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Portugal seeks to become low-tax haven for young people
- ExoticPearTree 2y agohttps://archive.ph/jfRjL https://archive.ph/jfRjL
- smackay 2y agoThe prices for housing, in any form, in the major metropolitan areas suggest this will not be successful.
- libertine 2y agoThis looks like is going to help increase the prices even more.
- Nifty3929 2y agoIndeed - people cannot live in money. Giving them more money will not help them get a place if there are not more places available to get. It would only drive up the price as the same people compete for the same housing with more money. Or, if they have some form of rent control - simply greater frustration all around. Another possible consequence is greater inter-generational friction as young people with more money out-compete existing, older tenants/owners for those homes.
- laweijfmvo 2y ago> A worker in Portugal earning the average annual wage of about €20,000 currently pays a top income tax rate of 26 per cent. Anyone earning between roughly €21,000 and €27,000 pays a top rate of 32.75 per cent. ouch
- FaridIO 2y agoPretty nominal for Europe to be honest. Most Americans don't realize a) how much money they make and b) how little taxes they pay. Apples and oranges with all the social safety nets and such of course, but still most (healthy) Americans get much more money in their bank accounts after all is said and done than they would in Europe.
- baal80spam 2y agoThis is correct. Here's a handy table: https://en.wikipedia.org/wiki/Tax_rates_in_Europe https://en.wikipedia.org/wiki/Tax_rates_in_Europe
- rsynnott 2y agoTop rates are kind of useless; some countries have many more brackets than others. The US used to have a 90% tax bracket, but that didn’t make it a particularly high-tax country; effectively no-one paid it. Comparisons, are in practice, inherently difficult, because the curves caused by the tax brackets and credits can be very different. It really depends an awful lot on income.
- laweijfmvo 2y agoI should look more into cost of living in Portugal, maybe, but one of the other commenters mentioned housing prices being… high. In US, making ~$20,000 you’d be considered poor (maybe not “officially”) and probably pay zero federal tax and receive quite a bit of assistance.
- titanomachy 2y ago$20k is technically above the US federal poverty line for a single person. I live in a state where anyone under $30k is considered low-income and qualifies for full benefits.
- gnwn2 2y agoWell, houses where I live, not Porto or Lisbon, are at 400k now. It is not cheap, getting worst every year
- benopal64 2y agoWhat happens to the unhealthy Americans? What happens to the Americans who are too poor they cannot pay health insurance and the cost of medicine/surgery. I think only the wealthiest Americans have much more money in their bank accounts than they would in Europe.
- xutopia 2y agoThey actually get healthcare and other services with that. It's not like it's just taken away in some black hole. They get value from the taxes they pay.
- matt-p 2y agoPretty similar to anywhere else in Western Europe. Includes health care and a state pension and things like that.
- stuaxo 2y agoWhen counting your tax in the US add in your health insurance cost to compare to most of Europe. Or if it's parts of Europe like Portugal where there is health insurance check the cost - looks like 14 euros to 90 euros a month: https://www.beportugal.com/health-insurance-in-portugal/ https://www.beportugal.com/health-insurance-in-portugal/
- AdrianB1 2y agoIt is realistically much more than 14 euros. In Eastern Europe I pay almost 700 Euro per month in mandatory state health tax (it is not an insurance, it is a tax because it is a percentage of income, not related to what you are covered for).
- profeatur 2y agoYes, there is a public health system, but people tend to avoid it when they can. Most opt to go private for their dental, for example. And if they have any kind of systematic (sibo, ibs, autoimmune, etc) problem the public system is useless and they will have to travel to find a private specialist. On the other hand, the private system is really good here, and also pretty cheap.
- insane_dreamer 2y agoDental is also typically not covered by medical insurance in the US (dental insurance is separate and works differently).
- johngladtj 2y agoIf you're counting that you should add the +30% for social security in Portugal as well. Straight up if you actually do the math and count every tax paid directly a d indirectly someone making minimum wage has a effective tax rate above 60%
- Aerroon 2y agoThat's only true if you take into account VAT as well though. But you're right, the big taxation items in Europe are not the income tax, but the "social tax" and VAT. The first is added as a payroll tax (>30% in some places) and the second is basically a sales tax on every purchase (>20%). These two tax items alone add up to a crazy percentage of your income.
- Me000 2y agoIn America the tax rate is higher? People are reacting like this is a lot haven’t seen a paycheck in the US in there lifetime. US is maybe 5% lower under some circumstances. I thought fake outrage was banned here?
- wil421 2y agoAt the levels OP described I’d be at 17% federal and state taxes rate. I’m at about 42% with state and federal but you need to add and zero and double the amounts to get close to our household income. Not sure if Portugal uses marginal tax rates or not.
