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VAT is generally considered to be regressive (lower and middle class people tend to spend a larger percentage of their income and therefore are disproportionall

VAT is generally considered to be regressive (lower and middle class people tend to spend a larger percentage of their income and therefore are disproportionally affected). The taxation system reflects our societal values to an extent: tax breaks incentivize some activities and excess taxes disincentivize. Pure VAT disincentivizes spending and rewards wealth hoarding.

jonnycomputer 5y ago
A tax system can be regressive and more efficient. The regressivity of a tax system can be offset by benefits, such as UBI, etc. Why is it that Europe has less income inequality and VAT? Because it is offset with a generous welfare state.
- TAForObvReasons 5y ago
  European countries also have significantly higher income and other taxes. For example, in Germany, the marginal personal tax rate above 57K euros per year is 42% and the top rate is 45%. In the US, at $100K the marginal rate is 24% and the top marginal rate (above $540K) is 37%. That 8% difference at the top probably explains the income inequality situation moreso than any other difference
  - noodlesUK 5y ago
    I hear this from a lot of Europeans (I am also European), but it’s not really an apples to apples comparison. In the UK for instance we have a higher income tax rate of 40%. The US 37% rate is lower (but also comes in at a way higher threshold). However, in the US you also have state income taxes which range from 0-12ish percent, so your overall tax rate can end up higher
    - jonnycomputer 5y ago
      My main experience with taxes in Europe is in Poland, and that second hand from my mother-in-law, mostly. In the US, a typical tax payer will pay federal income tax, federal medicare and social security payroll taxes, state income tax (which varies a lot by state, but can be much more regressive than the federal income tax), and municipal or county property taxes (usually real-estate, but may also include things like vehicles), and a state+municipal sales tax on purchases. Not to mention various other taxes specific to things like gasoline, alcohol, tobacco, etc, and various usage fees for toll roads, etc. I'm sure things are similar in Europe in many ways, and different in others, but it can be a little hard to figure out how much I pay in tax total in a year, and I'm hardly an unusual case. All of this to really underline your point that just talking about US income tax is too incomplete a picture for the purpose of comparison.

jonnycomputer 5y ago

A tax system can be regressive and more efficient. The regressivity of a tax system can be offset by benefits, such as UBI, etc. Why is it that Europe has less income inequality and VAT? Because it is offset with a generous welfare state.

TAForObvReasons 5y ago
European countries also have significantly higher income and other taxes. For example, in Germany, the marginal personal tax rate above 57K euros per year is 42% and the top rate is 45%. In the US, at $100K the marginal rate is 24% and the top marginal rate (above $540K) is 37%. That 8% difference at the top probably explains the income inequality situation moreso than any other difference
- noodlesUK 5y ago
  I hear this from a lot of Europeans (I am also European), but it’s not really an apples to apples comparison. In the UK for instance we have a higher income tax rate of 40%. The US 37% rate is lower (but also comes in at a way higher threshold). However, in the US you also have state income taxes which range from 0-12ish percent, so your overall tax rate can end up higher
  - jonnycomputer 5y ago
    My main experience with taxes in Europe is in Poland, and that second hand from my mother-in-law, mostly. In the US, a typical tax payer will pay federal income tax, federal medicare and social security payroll taxes, state income tax (which varies a lot by state, but can be much more regressive than the federal income tax), and municipal or county property taxes (usually real-estate, but may also include things like vehicles), and a state+municipal sales tax on purchases. Not to mention various other taxes specific to things like gasoline, alcohol, tobacco, etc, and various usage fees for toll roads, etc. I'm sure things are similar in Europe in many ways, and different in others, but it can be a little hard to figure out how much I pay in tax total in a year, and I'm hardly an unusual case. All of this to really underline your point that just talking about US income tax is too incomplete a picture for the purpose of comparison.