Very high tax rates in Europe are generally less about healthcare than about pensions, really, in most cases. Most European countries are a bit further down the demographic crisis road than the US is (and they mostly have higher life expectancies, too), so the cost of pensions has really become quite a big deal. Most European countries also have either very cheap or free university tuition; if you don’t qualify for a grant it’s 2k here, say. (This is an increase, due to the GFC; when I was in university it was 50 euro a year…)
That said, for _most_ countries, 40-70% effective tax is very high, and not encountered by the average person. To pay 40% effective in Ireland, say, you’d have to be earning at least 150k, and that’s assuming you’re single, have no kids, don’t pay rent or mortgage, and have no private pension (401k equivalent) contributions. Realistically, almost no-one hits those sorts of rates; for realistic setups you’re looking at closer to 200k for a single childless person.
It is impossible, here, outside of ultra-contrived circumstances, to pay over a 52% effective tax rate.
> It is impossible, here, outside of ultra-contrived circumstances, to pay over a 52% effective tax rate.
It depends on what you include though. You could look at someone earning 100k, having it taxed, paying all the things that are not taxes but obligatory just the same (social security, depending on the country), and then spending the rest on rent, travel, food & entertainment (and paying sales tax and various other specific taxes). How much of their total income has gone to the state?
If you want to extend that comparison, look at someone running a company. The value they create with their company will be taxed as well, then they receive dividends from their company which also will be taxed at different rates.
Of course, you'd need to either compare to individual US states, or make some choices about how to average their very different tax levels.
At least here, social security (PRSI) is a tax. Rent isn’t subject to VAT, nor is a lot of food. Someone running a company wouldn’t normally pay themselves with dividends, becuase it’s not tax efficient; they’d take a salary from it instead (that’s a cost, and thus is not subject to corporation tax).
Someone earning 100k (assuming single, no kids, no private pension) pays about 33% effective tax (including social security) and some VAT on spending. 50-70%, again, is just kinda nonsense.
You usually don't pay yourself all the money your company makes as salary. At least in Germany, your salary has to be "reasonable" (i.e. similar to what you'd pay someone who isn't a shareholder), otherwise it's considered a hidden distribution of profits ("verdeckte Gewinnausschüttung") and will not affect your company's taxable revenue. You'll always pay corporate (~30%) on your profits & capital gains tax (25%) on the remainder after corporate tax when you distribute it. You'll have to distribute it at some point.
"Some VAT on spending" is a bit hand-wavy, don't you think? If you take those 67k (probably a bit less in Germany, because you'll pay for health insurance one way or another, and it's not a 100% deduction) and spend it, most of that will be at the normal VAT rate, which in Europe is between 15 and 27%, the average is approximately 20%. That'll be another 10k or so (or another 10% of income), you're now at ~43%.
Buying gas for your car (~50% of sale price are taxes), or natural gas (~30% taxes), oil (20%), or electricity (27%) for your home, and you'll pay taxes, too. There's various small amount (~250€/yr for public television; nominally not a tax in Germany for legal reasons, but it would be dishonest not to include it -- it is by law, there's no way to opt out, you don't have a claim to anything in return, its height is controlled by the state), it adds up.
I doubt you could get to 70%, but 50% isn't far off if you actually spend your money (which you will have to at some point, so I don't see a reason why you wouldn't consider those taxes).
> At least in Germany, your salary has to be "reasonable" (i.e. similar to what you'd pay someone who isn't a shareholder), otherwise it's considered a hidden distribution of profits ("verdeckte Gewinnausschüttung") and will not affect your company's taxable revenue. You'll always pay corporate (~30%) on your profits & capital gains tax (25%) on the remainder after corporate tax when you distribute it. You'll have to distribute it at some point.
Okay, that's _really_ different to how it works in Ireland, and I think just shows the government trying to incentivise slightly different things. I think the key difference is that, per the above, dividends are taxed as capital gains in Germany (weird; they're clearly not capital gains); in Ireland they're deemed unearned income and taxed more or less as normal income (with some slightly weird treatment at the edges, I think; I'm not sure that you can offset income tax on them with pension contributions, say).
I'm a bit curious _why_ Germany wants to incentivise retention and payout via dividend vs payout via salary for small companies (it seems like, for high income people, corporate tax + dividend there would probably be lower than the highest band of tax?) but that's clearly what's going on here.
Sorry, I might have added confusion: this applies to limited-liability in Germany (all kinds, the cheap ones and the regular ones). If you're running your company with unlimited liability, there is no salary (I guess technically you could pay yourself a salary, but there's no reason you ever wood vs a limited liability which is its own entity) and your income from that work will be taxed as regular income (though labeled & treated slightly differently).