- ramses0 2y agoPlus mandatory insurance (minimally: health, arguably: car due to extremely poor public transit)
- deleted 2y ago[deleted]
- ativzzz 2y agoNot even close, the marginal federal tax rate is 12% for income between $11k and $44k [0]. This doesn't take into account state/property taxes, but it's nowhere near [0]https://www.irs.gov/filing/federal-income-tax-rates-and-brackets https://www.irs.gov/filing/federal-income-tax-rates-and-brac...
- codezero 2y agoMost people working in tech are making much more than that as are anyone considering moving to Portugal for a tax break. It’s a lot closer to 24-32% for that demographic.
- lostmsu 2y agoBoth calculations should include VAT btw
- s1artibartfast 2y ago
- victorbjorklund 2y agolaughs in swedish. 32.75% taxes. That is so low.
- speeder 2y agoPortugal taxes are probably higher than Sweden. Many people ignore portugal mandatory social contribution, it is mandatory even if you earn minimum wage, and the tax there is about 34% (forgot exact number, the way they charge make it clunky to calculate). Most portuguese people think this tax is "only" 11% because the rest of the tax is "paid" by the employer. Average people don't understand that if your salary was supposed to be 1000 and you get only 650 after tax you paid 350 in taxes even if your paycheck says your pretax salary is 800. Note: the income tax is paid on top of the social contribution, so is easy to end paying 50%+ taxes if you are in tech. Then Portugal gets mad with all recent grads moving to Germany. (By the way, I still live in Portugal but all companies I worked for since moving here were German, Portuguese companies can't compete in wages)
- jcmfernandes 2y agoIt can go up to 48%. But as in most countries, it's progressive: you pay X% over the first A€, then Y% over the next B€, etc. Then you have Social Security (mandatory): 11% on the employee and 23,75% on the employer, or 21,4% for independent workers.
- Muromec 2y agoCries in throat sounds and having tax discount expiring at the end of this month
- radicalbyte 2y agoI'm paying about 50% tax rate here in NL (we have a very high income), I just wish that those who have 10x and more than our income also had to pay a 50% tax rate. Only our tax rules have been written so that those who are very rich don't pay their fair share.
- rad_gruchalski 2y ago> I just wish that those who have 10x and more than our income also had to pay a 50% tax rate I'd imagine that those who earn 10x what you earn hit the €75518 faster than you so they pay their fair share faster. No? Define "fair".
- JetSpiegel 2y agoOnce again even professional people that write about money do not understand how marginal tax rates work, or more likely, are ideologically driven to lie. No, if you earn 20k€ you don't pay 26% of taxes, that's the start of the bracket.
- whatshisface 2y agoGoing by elementary macroeconomic principles, currency unification will always result in "dead zones," because their exchange rates can't stabilize the balance of trade.
- MichaelZuo 2y agoWhat does ‘ exchange rates can't stabilize the balance of trade’ mean?
- AnimalMuppet 2y agoIf the US is trading with the EU, say, and the US is importing too much and exporting too little, eventually that affects the exchange rate between the dollar and the euro. That adjusts in a way that somewhat counteracts the trade imbalance. But if Portugal imports too much from France and exports too little, and they're both using the euro, then there is no exchange rate to adjust, and so you're just left with the trade imbalance and no adjustment.
- moffkalast 2y agoSo what, the exchange rate in that case would change so US consumers lose buying power for EU imports as a sort of automatic customs fee and as a result would prefer locally made alternatives? I would question how well that works outside completely generic goods that you can buy anywhere, since with economies of scale consolidating production there is often hardly any alternative anymore. Also, feels like there could be a way to manually address the balance without reducing people's standard of living.
- whatshisface 2y agoThe balance is not maintained for individual goods, but rather for the whole market. If the EU is better than the US at manufacturing everything, the exchange rate will fall until the US can at least do one thing cheaper. Exchange rates don't help raise people's standards of living, but they do prevent countries from becoming economic dead zones.
- chaosprint 2y agomeanwhile Norway has started a controversial exit tax that can kill many tech startups: https://www.forbes.com/sites/danieladelorenzo/2024/04/09/norwegian-startup-scene-petitions-against-exit-tax-towards-tech-sector/ https://www.forbes.com/sites/danieladelorenzo/2024/04/09/nor...
