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I live in a country that's one of the highest taxed in the world, the Netherlands, paying up to 51.75% tax on my earnings. And I actually think it's fair and wo

I live in a country that's one of the highest taxed in the world, the Netherlands, paying up to 51.75% tax on my earnings. And I actually think it's fair and would not lobby for lower tax rates. It's probably because of how taxes and the government works is different in many ways to the US: 1. You feel it on your own wallet how your tax is spent and redistributed. Even though I pay a large amount in tax, being a high earner, I also get support from the government, paid monthly, for childcare and mortgage interests. Also, the government supports programs like no-downpayment mortgages, that are unheard of in many countries. 2. Public services are visible and efficient. This is true from healthcare to garbage collection and schools. Schools are actually a good example: while daycare in amsterdam would cost around $2,000/month for a child, schools are "free". Of course, once you paid for daycare, you know that it's not free, but paid for from tax, and have a good idea how much goes back into it. 3. Tax returns are ridiculously simple. They can also be done up to five years in the past, in case you forgot to claim refunds. 4. Thanks to how taxes are spent, there is less inequality across society. The government invests in social housing nationwide and has strong social net support, redistributing wealth via taxes from high earners to the low earners. For example, the $2,000/month childcare costs: for low earners the government pays up to 97% of this, dropping to 33% for people well off. Contrast this with places that don't have any of this and the inequality can be seen in all parts of life.

