the roads would go unmaintained, there’d be no police or fire department, etc., and the money I’d save in taxes wouldn’t be enough to provide those benefits for myself.

11

At a purely practical level there is “too high”. It is the experience of Britain and several other countries with quite high taxation that the tax take (especially on income tax) actually increases if you reduce the tax levels as people don’t go to so much effort to avoid and evade it.

We have had tax levels of 98% in the Uk - for purely idealogical reasons - and it collected next to nothing, now that our tax rate tops out at 60% people are happy to pay it. (well perhaps “happy” isn’t the right word).

I think that there is no “right” level of tax - but what people feel is that they want to see the money spent. In the current election a powerful tool against the current governement is that taxes have gone up and people don’t precieve an improvement, so they feel they are over taxed. If they felt that they were getting value for their money they’d feel happier.

12

There are some sites out there which compare tax levels more or less fairly (including most regional and otherwise hidden stuff) and this puts for instance the US at an average of 25% and the Netherlands at 38%. These are the only two countries that actually decreased their taxes over the last 30 years (albeit by a small margin, hardly more than one percent), but few other Western countries, if they did go up, went up by more than a few percent either.

But I fully agree with you, Mr2001. It’s all a matter of determining whether you’re better off dealing with something on a national level, communal level, or individual level. And there, ideological and economic reasons are the ones that have to decide what’s best given the circumstances.

13

To enlarge on Owl’s list ,these are the actual UK income tax rates.

Up to £4,895 = Zero

Next £2,090 = 10%

over that and up to £32,400 = 22%

Then the rest = 40 %

Regarding VAT there is a special 5% band charged on (natural) gas and electricity for home energy use.

14

See this is what I don’t get. The Government when it provides services like that doesn’t offer choice, so under the scenario you like, everyone would get the same thing, or an amount based on how many children. So X amount of bread, y amount of this, no steak, none of this, lots of that.

Money is a resource used to allow you to make choices about what you value more. If it all goes to the government and they give everyone “services” and goods, there no longer is choice in life, except the hope that you could change your government (which is impractical on any large scale, this is probably why small communes, can work, change is easier in them.)

I would never want to live in a country where I got alloted allowances of everything. Its the same reason I wouldn’t want to live soley on welfare. You really are just a number to the government then.

The other thing, is it seems you and the others in this thread supporting any and all tax rates believe that the government will automatically do everything well as long as it has a mandate from the people. You have a huge amount of faith in your government from my perspective.

Once you have 100% taxation, government has a easier way to get rid of many civil rights, by threatening that you will have no food if you speak out against them. 100% taxation also tends to support a minimalist set of services. If not everyone gets to go to college than no one will, because “thats not fair to have them get more”. If you think the US would keep its wealth under a conversion to a 100% tax system I don’t know what to say. Immediately, many people would start changing jobs to find shorter hours of work. If there was an extra stipend per child, reproductive rates would increase.

I don’t believe it is possible for government to provide us everything. Its funny how the more taxation there is, the more benevolent the government is seen for “providing” us with things when in fact it is just the tax money that would allow us to have at least some of what we want which is being taken from us. I’m staggered that someone would suggest they’d enjoy 100% taxation and 100% government services.

15

bah… you amateurs

Now in Denmark we know how to tax a man properly.

We pay:
Church tax: 0.7%
Brutto tax: everybody: 8%
Low tax level: for income over $4,500 (annually): 45%
Medium tax level: income over $33,000. 6% extra to: 51%
High tax level: income over $49,282 15% extra to: 66%

Then there’s property tax at 2-4% of property value annually. TV/Radio tax at $380 annually. A car tax you have to pay annually - I pay around $700 if I remember correctly. On top of that we pay 25% vat on everything. Every-fucking-thing. And on top of that there’s a whole bunch of special taxes on hundreds or thousands of specific items. Cars for instance are taxed by 400%. When you buy a car in Denmark you pay for four. Petrol costs around $1,6 / litre ($35 / US gallon). Water and electricity is very expensive. There’s special heavy tax on, just to mention a few: tobacco, wine, alcohol, beer, chocolate, sugar, CDs, coal, coffee, the, batteries, poison, plastic bags, tires, electricity, gas, plastic cutlery, water, light bulbs, fuses, ice, fertilisers, almonds & nuts, oil, mineral water, soft drinks, CFC, HFC, PFC, SF6, PVC and ftalases, sand, stone & gravel, antibiotics & growth hormones and a whole bunch of stuff I don’t know what is in English. Also we pay 1% pension tax. And I’m sure there’s another whole bunch of taxes I forgot or never heard of. Of course it goes without mentioning that companies are taxed pretty heavily too.

16

Il buono, il brutto, il cattivo: The Good, the Bad and the Ugly.

Does this mean you have a specific fund for acts of evil? Does this explain “Barbie Girl” by Aqua?

17

Don’t be ridiculous. Of course not. Acts of evil are not hidden away in some obscure fund, it’s part of the state’s core business.

18

Gods!! Its a wonder you have any money left over at all. Well, I’m sure the people of Denmark are happy with that level of taxation and the benifits they derive. If I had to be ‘poor’, Denmark sounds like the place to be.

There would be riots over here if someone tried to do some of that stuff. 400% tax to buy a car? $35/US gallon?? 25% VAT on everything? And tax rates that can go as high as 66% on top of that? Woof.

-XT

19

Thats just harsh!

20

Denmark is an example of why high taxes can be counter productive (as is the UK). For instance we regularly go to France for booze and Belgium for fags (and these are freely (but illegally) available in your local pub). I imagine this is even more the case for the Danes as they are already on the continent (poor sods).

Once a tax becomes worth avoiding - people find ways to avoid it.