- diggan 2y ago> When the natural interest for start-ups is to scale up and expand in foreign markets, or to leave the country to seek better deals, the proposed 37.8% exit tax on unrealized assets over $46.5 thousand that have been accumulated in Norway, seems to be the last drop for any foreigner or Norwegian with big dreams to set a business in the Nordic country. As prior art, doesn't the US have something similar where if you want to leave your residency/citizenship, you have to pay up, even for unrealized gains and such? Seems like Norway is modelling something similar to what the US already has, and the US seems to still have tech startups coming out of it.
- chaosprint 2y agowell. but these two countries are very different, so can't just copy paste policies.
- CalRobert 2y agoI think the difference is that the US is where you'd want to found your startup anyway.
- InDubioProRubio 2y agoA expected step. Nobody has a intention, to build a anti-(age)-statistic protection wall. Young, educated people are the gold of the western world- and the gold must not always flow towards rome as tax.
- JumpCrisscross 2y ago> Young, educated people are the gold of the western world No, they (we?) are not. The better analogy is a gold mine. You still need to invest in it to get anything out, and it’ll be a few years before you do. If you fail to do that, all you have is a Superfund site.
- s1artibartfast 2y agoDifferent analogies, but both are true. Young, educated, [and motivated] workers are a desired and contested resource. Producing them is also important.
- JumpCrisscross 2y ago> Young, educated, [and motivated] workers are a desired and contested resource Theoretically, sure. In reality this isn’t reflected in the immigration policy of any large economy. Portugal makes news with this for a reason. > Producing them is also important The point is having lots of underutilised young people is a liability. Gold doesn’t join gangs or riots.
- s1artibartfast 2y agoAgreed. There are also interests that benefit greatly from them them being a highly contested resource with restricted supply. If you are holding gold, you dont want someone to flood your market with more.
- JumpCrisscross 2y ago> If you are holding gold, you dont want someone to flood your market with more Right, this is why it’s a stupid analogy. That’s true for gold. But if you’re hiring young, educated people, you do want your country flooded with them.
- jcmfernandes 2y agoPortugal already has tax breaks for the youth (aka IRS Jovem), but the new right-wing government is seeking to extend what the previous left-wing government introduced. That includes loosening requirements and extending the duration of the tax breaks. Now, while in Portugal people talk about these as measures to retain the Portuguese youth in the country, no political party has framed it as a measure to capture foreign youth. Puzzling to me.
- bluecalm 2y agoI think in general the deal in EU is terrible for young and not so young productive people. Taxes on income are high, real estate is very expensive as the land is already taken by others (who usually pay very little tax on it). There is regulatory capture in many industries so you need to first spend years in school then more years to get various certificates and then often you need to work for basically free until you can jump to to the other side of the barricade and start exploiting newcomers. Taxes are high in Europe because we fund older generations and have oversized wasteful public sector. It has nothing to do with education (very low % of overall budget), healthcare (you are funding it mainly for old people paying multiple of you fair share if you have any kind of decent job) or "social safety nets". I hope more countries push against that. Portugal has fantastic weather and landscapes, same for Greece. Attract enough productive people who are fed up with being diary cows for pensioners and bureaucrats who never worked an honest day in their lives but are very qualified to spend your money and things will start happening there.
- alephnerd 2y ago> Taxes are high in Europe because we fund older generations and have oversized wasteful public sector Everyone seems to forget the Eurozone Crisis from 2008-2014 and how government debt skyrocketed. A lot of that debt was also at bad terms due to the high risk profile during that time period. The only easy lever a lot of European countries had to service their budgets was taxes, because a lot of other levels were handed off to the ECB.
- rsynnott 2y agoHow much of that is still at high rates? Ireland’s (at one point the second-highest debt to gdp ratio in the eurozone) average cost of debt servicing is ~1.5%; at that rate you don’t _want_ to pay it off. At least in Ireland it was largely refinanced since the crisis; I’d guess it’s similar in the other high-debt nations (except possibly Greece, where refinancing might be difficult).
- alephnerd 2y ago
- intellectronica 2y agoWhenever I read about these schemes I wonder ... did it not occur to the people running the governments of these countries that people are not purely economic maximisers, and that they can attract and retain people by having a country that is fun and comfortable and safe to live in? People in Denmark pay a lot in taxes, but I haven't seen many of them rushing to leave.
- alephnerd 2y ago> People in Denmark pay a lot in taxes, but I haven't seen many of them rushing to leave. The issue is salaries in Portugal are VERY VERY low - they are comparable to Poland, Romania, and Greece - yet their tax burden and cost of living is comparable to Denmark. A 25 year old Portuguese college graduate can immigrate visa free to Denmark and double-to-triple their salary almost overnight. The same can't be said for a Dane unless they immigrate to the US, but they're in the H1B queue like everyone else so it just isn't worth the hassle unless it's a high paying white collar job. The EEC has a massive disparity in incomes, with average monthly wages ranging from €700 to €5,000 depending on the country, and as EEC members tend to have fairly simplified immigration policies between each other, this causes a brain drain in the countries with lower wages.