paulsutter 7y ago
Taxes can be just as high in the US, but without the services. Top rate for California is 50.3% (37% federal + 13.3% state), and New York City is 49.7% (37% fed, 8.82% state 3.876% city) The US government actually spends more per capita on healthcare($4,197/person/year) than most countries with free excellent healthcare (Switzerland $4178/pp/y, Canada $3074/pp/y, UK $2802/pp/y). Netherlands govt spends barely more than the US govt at $4495/pp/y. https://www.visualcapitalist.com/u-s-spends-public-money-healthcare-sweden-canada/ https://www.visualcapitalist.com/u-s-spends-public-money-hea...
- wry_discontent 7y ago
  Is there good analysis on the differences in where the money goes?
- birdmanjeremy 7y ago
  This is misleading. Top tax rates can be as high as 50.3%, but the parent comment says they are paying 51% of their earnings. These are two different things, because of tax brackets. I was both taxed a marginal rate of 48.3% and had an effective tax rate of 40.6% (CA resident).
  - paulsutter 7y ago
    While you obviously have an above average income, there really are people that pay very close to the marginal rate ($10M income etc). Asymptotically, the marginal rate is the top rate.
    - birdmanjeremy 7y ago
      I would bet you most of those people are paying a lower tax rate than I am, as they're smart enough (and have the means) to shift most of their earnings to capital gains and take advantage of other tax avoidance strategies.
      - paulsutter 7y ago
        "Those people" are usually folks with a onetime windfall. For example a startup employee with options not stock. And I don't see what bearing that has on the top rate.
        birdmanjeremy 7y ago
        Most people who's earnings are over $1mm a year are spending significant time & resources planning their tax strategy and are not paying 50% effective tax rates. Source: Trump's tax returns. Actual source: https://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html https://www.nytimes.com/2011/08/15/opinion/stop-coddling-the...
        shadowprofile77 7y ago
        Stop coddling the rich? The top 20% of earners in the U.S pay a total of 87% of all tax revenue for the government, and their return from that in terms of value of government services relative to taxes paid is much smaller than it is for those in lower brackets. There are many wealthy people who use numerous legal (and in some cases illegal) means to avoid "their fair share" but overall, the numbers show that they pay far more than what most people would call fair in any other context. One source (there are many others with like 20 seconds of google searching): https://www.wsj.com/articles/top-20-of-americans-will-pay-87-of-income-tax-1523007001 https://www.wsj.com/articles/top-20-of-americans-will-pay-87...
- opencl 7y ago
  You have to make over $500k to hit 37% and that's a marginal rate so your total effective rate is nowhere near 50% unless you're making several million dollars. The Netherlands income tax is also marginal but the 51.75% rate kicks in at €68,507, and the lowest rates are already over 30%.
  - malandrew 7y ago
    Once you take into account sales tax, property taxes and other taxes that are not income tax, it's probably in excess of 50% much much sooner than $500k.
    - Balero 7y ago
      I don't think it's useful to look from an individual standpoint at taxes aside from income tax. If you keep going you can say you pay 'tax' when you buy something on sales tax, but also on a companies profits which you are contributing to. When you get to this point I think it's ,more useful to look at what proportion of a countries GDP is taken in by the government.
    - gamblor956 7y ago
      Sales tax does not apply to most grocery purchases, so you'd have to be eating out or buying lots of stuff for sales tax to become a large percentage of your total tax liability. You must also then compare the 0%-15% US sales tax rates to the 25% Norwegian VAT rates. Property tax rates are in the single digits (or very rarely, the low double digits). And only apply to property owners. Payroll taxes are distinct from income taxes but reduce taxable income so shouldn't be split out separately... So, TLDR: you'd still need to be making more than $300k+ each year for your annual total tax % (all inclusive) to exceed 50%. That puts you in the 0.1% of Americans.
- squirrelicus 7y ago
  See that's the trick. To make the high tax economies function, you have to tax even the lowest income earners at the high rate. Instead, in the US, we have greedy low earners who don't want to pay their share and just want the feds to steal more money from the rich Other and give it to the Good people like me.
- option 7y ago
  exactly. Then (on top of that) there are real estate taxes (huge in CA, unless you bought 25 years ago), sales taxes, medicare and social security taxes.
- pessimizer 7y ago
  I'm really baffled at the lack of understanding of marginal tax rates amongst otherwise educated adults (assuming you're not being deliberately deceptive here.) > The US government actually spends more per capita on healthcare($4,197/person/year) than most countries with free excellent healthcare (Switzerland $4178/pp/y, Canada $3074/pp/y, UK $2802/pp/y). Netherlands govt spends barely more than the US govt at $4495/pp/y. This is an unbelievably important thing to bring up. The US government already spends enough to have fully socialized, excellent health care. The only reason taxes have to go up for an M4A proposal is because enormous amounts of protectionist legislation and regulatory capture make the same services cost double in the US. If we had sane health care costs (which could be accomplished pretty quickly by opening the local market to foreign competition), taxes wouldn't have to go up at all. edit: Dean Baker made a suggestion that stuck with me years ago; instead of a public option, just allow Americans to buy into other countries' health systems, for example, France's. They could provide services at a nice rate on US soil, and use US payments and addition to the risk pool to subsidize their own citizens' health care at home. Other countries would start competing with each other for US business, and would so radically undercut local providers that health care prices would be vaguely economically justifiable in no time.
  - tracker1 7y ago
    The problem mostly comes down to patents and licensing... I think eliminating extension patents, and requiring dual sourcing for all medications for FDA approval would resolve a lot of that side. Forcing open-books for medical practices and making it illegal to charge more than 20% difference for the same procedure between two payees within 2 calendar years would help a lot as well. Last would be requiring insurance companies to negotiate as a fiduciary to the benefit holders would wrap it up. All these things really need to happen to close a lot of the loopholes in the US system.
  - basementcat 7y ago
    > instead of a public option, just allow Americans to buy into other countries' health systems, for example, France's. One problem is if this is opt in, only the elderly and sick will want to buy in and the foreign government would balk at the large number of high risk signups. Young and healthy individuals who are accustomed to the freedom of not buying insurance and just going to the emergency room will be reluctant to pay for something that they believe they don’t want. There’s also a mismatch between therapies permitted by the FDA, religious freedom laws, etc.
- jurassic 7y ago
  With FICA and the 0.9% Medicare surtax in the mix, in California, I think you'd need an income of about $2,300,000 to have an effective tax rate of ~50%.
ggambetta 7y ago
Had a similar experience in Switzerland, except the taxes were lower.
maximente 7y ago
a lot of these things are also investments in the sense that healthier, better educated people earn more (=> pay more taxes) and are less likely to develop chronic conditions that the state then has to pay for in some form or another ("welfare", crime, etc.) on the back end.
- sgeisler 7y ago
  Yeah, but that only works if you view your citizens as your "property" that works for you and doesn't move in and out of your country. If you view them as autonomous agents that move between jurisdictions to optimize their benefits in their current situation it doesn't. For example (as a German citizen) you can go to university in Germany for free and move to a low tax country afterwards for work. When you are old and fragile you come back and use the healthcare system since your foreign insurance becomes too expensive (I'm not entirely sure about that loophole, but I heard it existed). Of course there is some friction involved (friends, family in the home country). But which percentage of the population has to act rationally for the system to become unsustainable in the long run? Most countries haven't adapted their policies to the reality of globalization yet. I fear some might go the way of the former GDR and try to keep their citizens from leaving. I heard even the US is doing something like that, it's said to be quite hard to get rid of a US citizenship (and the IRS).
alkonaut 7y ago
Same for Sweden. Even higher taxed. Now, if we had 5% GDP on defense spending (especially if it looked like money wasted on wars or projects missing budget goals) I'd be fuming. I'm not getting rich (which my job would make me in the US) But I have a great work/life balance, have had 2 kids delivered free, spent 1.5 years off with each (shared with my wife) and now I use the remaining days off to pad my summer holiday from 4 to 7 or 8 weeks. Every year until the kids are 8. Daycare and schools including higher ed is free. My kid was born with an illness and has had 3 ambulance trips and 20 other ER visits with hospitalization in 6 years - still ZERO out of pocket, regardless of whether I was employed at the time. I'd have a comfortable life in the US too (even more comfortable) but what makes me happy to pay the 50%+ taxes is that the nursing assistants tending to my daughter in hospital also afford daycare, higher education and healthcare for their kids just as easily as I can.
gamblor956 7y ago
Once you add in Norways's VAT (equivalent to a sales tax) of 25%, which applies to most purchase and services, the effective tax rate is significantly higher than 51.75%. For most Norwegians, the effective tax burden is close to 75%!!!

