Taxes

Not only does Hong Kong have a lower income tax rate, they don’t have sales tax either. It’s the only place I’ve met American born non-Americans.

Jack’s comment raises the point that Cecil analyzed only Federal Income Tax – not sales tax, Value Added Tax, state income tax, city wage tax, etc. Does anyone know how the comparison would look if all taxes were included?

Link to the column: Does the U.S. pay less in taxes than elsewhere in the world?

When you get down to the level of including sales taxes, property taxes, estate taxes, gasoline tax, etc., comparisons become meaningless. There’s just too much complexity. Consider that gasoline (petrol) costs three or four times in Europe what it does in the U.S., and how do you factor that in? Some countries have “wealth” taxes or “asset” taxes, not based on income but based on accumulated net worth. So, you can make up examples where this person or that person would pay more in country A than in country B, and it becomes pretty meaningless. The biggest tax is the tax on income; the others can be thought of as cost-of-living differences, and that’s another topic.

My understanding is that the tables that Cecil showed in his column did NOT include state tax in showing the top marginal rates, but DID include an “average” state tax in calculating the average pay remaining after taxes.

I just might have something to say, but first just what is an American born non-American?

California state tax tops out at 8.9%

Social security is really more than 7.6% because your employer also kicks in 7.6%. I do not know if it works that way in others contries or not. I also don’t know if there is an equivilent to state tax in other contries.

Aren’t taxes at their highest peace time rates in the history of the country?

When I was doing Income taxes, we had a chart from Price-waterhouse or somebody. It showed Total tax burden, as a % of comparative income, amoung the 40 “industrailized nations”. Now, this was in the late 80’s, but it showed the USA at #39, and Turkey @ #40. So, overall, counting all taxes, we are pretty low. I do not know if Hong Kong was on the chart, tho.

I knew this column would cause discussion.

I’m guessing it’s someone born in America who is now a citizen of another country.

From this British government research (PDF, 196k) on income tax comparisons:

Tax less cash benefits as a & of gross earnings, 1999

Based on a single person and single-earner couple with two children where the employee is receiving the average wage for a manual worker in manufacturing.


Country        Single person         Single earner couple
US             25.9%                 18.7%
UK             24.6%                 16.7%
Australia      25.4%                 15.5%
France         27.6%                 15.0%
Germany        42.0%                 20.9%

The UK has a Value-Added Tax (VAT) of 17.5%. Australia has a Goods & Services Tax (GST) of around 10% (IIRC).

I took it to mean that he got it bass-ackwards and meant to say “‘non-American-born’ Americans” (or something like that) – implying that they aren’t Americans, but have that true American spirit for low taxes.

BTW, wouldn’t the tables be more useful if they were sorted by something other than alphabetically by country?? Maybe tax rate? It’s a bit hard to see how they rank…

Interesting that Cecil ends this article by saying, “Compared to other developed countries, we don’t pay much in taxes and we don’t get much” yet immediately before that he said, “many economists believe that relatively low U.S. taxes, and the comparatively low cost of doing business in the U.S. overall, explain why the U.S. has had the most dynamic economy of any major developed nation over the past decade, without the sluggish growth or double-digit unemployment that has afflicted other countries”.

Seems odd to call a dynamic healthy economy “not much”.

I guess I should have explained this better in my OP.
I was referring to people who were born in the US and therefor US citizens who had chosen to renounce their citizenship. This was before the Chinese take over. I don’t know if they remain in HK, but their sole reason of becoming non-Americans was to free themselves from the heavy tax burdens.

By the way, do you know that the US is the only country (that I know of) which taxes citizens who live overseas.
In most other countries, citizens living overseas are tax exempt.

If my -very- limited experience with the multi-layered VAT’s and GST’s of Europe and Canada is any sign, in most of the USA you still make out better tax-burdenwise.

Also, I wonder if the threshold income at which you become liable for US Federal Income Tax is itself relatively high if compared with other major countries. I suspect it would be.