- intellectronica 2y agoRight, but there are two variables in that equation. If the economy were stronger and more productive people could earn higher salaries. Don't get me wrong, I don't like taxes either (I live in Switzerland and pay relatively low rates of income tax) but it just seems like a loser move to decide that the solution is to fiddle with the taxes, rather than figure out how to make it a place people can build a great life in, including salaries, services, fun, comfort, safety ... all the different things that are important to people.
- alephnerd 2y ago> If the economy were stronger and more productive people could earn higher salaries The issue is Portugal is very business unfriendly and human capital is weak. It's hard to make the case to invest in Portugal when you can invest a similar amount in neighboring Spain and get a much better return. Nor do local businesses earn enough to pay comparable to higher income countries in the Single Market - especially because Portugal essentially penalizes large employers This means the only way to make up the salary differnce that is the cause of the brain drain is to decrease taxes for early career Portuguese. Denmark and Portugal are nowhere near the same level of development, and what works for Denmark does not work for Portugal.
- steveBK123 2y agoPortugal is an interesting microcosm of the general economic problems in EU vs US. I don't think tinkering with income tax brackets/credits is going to fix the actual problem - robust and steady job creation of good paying jobs. There are ~11M people in Portugal, 3M of which are in Lisbon metro and 2M are in Porto metro areas. This leads them to having the same problem as Japan - the population is decreasing, BUT the countryside and 2nd/3rd tier cities are emptying out. So housing affordability in the major cities remains poor. The youth therefore get squeezed out and emigrate, leaving an increasing tax burden problem paying for all the benefits given to the increasingly aging population. My father visited his home town in the countryside in the last decade and found much of the town essentially abandoned. No one lived in the home he grew up in. His uncle owned an inn that had no guests, etc. Meanwhile, Portugal remains a beautiful place and I will visit more in the future, and could even see wanting to retire there.
- klipt 2y agoThe EU and USA both have free movement between states. But the USA has massive federal tax revenue and spending which redistributes wealth from rich states to poor states. Federal taxes are much higher than state taxes. By comparison the EU has high state taxes, but very tiny "confederal" EU level revenue. So much less ability to balance things between rich and poor member states. This puts poor states like Portugal into a bad position where they suffer from brain drain due to the free movement, but don't get enough monetary benefits from the EU to counteract that. This turns Portugal into a gateway country for the EU: they have loose immigration rules because they want to attract young workers. But as soon as those workers live in Portugal long enough to get an EU passport, many brain drain away to other (better paying) EU countries, and need to be replaced with even more immigrants.
- alephnerd 2y ago> This puts poor states like Portugal into a bad position The only reason Portugal (and Ireland, Spain, Greece, etc) is counted as a "Developed Country" today is because of the EU. These countries received the lion's share of EU Development Funds until EU expansion in the 1990s-2000s. If Portugal didn't join the EU, it would have been similar to Argentina - it's economic peer until EU ascension in 1986
- nickip 2y agoWhat does "young people" entail? What age group?
- pjmlp 2y agoAs Portuguese I have my doubts about this actually being successful.
- lostmsu 2y agoI'd love to move to Portugal, but I have kids that are about to enter school age, and Portuguese education seems much worse (judging by outcomes) than the rest of EU, especially former eastern block.
- Nifty3929 2y agoPolicies lead to results. If Portugal wants to keep the young people from leaving, why don't they look at where those people are going - and why - and emulate the policies of those destination countries? If you don't want to adopt the policies that lead to the results that you want, then you don't really want those results. Maybe most of the voters and politicians in Portugal don't want to change those things that the young people don't like.
- speeder 2y agoIn this case the problem is literally democracy. Portugal has more old people than young people, and those old people are perfectly fine screwing the younger generation. Specially because lots of older people don't have many descendants anyway so they don't care what will happen after they die.
- gnwn2 2y agoThey do not care about young people, if they did they would not have opened the country to receive millions of immigrants in a few years which has massively increased rents and property prices, taxes are high as hell, they even lowered the tax bracket where you start paying 43%, and this lower tax for "everyone under 35" is not for everyone under 35 Did I forgot to mention that if you come here you're capped at 20% IRS
- jokethrowaway 2y agoNice tax discount from the leviathan and 10 years is just enough time to get some working experience and then move to a country with an upward trajectory to have children. It's a shame, Portugal is a nice place to live. offer a low flat tax on income and productive people will flock to Portugal, making businesses, families, investing in the territory until they retire.