But since limited liability is a pretty good thing to have and is affordable now, these days many people opt for it, especially if you're somewhat successful because one of the disadvantages is increased accounting duties -- but if you make more than 50k (or something thereabout; in profits) without a limited liability, they'll apply the same duties to you.
Corporate tax + dividends is usually more expensive than personal income. On 100k profits, you'll pay 30k taxes, and then you'll distribute 70k of which 25% are tax (capital gains), so another 17.5k gone, and you've paid 47% until the money is yours. Top marginal income tax is 45% (250k+/yr). Accountants are technically optional, but practically mandatory for LLCs, and they cost 2-3% of revenue (by law, no negotiations possible).
Germany very much doesn't like self-employment when you look at it from that angle. But I doubt there's an intention behind it, it's mostly historical: limited liability is supposed to be the larger companies, not an electrician with two employees. But Germany doesn't adjust, so our 2nd highest marginal tax rate (42%) starts at 66k€, which around 10% of employees in Germany hit, and it rarely gets adjusted to account for inflation. But no worries: there's been a lot of noise to increase this to 57%, payable on income > 80k€. We'll get to the 70% eventually.
We have immigration (illegal or otherwise) to stave off demographic cliffs. As much as the right hates illegal immigration, it is mostly Christians and they integrate well.
The EU either has to integrate muslims, which is a rougher ride, or Russians/Ukrainians, of which there is a more limited number to import.
The country with the worst demographics, South Korea, still IMO has an out: it can topple North Korea and import a huge number of people from there.
China is in deep, deep trouble. They have restated demographics downward, and probably it is still worse than that. Combined with increasing levels of totalitarianism, allegedly a huge financial house of cards in real estate and regional governments, and a likely invasion of Taiwan that results in blockade and sanctions...
Russia was having huge problems before the war. Now they are throwing away a badly needed generation, and causing 2-5x that amount to flee the country.
Democracies have the potential to pivot from demographic disaster, but totalitarian regimes don't care about them, because demographic cliffs mean there is just an older more compliant population to suppress. Of course it means long term their country will fade to irrelevance and perhaps starvation/economic collapse, but totalitarian regimes exist primarily to ensure the survival of the regime, not the population.
> We have immigration (illegal or otherwise) to stave off demographic cliffs. As much as the right hates illegal immigration, it is mostly Christians and they integrate well.
Indeed, but, even Mexico and much of Latin America now has below replacement fertility too. So now what?
Democracies that entice immigration are also strategic weapons.
But to answer your question, that's their problem.
Countries and governments need to wake up and structure their societies towards liberal reforms to get encourage child rearing. That involves a host of things that the right won't like, but the side effects will be a society that people want to immigrate too.
It's a double demographic effect. Now, so far even Europe has not restructured its housing, work, subsidies, childcare, and the like to fully stimulate demographics.
The US would need huge reforms in healthcare, workers rights, and childcare, and the doom of an imbalanced demographics like we have with the boomers (ESPECIALLY the baby boomers) is that they vote only for their selfish needs and won't vote to invest in the younger generation
> Effective tax rates of 40-70% do not exist in the Us. It’s still a ridiculous amount of the economy to tax and spend.
That isn’t true. In Germany, where we have fairly high taxes, I get to keep about 60% of my gross income, and I’m in the maximum taxation group. This 40% includes universal health care, pensions, tax, and mandatory insurance for job loss.
Don't forget the effects of VAT and various consumption taxes. If you buy stuff with your net income, ~ a sixth of the money spent will be indirect taxes again.
Those tax rates have nothing to do with healthcare, to take France as an example most of it is for other things, like pay-as-you-go pension plan or free education. Budget of french "assurance maladie" is 25% of the PIB or 450 billion euros for 68 million people, most of it paid by salary taxes. All things being equal, for the USA the same system would cost 2322 billion dollars.
The way that I've seen GP's point expressed that makes sense to me is that the per-person cost to provide health-care for those special interests you mention is roughly equivalent to the per-person tax burden in most other developed countries to care for everyone. That gives me a useful handle on how gob-smackingly wasteful the US system (writ large) actually is.
Effective tax rates of 40-70% do not exist in the Us. It’s still a ridiculous amount of the economy to tax and spend.
But what I think is more annoying is that the US has health systems for special interest groups:
- seniors - veterans - native Americans - women and children - government employees (especially teachers) - immigrants seeking asylum
This must be getting close to half the population. Either get rid of them, or pay for everyone.