paulsutter 7y ago

Taxes can be just as high in the US, but without the services. Top rate for California is 50.3% (37% federal + 13.3% state), and New York City is 49.7% (37% fed, 8.82% state 3.876% city) The US government actually spends more per capita on healthcare($4,197/person/year) than most countries with free excellent healthcare (Switzerland $4178/pp/y, Canada $3074/pp/y, UK $2802/pp/y). Netherlands govt spends barely more than the US govt at $4495/pp/y. https://www.visualcapitalist.com/u-s-spends-public-money-healthcare-sweden-canada/ https://www.visualcapitalist.com/u-s-spends-public-money-hea...

wry_discontent 7y ago
Is there good analysis on the differences in where the money goes?
birdmanjeremy 7y ago
This is misleading. Top tax rates can be as high as 50.3%, but the parent comment says they are paying 51% of their earnings. These are two different things, because of tax brackets. I was both taxed a marginal rate of 48.3% and had an effective tax rate of 40.6% (CA resident).
- paulsutter 7y ago
  While you obviously have an above average income, there really are people that pay very close to the marginal rate ($10M income etc). Asymptotically, the marginal rate is the top rate.
  - birdmanjeremy 7y ago
    I would bet you most of those people are paying a lower tax rate than I am, as they're smart enough (and have the means) to shift most of their earnings to capital gains and take advantage of other tax avoidance strategies.
    - paulsutter 7y ago
      "Those people" are usually folks with a onetime windfall. For example a startup employee with options not stock. And I don't see what bearing that has on the top rate.
      - birdmanjeremy 7y ago
        Most people who's earnings are over $1mm a year are spending significant time & resources planning their tax strategy and are not paying 50% effective tax rates. Source: Trump's tax returns. Actual source: https://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html https://www.nytimes.com/2011/08/15/opinion/stop-coddling-the...
        shadowprofile77 7y ago
        Stop coddling the rich? The top 20% of earners in the U.S pay a total of 87% of all tax revenue for the government, and their return from that in terms of value of government services relative to taxes paid is much smaller than it is for those in lower brackets. There are many wealthy people who use numerous legal (and in some cases illegal) means to avoid "their fair share" but overall, the numbers show that they pay far more than what most people would call fair in any other context. One source (there are many others with like 20 seconds of google searching): https://www.wsj.com/articles/top-20-of-americans-will-pay-87-of-income-tax-1523007001 https://www.wsj.com/articles/top-20-of-americans-will-pay-87...
opencl 7y ago
You have to make over $500k to hit 37% and that's a marginal rate so your total effective rate is nowhere near 50% unless you're making several million dollars. The Netherlands income tax is also marginal but the 51.75% rate kicks in at €68,507, and the lowest rates are already over 30%.
- malandrew 7y ago
  Once you take into account sales tax, property taxes and other taxes that are not income tax, it's probably in excess of 50% much much sooner than $500k.
  - Balero 7y ago
    I don't think it's useful to look from an individual standpoint at taxes aside from income tax. If you keep going you can say you pay 'tax' when you buy something on sales tax, but also on a companies profits which you are contributing to. When you get to this point I think it's ,more useful to look at what proportion of a countries GDP is taken in by the government.
  - gamblor956 7y ago
    Sales tax does not apply to most grocery purchases, so you'd have to be eating out or buying lots of stuff for sales tax to become a large percentage of your total tax liability. You must also then compare the 0%-15% US sales tax rates to the 25% Norwegian VAT rates. Property tax rates are in the single digits (or very rarely, the low double digits). And only apply to property owners. Payroll taxes are distinct from income taxes but reduce taxable income so shouldn't be split out separately... So, TLDR: you'd still need to be making more than $300k+ each year for your annual total tax % (all inclusive) to exceed 50%. That puts you in the 0.1% of Americans.
squirrelicus 7y ago
See that's the trick. To make the high tax economies function, you have to tax even the lowest income earners at the high rate. Instead, in the US, we have greedy low earners who don't want to pay their share and just want the feds to steal more money from the rich Other and give it to the Good people like me.
option 7y ago
exactly. Then (on top of that) there are real estate taxes (huge in CA, unless you bought 25 years ago), sales taxes, medicare and social security taxes.
pessimizer 7y ago
I'm really baffled at the lack of understanding of marginal tax rates amongst otherwise educated adults (assuming you're not being deliberately deceptive here.) > The US government actually spends more per capita on healthcare($4,197/person/year) than most countries with free excellent healthcare (Switzerland $4178/pp/y, Canada $3074/pp/y, UK $2802/pp/y). Netherlands govt spends barely more than the US govt at $4495/pp/y. This is an unbelievably important thing to bring up. The US government already spends enough to have fully socialized, excellent health care. The only reason taxes have to go up for an M4A proposal is because enormous amounts of protectionist legislation and regulatory capture make the same services cost double in the US. If we had sane health care costs (which could be accomplished pretty quickly by opening the local market to foreign competition), taxes wouldn't have to go up at all. edit: Dean Baker made a suggestion that stuck with me years ago; instead of a public option, just allow Americans to buy into other countries' health systems, for example, France's. They could provide services at a nice rate on US soil, and use US payments and addition to the risk pool to subsidize their own citizens' health care at home. Other countries would start competing with each other for US business, and would so radically undercut local providers that health care prices would be vaguely economically justifiable in no time.
- tracker1 7y ago
  The problem mostly comes down to patents and licensing... I think eliminating extension patents, and requiring dual sourcing for all medications for FDA approval would resolve a lot of that side. Forcing open-books for medical practices and making it illegal to charge more than 20% difference for the same procedure between two payees within 2 calendar years would help a lot as well. Last would be requiring insurance companies to negotiate as a fiduciary to the benefit holders would wrap it up. All these things really need to happen to close a lot of the loopholes in the US system.
- basementcat 7y ago
  > instead of a public option, just allow Americans to buy into other countries' health systems, for example, France's. One problem is if this is opt in, only the elderly and sick will want to buy in and the foreign government would balk at the large number of high risk signups. Young and healthy individuals who are accustomed to the freedom of not buying insurance and just going to the emergency room will be reluctant to pay for something that they believe they don’t want. There’s also a mismatch between therapies permitted by the FDA, religious freedom laws, etc.
jurassic 7y ago
With FICA and the 0.9% Medicare surtax in the mix, in California, I think you'd need an income of about $2,300,000 to have an effective tax rate of ~50%.