But the society doesn’t get that in exchange for the taxes themselves but from the low rates.Also, the “much” that “we” don’t get includes things that may not be the best for the economy (generally involving large national centralized bureaucracies)
jrd

<< Social security is really more than 7.6% because your employer also kicks in 7.6%. I do not know if it works that way in others contries or not. I also don’t know if there is an equivilent to state tax in other contries. >>

Yes, and in fact the medicare part of social security is not limited by a ceiling. The tables that Cecil used were simplifications, designed to show the impact on employees of the various taxes. The two other elements that would give a rounded picture of the financial structure would be the taxes on employers; social security taxes in many countries are shared fairly evenly between employee and employer, but there are many notable exceptions (some where the burden is almost entirely paid by the employee, like in Chile, and some where the burden is almost entirely paid by the employer, like in Singapore. However, the question was not about where governments get tax from, but on the impact of tax on the individual.

The other aspect that could be considered is the cost of living, which would include VAT and sales tax and related costs. However, that’s a different topic as well.

And yes, Jack, the U.S. is the only country that taxes citizens regardless of where they reside. Every other country taxes people based on residence only.

Matt: << Tax less cash benefits as a & of gross earnings, 1999 >> I couldn’t link to the page you set up, and I have no idea what this means. What is “tax less cash benefits”?

[Edited by CKDextHavn on 12-02-2000 at 10:32 PM]

>However, the question was not about where governments get tax from, but on the impact of tax on the individual.

To say that the cost of employing you goes up because of taxes does not impact the individual is wrong.

If I am running a project and I have a budget of $X to hire people with. The full 15.2% social security is how much is costs. If it cost 7.6% less I could hire more people or hire better people by paying them more.

To say the burden of social security is shared between your employer and you sounds very egalitarian but it is just an accounting trick.

Pardon me while I go into full rant mode.
I think that it is very bad to have these sorts of hidden and complicated taxes because it disgiues the true cost of things. Were are having a long debate about what the tax burden is. We should be able to know what our taxes are so we can have informed opinions on what the cost of things are. It is easy to say lets spend a lot of money on this or that thing. It is different to say lets spend this much of your money on this or that thing.

I would quote directly from the PDF (link can be found at this page, under number 00/65), but unfortunately Acrobat isn’t working for me today. My guess is that they mean income tax less government cash benefits such as social security payments. A couple of the countries mentioned had negative figures, since the benefits receivable by the example workers outweighed the income taxes payable (I think the Czech Republic was one).

Actully, up to around $75,000 (don’t remember exact figure) is exempt under the foreign earned income exclusion. Helped me a lot when I lived in Japan.

There are things called “tax treaties”, which decide to whom & on what you pay your taxes if you are an individual. I know there are some other counties that do, as the USA, tax their Citizens who are not residents- but that is not common. However (in the USA), if you are taxed in another country, you do get credit for that tax vs your US taxes- thus you would only owe US taxes oif that nation had LOWER taxes than the USA- which as the chart shows, is not common amoung industrial nations. However, in many case, becuase of these tax treaties, a US citizen, who is not a full time resident of another country, would only owe US taxes- which would be cheaper.

I know of no other country which taxes their non-resident citizens, and would be happy to hear of specific examples. The real difficulty with the US is that non-resident citizens are required (under pain of stiff legal penalty, up to and including jail terms) to file US tax forms each and every year, regardless of their tax burden. Sure, I may not have to pay US taxes while living in Canada, but I do have to file the stupid US tax forms, which before the web, were often almost impossible to even get. And don’t even talk to me about the difficulty of getting anyone from the IRS on the phone! I have to call Guam, since all of the published numbers are 800 ones only available from the USA. The people in Guam don’t return calls either.

The US already taxes non-resident non-citizens who do business in the USA, why don’t they just do the same for their non-resident citizens?

I wonder what the amount collected by the IRS is for non-resident citizens? Should I be demanding better consular services? Should we open US consular offices in Spuzzum, BC with all the extra cash income?