4 ms·

Yep, but you need to count employer paid taxes too to get the whole picture. Tax base will be different (+ 7.3% healthcare + 9.3% pension + 1.5% unemployment),

Yep, but you need to count employer paid taxes too to get the whole picture. Tax base will be different (+ 7.3% healthcare + 9.3% pension + 1.5% unemployment), so if your base is ~1.17 of your "official" base, the effective tax becomes (0.35 + 0.17) / 1.17 = 45% (leaving you with 55%). Which is in line with the chart I posted. Now here's how it works in the US. Let's take my $170K household income (it's 2x of state median in Massachusetts, but 1x in my town). My effective tax rate (without medical insurance and without employer part of payroll taxes) is 33%, but with employer taxes and after tax base adjustment it's going to be (0.33 + 0.08) / 1.08 = 38% (I'm ignoring social security cap here, but it won't make a big difference). But we left out a very important part, and it's medical insurance. Let's add 24K/year (14%) to the mix, then it becomes (0.33 + 0.08 + 0.14) / 1.22 = 45%. Oops! Sounds like I'm paying the same percentage as in Germany. Sure, I have 2x of median, but for 1x things are getting even more ugly, because 24K will stay the same, and while the income tax is lower, medical will take its part and more. Of course I still bring home more than an average German family, yet expenses are different too so it's hard to compare. Sure, I can buy more junk, and I have a bigger home so I still have some place to live after I placed all that junk :) But to the original comment: > The American lower and middle classes pay a lot less of their incomes - that would be the group that would have to pay for an American welfare state. That won't go over well... No, American lower and middle class doesn't pay "a lot less of their incomes", it's simply not true.

pclmulqdq 4y ago
Now do the VAT. Almost everyone who does the math on this (counting healthcare as a tax in the US) finds that only considering the income portion of your taxes, it's about equal. In most places in Europe, you also have the VAT acting as an extra tax. Your tax burden would be a lot higher. Also, you must be thinking of your marginal rate being 33% - your federal taxes should be under 20% of your income at $170k, even if filing as single. In Germany, your tax rate would be about 27%.
- vc8f6vVV 4y ago
  Agree on VAT, but MA also has 6.25% sales tax which I didn't consider, that is if you want to start from revenue. So the difference will be less than 19%. Also VAT in Germany is not 19% on everything, there are exemptions and low rate of 7%. 33% is not a marginal rate, it's an effective tax rate (filing jointly) including payroll taxes which are deducted from my wages, I mentioned it. Also we have a state tax in MA which is also included in 33%. In any case there are other taxes too (e.g. gas excise, vehicle excise, property tax etc.), so I'm not trying to compare the whole tax burden, that would be too much for HN. But regarding payroll taxes -- they are pretty close even if you consider VAT, certainly not a "lot less", it's a myth propagated by politicians. So the question is: we pay (almost) "welfare state" taxes, where is my part of a welfare state?
  - pclmulqdq 4y ago
    Yeah, you live in a high-tax state - counting that and payroll tax would make it to 33%. However, you can deduct a good fraction of that tax (actually all of it) from your federal taxes. Also, you included the cost of your healthcare in your calculation, so you are getting "welfare state" benefits for that cost. As to your taxes, those are paying for a welfare state for people who are less well off than you. I'm pretty sure you are in the 90th percentile on income, by the way, so you're not actually in the lower class, and arguably not even the middle class (although that level of income in a rich state like MA feels middle class). All those other taxes exist in Germany too, by the way, and are much higher.
    - vc8f6vVV 4y ago
      MA is not a "high-tax state", it's in the middle by an overall tax burden (depending how you count), so it's another myth. Check this for example: https://wallethub.com/edu/states-with-highest-lowest-tax-burden/20494 https://wallethub.com/edu/states-with-highest-lowest-tax-bur.... Also I'm not in the top 10% percentile, more like in the top 20% in MA. Give me your definition of the "middle class". Also I explained that for the "lower class" medical payments are even higher. No, I'm not getting "welfare state" benefits, I'm getting a pretty crappy medical service for a price which is waaay higher than in Germany. And if I lose my job I will be paying 2K/month + copays and co-insurances, not mentioning deductibles, unlike in Germany. And God forbids you get into a hospital without insurance, your jaw will drop to the floor when you see the bill. Have you ever been in the Boston subway? Compare it with almost any city in Europe, hell, even with Montreal. Tell me which welfare state has subways like Boston or NYC? Commuter rail like in Boston? NYC commuter rail is a bit better, but still is not even close to German railways. And all of the above we get for taxes which are very similar to Germany. No, they are not much lower, it's something with your math. And in absolute value we pay waaay more than in Germany given higher salaries.

pclmulqdq 4y ago

Now do the VAT. Almost everyone who does the math on this (counting healthcare as a tax in the US) finds that only considering the income portion of your taxes, it's about equal. In most places in Europe, you also have the VAT acting as an extra tax. Your tax burden would be a lot higher. Also, you must be thinking of your marginal rate being 33% - your federal taxes should be under 20% of your income at $170k, even if filing as single. In Germany, your tax rate would be about 27%.

vc8f6vVV 4y ago
Agree on VAT, but MA also has 6.25% sales tax which I didn't consider, that is if you want to start from revenue. So the difference will be less than 19%. Also VAT in Germany is not 19% on everything, there are exemptions and low rate of 7%. 33% is not a marginal rate, it's an effective tax rate (filing jointly) including payroll taxes which are deducted from my wages, I mentioned it. Also we have a state tax in MA which is also included in 33%. In any case there are other taxes too (e.g. gas excise, vehicle excise, property tax etc.), so I'm not trying to compare the whole tax burden, that would be too much for HN. But regarding payroll taxes -- they are pretty close even if you consider VAT, certainly not a "lot less", it's a myth propagated by politicians. So the question is: we pay (almost) "welfare state" taxes, where is my part of a welfare state?
- pclmulqdq 4y ago
  Yeah, you live in a high-tax state - counting that and payroll tax would make it to 33%. However, you can deduct a good fraction of that tax (actually all of it) from your federal taxes. Also, you included the cost of your healthcare in your calculation, so you are getting "welfare state" benefits for that cost. As to your taxes, those are paying for a welfare state for people who are less well off than you. I'm pretty sure you are in the 90th percentile on income, by the way, so you're not actually in the lower class, and arguably not even the middle class (although that level of income in a rich state like MA feels middle class). All those other taxes exist in Germany too, by the way, and are much higher.
  - vc8f6vVV 4y ago
    MA is not a "high-tax state", it's in the middle by an overall tax burden (depending how you count), so it's another myth. Check this for example: https://wallethub.com/edu/states-with-highest-lowest-tax-burden/20494 https://wallethub.com/edu/states-with-highest-lowest-tax-bur.... Also I'm not in the top 10% percentile, more like in the top 20% in MA. Give me your definition of the "middle class". Also I explained that for the "lower class" medical payments are even higher. No, I'm not getting "welfare state" benefits, I'm getting a pretty crappy medical service for a price which is waaay higher than in Germany. And if I lose my job I will be paying 2K/month + copays and co-insurances, not mentioning deductibles, unlike in Germany. And God forbids you get into a hospital without insurance, your jaw will drop to the floor when you see the bill. Have you ever been in the Boston subway? Compare it with almost any city in Europe, hell, even with Montreal. Tell me which welfare state has subways like Boston or NYC? Commuter rail like in Boston? NYC commuter rail is a bit better, but still is not even close to German railways. And all of the above we get for taxes which are very similar to Germany. No, they are not much lower, it's something with your math. And in absolute value we pay waaay more than in Germany given higher salaries.