Tuesday, April 05, 2011

Low Taxes

The United States has lower tax rates than any other advanced country I could find - slightly less than 27% for 2010, vs. 40% for the UK, 44% for Czechia, and 55% for Sweden. Less developed countries like Mexico and India pay less, about 20%, partly because the rich have great power but mainly because they are much poorer. This fact does not keep Americans from bitching and moaning about taxes.

The super wealthy like the Koch brothers who fund Tea Parties and other tax protesters would like the US to be more like Mexico, at least in its tax rates.

So why are Americans so convinced that they are over taxed? One theory I like goes as follows. Europeans pay a lot of taxes, but they get a lot from the government: health care, education, and a generous welfare system. Americans mostly get wars and bailouts for billionaires.

UPDATE FOR LUMO & OTHER COMMENTER'S: Lumo: Your figures for the Czech Republic are some meaningless composite amount containing all kinds of social, healthcare, and value-added taxes and fees. The income tax is (a flat tax of) 15% of the base - which is less than the salary itself, so the income tax is really less than 15%. Something like extra 7% and 5% is for social and mandatory health insurance. Corporations commonly add value-added tax which is 20%. One may get 44% by inconsistently adding all kinds of these things - but I don't think that this was done for the other nations.

The methodology is simple and common to all nations. It has the advantage of averaging over all the details of who pays what and over all kinds of taxes or social insurances administered by governments. All government income from all taxes, social insurance programs, license fees, etc. is totaled and that number is divided by the national income. It's a good number, because all nations measure the first number and all advanced nations measure the second. It counts all government income at national, state and local levels(but not borrowing - a deferred tax).

Details of who pays what differ drastically among nations.

Note that although the US has very low taxes, it still spends a lot. That's because (a)It's still pretty rich and (b)Thanks to GW and Ronnie, an awful lot of the spending is borrowed money, a deferred tax not yet counted.