6 ms·

Why, then, do most US states have such laughably low sales tax rates, compared to e.g. the EU?

by niek_pas 4y ago

dboreham 4y ago
Because most US states also have income tax.
- sergiosgc 4y ago
  That's not it. EU countries have income tax.
- andsoitis 4y ago
  As does the EU. So that doesn't explain it.
mysterydip 4y ago
You're trading programs for taxes. All those free benefits of society have to get money from somewhere.
- acdha 4y ago
  It’s more that we shift where things are taxed (lower sales taxes are made up for with higher property taxes, etc.). Americans pay similar amounts to Europeans when you look at taxes + health insurance but we get less because of politically-mandated inefficiency.
  - junofan 4y ago
    Source for similar amounts? Median disposable income is way higher in the US.
    - acdha 4y ago
      It depends on what you’re measuring and especially what income levels but https://www.theatlantic.com/business/archive/2013/04/the-myth-of-low-tax-america-why-americans-arent-getting-their-moneys-worth/274945/ https://www.theatlantic.com/business/archive/2013/04/the-myt... gives you the general idea of what to look for. In general, Americans pay less in total taxes but we give that back with much greater expenses for things like healthcare & drug costs, retirement, education, etc. At the top end that works out in your favor but there’s no equivalent for things like our rates of medical bankruptcy for everyone below the highest income levels.
- weberer 4y ago
  But the USA is #10 in the world in welfare spending per capita. Even beating out a few countries commonly called "welfare states" like the UK. https://en.wikipedia.org/wiki/List_of_countries_by_social_welfare_spending#Per_capita https://en.wikipedia.org/wiki/List_of_countries_by_social_we...
MichaelApproved 4y ago
I don’t agree with the person you replied to but the answer to your question is: Because the US collects taxes very differently, so you can never make a fair comparison between identical tax categories. Just look at the gasoline tax differences between the two. The core purpose of that tax and what it’s used to fund varies dramatically between the two regions. So, naturally the amount being taxed would be different. Also, The US govt tends to have taxes below the rates needed to operate (US has a higher deficit), so the taxes will more likely be lower by comparison.
- b112 4y ago
  And a side note, as many EU residents constantly remind us in North America. We drive greater distances here. More rural miles. More highway miles. Rural driving (constant 50mph with no stop and start of lights for an hour or more), is far less damaging to roads than start and stop traffic. Interstate miles are the same concept. Beyond that, expanding and building roads, is cheaper in rural areas. So there may actually be more gas tax collected per repair cost, even with the rate lower in the US. Canada has higher gas tax than the US, but lower than the EU. But we also have cold weather everywhere, with frost and ice destroying roads. So on average, we need more than the US, which only has a few northern/cold states.
treis 4y ago
The EU doesn't have a sales tax. They have a VAT which is a tax on net income not sales.
- tzs 4y ago
  From the point of view of the consumer what's the difference? An item that is listed for price P online in the US costs a US buyer P x (1 + s) where s is the sales tax rate and costs an EU buyer P x (1 + v) where v is the VAT rate. As far as I can see the differences are in what happens on the retailer's supply side. In the US generally there won't be sales tax on the supplier's sale of goods to the retailer. In the EU there might be VAT on those, but the retailer might get to deduct the VAT they pay when they are remitting the VAT they collect. The net result in both systems is that the consumer pays all of the sales tax or VAT. In the US system the government doesn't see any of that until the final sale to the consumer. In the EU, entities up the supply chain pay part of it but get it back later via deductions so in effect VAT for those entities is a loan to the government which the government pays back from the VAT consumers pay.
  - treis 4y ago
    For the consumer not much difference. For comparing tax levels it makes a big difference. VAT is a tax on all the steps in the manufacturing & sales process. Sales tax is a tax on the last step alone.

Why, then, do most US states have such laughably low sales tax rates, compared to e.g. the EU?

dboreham 4y ago

Because most US states also have income tax.

sergiosgc 4y ago
That's not it. EU countries have income tax.
andsoitis 4y ago
As does the EU. So that doesn't explain it.

mysterydip 4y ago

You're trading programs for taxes. All those free benefits of society have to get money from somewhere.

acdha 4y ago
It’s more that we shift where things are taxed (lower sales taxes are made up for with higher property taxes, etc.). Americans pay similar amounts to Europeans when you look at taxes + health insurance but we get less because of politically-mandated inefficiency.
- junofan 4y ago
  Source for similar amounts? Median disposable income is way higher in the US.
  - acdha 4y ago
    It depends on what you’re measuring and especially what income levels but https://www.theatlantic.com/business/archive/2013/04/the-myth-of-low-tax-america-why-americans-arent-getting-their-moneys-worth/274945/ https://www.theatlantic.com/business/archive/2013/04/the-myt... gives you the general idea of what to look for. In general, Americans pay less in total taxes but we give that back with much greater expenses for things like healthcare & drug costs, retirement, education, etc. At the top end that works out in your favor but there’s no equivalent for things like our rates of medical bankruptcy for everyone below the highest income levels.
weberer 4y ago
But the USA is #10 in the world in welfare spending per capita. Even beating out a few countries commonly called "welfare states" like the UK. https://en.wikipedia.org/wiki/List_of_countries_by_social_welfare_spending#Per_capita https://en.wikipedia.org/wiki/List_of_countries_by_social_we...

MichaelApproved 4y ago

I don’t agree with the person you replied to but the answer to your question is: Because the US collects taxes very differently, so you can never make a fair comparison between identical tax categories. Just look at the gasoline tax differences between the two. The core purpose of that tax and what it’s used to fund varies dramatically between the two regions. So, naturally the amount being taxed would be different. Also, The US govt tends to have taxes below the rates needed to operate (US has a higher deficit), so the taxes will more likely be lower by comparison.

b112 4y ago
And a side note, as many EU residents constantly remind us in North America. We drive greater distances here. More rural miles. More highway miles. Rural driving (constant 50mph with no stop and start of lights for an hour or more), is far less damaging to roads than start and stop traffic. Interstate miles are the same concept. Beyond that, expanding and building roads, is cheaper in rural areas. So there may actually be more gas tax collected per repair cost, even with the rate lower in the US. Canada has higher gas tax than the US, but lower than the EU. But we also have cold weather everywhere, with frost and ice destroying roads. So on average, we need more than the US, which only has a few northern/cold states.

treis 4y ago

The EU doesn't have a sales tax. They have a VAT which is a tax on net income not sales.

tzs 4y ago
From the point of view of the consumer what's the difference? An item that is listed for price P online in the US costs a US buyer P x (1 + s) where s is the sales tax rate and costs an EU buyer P x (1 + v) where v is the VAT rate. As far as I can see the differences are in what happens on the retailer's supply side. In the US generally there won't be sales tax on the supplier's sale of goods to the retailer. In the EU there might be VAT on those, but the retailer might get to deduct the VAT they pay when they are remitting the VAT they collect. The net result in both systems is that the consumer pays all of the sales tax or VAT. In the US system the government doesn't see any of that until the final sale to the consumer. In the EU, entities up the supply chain pay part of it but get it back later via deductions so in effect VAT for those entities is a loan to the government which the government pays back from the VAT consumers pay.
- treis 4y ago
  For the consumer not much difference. For comparing tax levels it makes a big difference. VAT is a tax on all the steps in the manufacturing & sales process. Sales tax is a tax on the last step alone.