ggambetta 7y ago

Had a similar experience in Switzerland, except the taxes were lower.

maximente 7y ago

a lot of these things are also investments in the sense that healthier, better educated people earn more (=> pay more taxes) and are less likely to develop chronic conditions that the state then has to pay for in some form or another ("welfare", crime, etc.) on the back end.

sgeisler 7y ago
Yeah, but that only works if you view your citizens as your "property" that works for you and doesn't move in and out of your country. If you view them as autonomous agents that move between jurisdictions to optimize their benefits in their current situation it doesn't. For example (as a German citizen) you can go to university in Germany for free and move to a low tax country afterwards for work. When you are old and fragile you come back and use the healthcare system since your foreign insurance becomes too expensive (I'm not entirely sure about that loophole, but I heard it existed). Of course there is some friction involved (friends, family in the home country). But which percentage of the population has to act rationally for the system to become unsustainable in the long run? Most countries haven't adapted their policies to the reality of globalization yet. I fear some might go the way of the former GDR and try to keep their citizens from leaving. I heard even the US is doing something like that, it's said to be quite hard to get rid of a US citizenship (and the IRS).

alkonaut 7y ago

Same for Sweden. Even higher taxed. Now, if we had 5% GDP on defense spending (especially if it looked like money wasted on wars or projects missing budget goals) I'd be fuming. I'm not getting rich (which my job would make me in the US) But I have a great work/life balance, have had 2 kids delivered free, spent 1.5 years off with each (shared with my wife) and now I use the remaining days off to pad my summer holiday from 4 to 7 or 8 weeks. Every year until the kids are 8. Daycare and schools including higher ed is free. My kid was born with an illness and has had 3 ambulance trips and 20 other ER visits with hospitalization in 6 years - still ZERO out of pocket, regardless of whether I was employed at the time. I'd have a comfortable life in the US too (even more comfortable) but what makes me happy to pay the 50%+ taxes is that the nursing assistants tending to my daughter in hospital also afford daycare, higher education and healthcare for their kids just as easily as I can.

gamblor956 7y ago

Once you add in Norways's VAT (equivalent to a sales tax) of 25%, which applies to most purchase and services, the effective tax rate is significantly higher than 51.75%. For most Norwegians, the effective tax burden is close to 75%!!!