Why Is Everyone Whining About Taxes?

INSERT DESCRIPTIONFrom Flickr user Global Jet.

The Economist published its annual graph showing total taxes as a percent of G.D.P. for a large number of rich countries.

Not surprisingly, there’s little year-to-year change — and the U.S. is near the bottom. We are a low-tax country; our average tax rate, counting all taxes, hovers above 30 percent.

Why do we hear so many more complaints about high taxes than I hear in the European Union, where taxes are a much higher percentage of G.D.P.? It’s hard to believe our governments are less efficient than European governments — and that we’re getting less bang for the buck than Europeans get bang for their tax euros.

And it certainly is not the case that our taxes are structured so that the average person pays the top rate: The top federal marginal tax rate kicks in much farther up the income distribution in the U.S. than in European countries.

So what is it?

After all, Joe the plumber pays far lower taxes than Josef or José the European plumber does, so why should Joe’s fellow citizens have any sympathy for him?

One economic answer to this question is that we all expect to become rich and don’t want to have very high taxes on our expected large incomes. Yet today, income mobility is no greater in the U.S. than in Europe, so our expectations do not seem rational.

What’s the answer? Are we more selfish than Europeans? Are our governments less efficient?


T

With a parent who is an Irish & UK citizen, a brother-in-law who is a German, an aunt who is French, Spanish and Dutch friends and Swiss uncles, it has been my experience that these nationalities (except the Swiss) complain much more about taxes than Americans do. And most of these people are teachers, secretaries, etc. The premise of the question is ridiculous and fatally flawed.

And since when were Czechs, Poles and other central and eastern europeans not Europeans? Maybe these nationalities do not complain as much because their taxes are significantly lower than Americans'...

Beezer

One thing is certain, no one has the same facts. For every "fact" mentioned in the previous 164 posts there seems to be at least one completely opposite fact given elsewhere. No wonder we're in such a mess!

What follows are not facts, but opinions.

Free markets can't do everything well. And they tend to have relatively short horizons and strong, though limited focus. Pollution is an example. Free markets didn't really price pollution much, if at all, in product pricing. Later generations had to pony up tax dollars to have government lead the effort to clean up the mess.

Today, free markets aren't really pricing future scarcity into energy prices. Presumably, future generations will have to pay taxes to compensate for too cheap energy in the past.

Free markets won't provide for broad based education. Do we currently price correctly the value of broad based education? Based upon the tuition charged by private (free market) schools, my guess is no.

All this involves government and taxation. The problem is that no one seems to have any consensus ideas about what the price really is of those benefits which most would agree would never be provided alone by free markets. All we know is that, at some future point, free market mis-pricing will have to be made up for by higher taxes on future generations.

Take our current financial and economic problems. A good part of this came about because the free market underpriced risk. Made a heck of a lot of money for a lot of people, but in the end the products sold were vastly underpriced. So now who is going to pick up the tab?

Personally, I'd prefer to err on the side of caution. I'll take a little less "efficiency" in financial markets as a tradeoff for more regulation and transparency.

I'll pay more for today's energy as a trade-off for knowing government is boosting renewable energy research, production and transmission in preparation for the day oil is used only for lubrication.

And so on. I know free markets and capitalism can generate tremendous growth and wealth, I just want some cushion elsewhere in the event free markets make long term mistakes in pursuit of short term profits.

So I don't really whine much about increasing tax rates.

Read more...

LZ

Much of European taxation is derived from the VAT, which is distributed more evenly through the population.

It is easy to complain about a 50% combined income tax when 40% of the population pays no income tax at all, or gets IRS-administered welfare in the form of "tax cuts" or "refundable tax credits." The disparity between the highest and lowest taxpayers is a rate of 50-60% of income. (FICA is not a tax but a forced savings scheme where you get your contribution back).

It is harder to complain about a 55% combined income+VAT tax since everyone in society pays the 25% VAT, so that the disparity between the highest and lowest taxpayers is a rate of only 30% of income.

Europe has discovered that if you make everyone pay some tax, the burden is distributed more evenly and fairly, the 5% minority are less likely to complain about being picked on by the 95% majority, everyone has a stake in controlling government spending, and you can help out the poor simply by spending on social programs. Perhaps America should do the same.

And to the above poster who complained that Americans complain about taxes because of racism, I'm guessing you're unaware that over 10% of Europeans are non-white who receive disproportionately more in social benefits.

Read more...

Dean

Shouldn't our discussion of tax rates be directed toward what should our government be spending, and what is the best, most efficient way to raise the requisite sums? If lower taxes are better, wouldn't zero taxes be best? Taxes provide society a way to spend money(and express our values) as a collective whole. So, what, exactly, are our values?

JJ

I agree with the Belgian! Here in the Netherlands (let's not see Europe as a monolith, shall we? It isn't!) we also have high income taxes. I am in a relatively high tax bracket for part of my income, and I look at it this way. The reason I have a good income is mostly because I was able to go to university - where I had to pay only part of the real cost of my education, the rest gets subsidized by the state. Plus we have good public transport, which for me turns out cheaper than owning a car, I get free health care, social security, guaranteed holdidays, a decent pension... I like the idea that should I become too ill to work full-time I will get financial support from the state. And I am perfecly willing to pay taxes for that. In fact, when I discuss this with friends and somebody complains about paying taxes, somebody else will usually say "but we wouldn't want the American situation over here, would we" - and everybody tends to nod in agreement ;-)...

Read more...

