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I think this is misleading to focus on corporate tax without comparing total system tax loads, as well as major differences in that the taxes pay for: like heal

by dv_dt 7y ago

I think this is misleading to focus on corporate tax without comparing total system tax loads, as well as major differences in that the taxes pay for: like healthcare.

rayiner 7y ago
I think there are two meaningful bits of data here: the tax burden on corporations, and what share of the overall tax burden is paid by corporations. The article's phraseology ("business contributes smallest share") invites the latter comparison. But the former tells an interesting story as well: https://data.oecd.org/tax/tax-on-corporate-profits.htm#indicator-chart https://data.oecd.org/tax/tax-on-corporate-profits.htm#indic.... In Germany, France, Italy, and Spain, corporate taxes amount to 2-2.4% of GDP. The U.K. is at 2.8%, while the U.S. is at 1.9%.[1] Although the U.S. raises more of its taxes from corporations than Germany, France, Italy, or Spain, it has a much lower tax burden overall. However, the absolute tax burden on corporations is not that far off. Germany was at 1.7% in 2012, while the U.S. was at 2.3% in 2104. Same thing for income taxes: https://data.oecd.org/tax/tax-on-personal-income.htm#indicator-chart https://data.oecd.org/tax/tax-on-personal-income.htm#indicat.... Income taxes ranged from 7.5% to 10.9% of GDP Germany, France, Italy, Spain, and the UK in 2017. The U.S. was at 10.5%, near the top of the range. Almost all of our overall much lower tax burden is explained by the fact that our "middle class taxes" are far lower than in Europe. Socials security taxes are 6.3% of GDP, versus 11.5-16.8% in France, Germany, Italy, and Spain. (The U.K. is at 6.4%.) https://data.oecd.org/tax/social-security-contributions.htm#indicator-chart https://data.oecd.org/tax/social-security-contributions.htm#.... Consumption taxes in the U.S. are just 4.3% of GDP, versus 9.7-12% in the U.K., Spain, France, Germany, and Italy: https://data.oecd.org/tax/tax-on-goods-and-services.htm#indicator-chart https://data.oecd.org/tax/tax-on-goods-and-services.htm#indi.... What is the policy takeaway? Those on the left point to Europe and say "we should be more like that; those countries have already figured out how to have a fairer, more humane society." What would our taxes look like if we raised the U.S. tax burden to European levels, but also adopted a similar distribution of taxes? Corporate taxes would go up slightly. Income taxes would not go up at all. Middle class taxes would double or triple. Put it another way. What if we raised income taxes to Swedish levels? We would add about $500 billion in revenue, assuming that did not reduce GDP. Nice, but not even enough to balance the budget. What if we raised consumption taxes to Swedish levels? We'd raise $1.55 trillion, enough to balance the budget, pay for free college, and make a serious dent in universal healthcare. What if we tried to raise that same money through income taxes? Our income tax burden would shoot to 18.5% of GDP, higher than all but Denmark (which is a huge outlier in the OECD). And what if we tried to raise that money from just the top 1%, like the left wants to do, instead of from everybody, as in Sweden (where the top tax bracket kicks in at $70,000)? You'd have to raise taxes on that group to 100% of income. [1] I use these countries as reference points because they are the largest in the EU28--accounting for over 70% of the population.
- dv_dt 7y ago
  At the very least, you need to add healthcare costs from the US in to compare vs personal tax costs in European nations. Otherwise what the taxes buy is vastly different. The US pays more than double per capita for healthcare what the Europeans pay, and when you look at the subset of working citizens in America, it's even higher because they're the ones loaded with the US health system costs. Healthcare is just one major difference in what taxes pay vs other costs which can be offloaded to private budgets, or fees, or other non-tax categories. Edit: Just back of the envelope: if median income is 50k and US health costs are 10k/year vs 5k/year in the average EU nation, then healthcare alone could account for a 10% higher "tax" load from the US side. Warren Buffet often laments that for all our obsession about tax rates, the healthcare inefficiency costs in the US are GDP percentage wise, much higher.
  - rayiner 7y ago
    I'm not getting into a calculation of what you get in return for your money. I'm just talking about where the dollars come from to pay for whatever the government wants. I think it's important to compare the existing tax revenue mix because the proposals for expanding the U.S. welfare state focus on paying for those benefits through corporate taxes or progressive income or payroll taxes. E.g. Sanders' proposals: https://www.vox.com/2019/4/10/18304448/bernie-sanders-medicare-for-all https://www.vox.com/2019/4/10/18304448/bernie-sanders-medica.... Nobody is proposing what e.g. Germany does, a 15% payroll tax essentially capped at incomes of $70,000.
    - dv_dt 7y ago
      Then all you're comparing is that x% pays for apples and y% pays for apples & oranges, and you really can't compare x% vs y%.
      - rayiner 7y ago
        Sure you can! The corporate and income tax burdens in the U.S. are already at similar levels to Germany, France, the U.K., Spain, and Italy, but they're paying for just apples, versus apples + oranges. If we want to also buy everyone oranges, we should probably pay for those oranges by looking at the tax-revenue sources where the U.S. burden is much lower than in Europe. The political question is: how do we go from taxes being 27% of GDP to taxes being 37.5% of GDP. (That's the level in Germany, and there is no way we do a welfare state more efficiently than Germany.) That's like $2 trillion. If we raise that money through higher income and corporate taxes, we'd be departing substantially from the norms established by the big EU countries. If we raise that money instead through higher middle class taxes, we'd be keeping within those norms. Not only that, the actual tax increase would be offset to a large degree by the savings to the middle class from not having to pay health insurance premiums and tuition fees.

