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Taxes and Taxes
Over the years, various commentators have made various tax comparisons between the United States and European countries on the amount of taxes that are paid, or the tax rates that are paid. Unfortunately, most of the comparisons are anything but "apples to apples" comparisons. For example, regardless of what the various tables say, U.S. tax rates on personally earned income range effectively from 0% to somewhere above 50%. A self-employed person who lives totally on cash, with an income below $20,000, who doesn't report income can often get away with paying no taxes [yes, I know it's illegal, but it still happens]. On the other hand, an individual who makes, say, $450,000 in salary and lives in New York City might easily pay more than 40% in taxes and have a marginal tax rate of close to 60% when one includes FICA, state and local income taxes. And those rates are actually higher than those in many European countries that Americans consider "high tax."

How does this happen? First, because the United States is a federal representative republic, the states can levy income taxes, and in some states, such as New York and Maryland, so can local jurisdictions. That means as much as 8% - 10% on top of federal income taxes. Add to that FICA, which can amount to 17% on approximately the first $100,000 of income earned by self-employed individuals [which averages out to more than an additional 4% on $400,000 of income].

Then add property taxes and sales taxes on top of those.

Canada has provincial taxes, but from what I've been able to dig up, most European countries don't have the equivalent of state taxes, but a number do have the equivalent of FICA/Medicare taxes. Some include that in the individual income tax rate. On the other hand, in places like France, they also have occupation taxes [paid whether you own or rent property] and "wealth taxes" based on net worth, which are also paid annually.

According to an Australian study, Australia has the highest rates for high earners, but the USA isn't all that far behind if you factor in state taxes [unless you live in one of the few U.S. states that doesn't have an income tax].

At the same time, the United States now has the highest tax rates in the world on corporate income, not that many corporations are likely to be paying much of it after deducting last year's losses.

All told, there doesn't seem to be that much difference between those so-called high foreign tax countries and the United States, not in terms of the tax rates. What the taxes are spent on, though, is another question, and one that would take far more space and time than I have at the moment.


Comments:
Were you trying to make a point here?

Was it just a case of bleating about not being able to get by on your $450,000 a year?? :-)

I also think tax avoidance doesn't only apply to those earning low wages and getting cash in hand!
 
No... and I certainly don't make that kind of money. I picked that number because it's thought to be the threshold of the "very rich" in the USA, in essence the top 1%.

Tax avoidance occurs at all income levels. People just tend to get far more incensed when those who are rich do so.

My point was simply that tax stereotypes are just that...
 
I suppose stereotypes can be urban myths, sometimes? :-)

I would like to know what percentage of total tax avoidance is made of the top 1% of earners though?

Madoff et al have shown what capitalism brings, also the attitude of the people who think they should get a bonus even though company has gone bust.

Wealth redistribution can possibly give a decent life to all, rather than let a small percentage of the population live a ridiculous lifestyle.

Maybe a return to fiscal probity where people don't get sucked in by the marketing and live off credit but live to their means.

Payment of taxes obviously part of this, so that society can be fair for all.

It'll never happen of course, due to the inherent greed of mankind and the amoral nature of a few, about 1%?? :-)
 
Interesting that you oh so subtly equate all high earners with amorality. Do you know them all? Is that any better than equating all poor people with laziness? Or are all middle-income American's the ideal?

Madoff shows what selfish ethics will bear as fruit. Madoff-type parasites have existed in every economic system that mankind has created, even the socialist paradises. Bonuses during tough times have nothing to do with capitalism but more to do with poor management. Do you think management doesn't exist in socialism or communism? Do you think that the "management" of Cuba has the same lifestyle as the common citizen?

As for fair, is it fair to take by force? Obviously you think so, but I'm not so sure it's that simple. The demagogues of both sides would love for people to settle for simplistic answers.

Note, I'm not even close to being in that upper 1% but I do believe in making my redistribution personal instead of institutional.
 
Ian subscribes to the myth of wealth redistribution. How can anyone believe that you can rob the rich and distribute the money to the poor for more than a few years? After that, there are no rich left. My second point is WHY should there be wealth redistribution? How many poor people do you know? And how many of them are poor due to their own choices and decisions? In my experience (I grew up in a very poor rural county), most poor people who stayed poor were irresponsible, lazy, unthrifty (any time they had money they spent it on toys like big TVs, snowmobiles, boats, etc.) So, why do they deserve any of my wealth? (I worked my way from poverty to being a physician, and I was thrifty and saved most of my earnings instead of going on expensive vacations or buying a million dollar home.)

The urge that some people have to level outcomes regardless of the traits and qualities of the persons just baffles me. Why does a lazy poor person deserve more wealth while a hard-working rich person deserves less wealth? We already have highly progressive income taxes that take disproportionately more money from the upper middle and upper classes.

A poor person in the US lives better than the average person in the world. A poor person in the US today lives better than a middle class person in the US in the 1920s. The biggest health care problems of our poor people are related to obesity and smoking. The typical poor family in the US has more than enough food, adequate shelter, clothes, a car, and at least one TV connected to cable. Why do we need to rob the wealthy to give them more?
 
I think that it is a weakness in society that those who have resources tend to use them on things that many would consider frivolous (million dollar homes, expensive cars, etc...). Demagogues and others that would profit from destabilizing the society benefit from that weakness.

If it was an embedded ethic such that those with resources felt obliged to help those without, we might not have the movement to force the rich to help. Given the choice between noblesse oblige and taxation, I'll choose the former.

As for those who are poor, I've been there and seen the same demographics. Many of those who are poor are there for poor choices. However, I wonder how much is due to free will, nurture, nature or opportunity. Is it knowing self-sabotage, lack of training, lack of ability, or lack of opportunity? All of those exist and must be dealt with differently, which is why I disagree with wealth redistribution as a blanket answer to society ills. I also disagree with those who say that the poor are where they belong. Some yes, some no, and some could benefit from help.

There is no substitute for intelligent human compassion: helping when needed and withholding when not.

As to those who are high earners, I really don't think that many of them deserve their high pay. Does a anesthesiologist deserve $1000/hour for his work? Does a CEO deserve tens or hundreds of millions per year? Perhaps they deserve hundreds of thousands, but I struggle with the justification for their current salaries.

I think that some high earners are frankly a drag on society. The wealth that they have is poorly utilized. It is spent on consumables that destroy the wealth (e.g. caviar and automobiles) instead of spent on things that build up society (infrastructure, capital investments in businesses, educational facilities). To be fair, there is a considerable charitable contribution from high earners, but I think that the waste in high-income brackets is far too high.
 
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