Kirilius

Mike (173), I think you are very wrong when you say that Europe is not a country. Just look here:

http://www.youtube.com/watch?v=juOQhTuzDQ0

;-)

Bob Mounger

to elaborate a bit on the point made by #163

http://tinyurl.com/3hy6y8

Amy

Here in Belgium we have the 3rd highest taxes in Europe. But, included in that we have: healthcare; social security, such as unemployment allowance (for as many years as you need it, at a percentage of your former income), guaranteed maternity leave of 14 weeks at full pay, guaranteed holidays of 20 days per year (plus public holidays), state pensions, employer-funded travel allowance and meal vouchers; free schools and universities... It's not hard to see why we pay more taxes. Personally I prefer it that way, as it ensures everyone, no matter how much they earn, has the same rights.

Free Marketeer

If taxes are the price of government, what's wrong with asking if the price is too high? How is that irrational or selfish? Studies have shown that if you add up all local taxes, property taxes, federal taxes, state taxes, sales taxes, gas taxes, etc. many people give up 25% to 40% of their income a year.

For those of you that see government as a form of charity, ask yourselves if you would give to any charity that wastes a good portion of its revenue.

In any case, the best solution to this problem is a FairTax or a Flat Tax. Other countries have implemented it with great success.

Jay

@127: Even *after* the taxes you (or your family) make eight times what the median American family earns (per Wikipedia, US census bureau says it is $50,000). You can look down on 98% of the American people, knowing they are worse off than you, and many many of them very much worse off indeed. Isn't that enough? What on earth do you want to do that you can't do now?

Phil H

Try to see it from a European's perspective. They had an excellent education that cost them little; they travel to work on cheap public transport; their inner-city streets are generally clean and safe; they can see a doctor or go to hospital without having to worry about how they'll pay for it; when they call the police, they usually turn up promptly; last time they lost their job, they didn't have to worry about being destitute as a result; and some of them can drive at 140mph on the freeway if they like.

All of which may mean higher taxes, but if you use these services every day, I don't think you'd doubt their value, and you'd probably laugh at the idea that private enterprise would be able to provide them at the same cost (or at all).

Clyde Kahrl

In most states, total government spending (including federal) exceeds 50% of the "income" roughly.

Sales tax here is 6.5%. That is over and above income tax. Ohio has a state income tax, and muny and school income taxes also. Also, several payroll taxes. Most revenue comes from property taxes.

Anyway, the point is this: over half of government spending is at the state and local level.

I should also point out, that as Milton Friedman chronically observed: the real tax rate is what government spends.

David Karlson

From the early comments, I identify most with # 4, which De Tocqueville was saying about Americans some 180 years ago and is remarkably true to this day. In the 1820's this observant Frenchman noted that lots of Americans wanted to be rich. This, of necessity, requires one to make end runs around the boring morality in treating people decently ( see Enron, etc.) The false God of deregulation has been thrust upon us by a top heavy slate of overly greedy big shots and requires constant monitoring !! May Zeus give us strength in the years ahead. David Karlson

Jay

@37:

Yes, I think it would be good for the country. If she is complaining because of tax structure is not making it worthwhile for her to work, then she is obviously not in need of the money, since she is at a level where she can rationally calculate the cost of working versus the cost of not working and can seriously consider not working.

It is also clear that in addition she has no great love (or no longer any great love) of the work itself, since if she were working just for the love of the work, then she wouldn't care about taxation affecting her paycheque: the money would just be a bonus.

She ought then to give up the job either to someone else who actually needs it to support himself/herself and his/her family, or who actually loves the work. In either case she will be replaced by someone who is more productive in the job.

ruralcounsel

#81 Lynne,

Clearly you're a pampered city brat.

A lot of us out here in the place where they make things and grow everything that you eat, do just that. And we do without (most) government a lot better than you do, even (or especially) when the power goes out.

We're the folks that built all that stuff. Roads, bridges, dams, tunnels, railroads ... you just enjoy the benefits of it.

Alex

If I felt the gov't was spending my tax dollars EFFICIENTLY then I may not care. However, half of the work the govt does can be done for half of the cost in the private sector. That takes the 30% tax rate down to 15% + 7.5% leaving me the extra 7.5% income. That's probably a huge underestimation. The high tax argument is more appropriately designated as a government inefficiency argument in my book.

Lynne

For all those whiners -- those who think things would be better if they alone decided how to spend the money they earn: Are you also willing to take financial responsibility for maintaining your sewage systems and water supplies? Your roads, bridges, and tunnels? Plowing and sanding the roads at 3am when there is a snowstorm, so you will be able to get to work safely? How about libraries, national parks, local parks? I could go on and on and on. You are a bunch of spoiled brats, so pathetically full of self-entitlement. What a comedy it would be to see how well you would do without government!

bob

as a wise woman once said (my mom), if Europe jumped off a bridge, does that mean you would too?

Interesting Data: compare GDP growth with the tax rate. Denmark's growth is unimpressive.

http://indexmundi.com/denmark/gdp_real_growth_rate.html

while the USA is much better:

http://indexmundi.com/united_states/gdp_real_growth_rate.html

Perhaps, Europe should be looking at us.

Adam

"Why do we hear so many more complaints about high taxes than I hear in the European Union, where taxes are a much higher percentage of G.D.P.? "

The answer is simple: we complain because of the American Dream. It is a cornerstone of American culture and is a definitive trait of our nation.

There is no "European Dream." Ever-increasing taxes are a threat to our economic liberty. That which differentiates us from Europe is what Americans love.

Ann

I think it's pretty jingoistic (and deeply insulting, not to mention unscientific) to say us Europeans are more genetically predisposed to submission and serfdom than Americans. How would you feel if we said that you are genetically predisposed to being greedy and careless of your fellow countrymen?