by dv_dt 7y ago

I think this is misleading to focus on corporate tax without comparing total system tax loads, as well as major differences in that the taxes pay for: like healthcare.

rayiner 7y ago

I think there are two meaningful bits of data here: the tax burden on corporations, and what share of the overall tax burden is paid by corporations. The article's phraseology ("business contributes smallest share") invites the latter comparison. But the former tells an interesting story as well: https://data.oecd.org/tax/tax-on-corporate-profits.htm#indicator-chart https://data.oecd.org/tax/tax-on-corporate-profits.htm#indic.... In Germany, France, Italy, and Spain, corporate taxes amount to 2-2.4% of GDP. The U.K. is at 2.8%, while the U.S. is at 1.9%.[1] Although the U.S. raises more of its taxes from corporations than Germany, France, Italy, or Spain, it has a much lower tax burden overall. However, the absolute tax burden on corporations is not that far off. Germany was at 1.7% in 2012, while the U.S. was at 2.3% in 2104. Same thing for income taxes: https://data.oecd.org/tax/tax-on-personal-income.htm#indicator-chart https://data.oecd.org/tax/tax-on-personal-income.htm#indicat.... Income taxes ranged from 7.5% to 10.9% of GDP Germany, France, Italy, Spain, and the UK in 2017. The U.S. was at 10.5%, near the top of the range. Almost all of our overall much lower tax burden is explained by the fact that our "middle class taxes" are far lower than in Europe. Socials security taxes are 6.3% of GDP, versus 11.5-16.8% in France, Germany, Italy, and Spain. (The U.K. is at 6.4%.) https://data.oecd.org/tax/social-security-contributions.htm#indicator-chart https://data.oecd.org/tax/social-security-contributions.htm#.... Consumption taxes in the U.S. are just 4.3% of GDP, versus 9.7-12% in the U.K., Spain, France, Germany, and Italy: https://data.oecd.org/tax/tax-on-goods-and-services.htm#indicator-chart https://data.oecd.org/tax/tax-on-goods-and-services.htm#indi.... What is the policy takeaway? Those on the left point to Europe and say "we should be more like that; those countries have already figured out how to have a fairer, more humane society." What would our taxes look like if we raised the U.S. tax burden to European levels, but also adopted a similar distribution of taxes? Corporate taxes would go up slightly. Income taxes would not go up at all. Middle class taxes would double or triple. Put it another way. What if we raised income taxes to Swedish levels? We would add about $500 billion in revenue, assuming that did not reduce GDP. Nice, but not even enough to balance the budget. What if we raised consumption taxes to Swedish levels? We'd raise $1.55 trillion, enough to balance the budget, pay for free college, and make a serious dent in universal healthcare. What if we tried to raise that same money through income taxes? Our income tax burden would shoot to 18.5% of GDP, higher than all but Denmark (which is a huge outlier in the OECD). And what if we tried to raise that money from just the top 1%, like the left wants to do, instead of from everybody, as in Sweden (where the top tax bracket kicks in at $70,000)? You'd have to raise taxes on that group to 100% of income. [1] I use these countries as reference points because they are the largest in the EU28--accounting for over 70% of the population.

dv_dt 7y ago
At the very least, you need to add healthcare costs from the US in to compare vs personal tax costs in European nations. Otherwise what the taxes buy is vastly different. The US pays more than double per capita for healthcare what the Europeans pay, and when you look at the subset of working citizens in America, it's even higher because they're the ones loaded with the US health system costs. Healthcare is just one major difference in what taxes pay vs other costs which can be offloaded to private budgets, or fees, or other non-tax categories. Edit: Just back of the envelope: if median income is 50k and US health costs are 10k/year vs 5k/year in the average EU nation, then healthcare alone could account for a 10% higher "tax" load from the US side. Warren Buffet often laments that for all our obsession about tax rates, the healthcare inefficiency costs in the US are GDP percentage wise, much higher.
- rayiner 7y ago
  I'm not getting into a calculation of what you get in return for your money. I'm just talking about where the dollars come from to pay for whatever the government wants. I think it's important to compare the existing tax revenue mix because the proposals for expanding the U.S. welfare state focus on paying for those benefits through corporate taxes or progressive income or payroll taxes. E.g. Sanders' proposals: https://www.vox.com/2019/4/10/18304448/bernie-sanders-medicare-for-all https://www.vox.com/2019/4/10/18304448/bernie-sanders-medica.... Nobody is proposing what e.g. Germany does, a 15% payroll tax essentially capped at incomes of $70,000.
  - dv_dt 7y ago
    Then all you're comparing is that x% pays for apples and y% pays for apples & oranges, and you really can't compare x% vs y%.
    - rayiner 7y ago
      Sure you can! The corporate and income tax burdens in the U.S. are already at similar levels to Germany, France, the U.K., Spain, and Italy, but they're paying for just apples, versus apples + oranges. If we want to also buy everyone oranges, we should probably pay for those oranges by looking at the tax-revenue sources where the U.S. burden is much lower than in Europe. The political question is: how do we go from taxes being 27% of GDP to taxes being 37.5% of GDP. (That's the level in Germany, and there is no way we do a welfare state more efficiently than Germany.) That's like $2 trillion. If we raise that money through higher income and corporate taxes, we'd be departing substantially from the norms established by the big EU countries. If we raise that money instead through higher middle class taxes, we'd be keeping within those norms. Not only that, the actual tax increase would be offset to a large degree by the savings to the middle class from not having to pay health insurance premiums and tuition fees.