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How do you get around 64% of European countries' tax revenues coming from REGRESSIVE taxes? That's the exact opposite of the U.S., in which the most tax revenue is collected via our highly progressive federal income tax.
I don't have any problem with that. It has nothing to do with your assertion that a low or middle-income person in those countries pays a higher tax rate than a rich person. That assertion is WRONG. Because if a rich person pays 59% income tax, and pays the additional regressive taxes, his tax rate is going to be at least 65%. For your assertion to be true, then low or middle-income people have to be paying more than 65% of their annual income in taxes. Which is untrue.
Just because the majority of a nation's income comes from regressive taxes does not mean that the nation doesn't also collect progressive taxes. And when you discuss individual tax rates for people in different tax brackets in those countries, the progressive taxes on the rich mean that even with the amount of regressive taxes, their progressive income tax causes the average rich person to carry a greater tax burden, (ie pay a higher tax rate, tax rate being defined as the percentage of their income paid to the state in the form of taxes) than the average low or middle-income person.
I don't have any problem with that. It has nothing to do with your assertion that a low or middle-income person in those countries pays a higher tax rate than a rich person. That assertion is WRONG. Because if a rich person pays 59% income tax, and pays the additional regressive taxes, his tax rate is going to be at least 65%. For your assertion to be true, then low or middle-income people have to be paying more than 65% of their annual income in taxes.
Exactly. Why do you propose that isn't true?
Even Krugman cites exactly what I've stated
Quote:
"countries with strong social safety nets generally rely a lot on consumption taxes"
Who spends more of their income on consumption? Lower and middle income earners? Or high income earners? The former, which is what makes European countries tax systems regressive.
Those are the facts. Even Krugman gets it. Not sure why you don't.
Who spends more of their income on consumption? Lower and middle income earners? Or high income earners? The former, which is what makes European countries tax systems regressive.
Those are the facts. Even Krugman gets it. Not sure why you don't.
European countries tax systems are combinations of regressive and progressive tax collections. The regressive tax collections collect more money than the progressive tax collections, which is why the tax systems are characterized as regressive. That doesn't mean that no progressive tax collection occurs.
And since progressive tax collection, income tax, is collected, and the richest pay an enormous percentage of their income, their effective tax rate is higher than the effective tax rate paid by lower or middle-class earners. This doesn't mean that regressive taxes don't impact lower and middle-class earners more, it simply means that the progressive taxes are so high that the rich still pay a higher tax rate. Not sure why you don't get this.
European countries tax systems are combinations of regressive and progressive tax collections.
Yes, with the net effect being REGRESSIVE, meaning that lower and middle income earners end up paying higher total effective tax rates than do higher income earners.
Yes, with the net effect being REGRESSIVE, meaning that lower and middle income earners end up paying higher total effective tax rates than do higher income earners.
Those are the facts. Why are you so loathe to admit it?
The net effect is that the government's income is derived from regressive taxes more than from progressive taxes.
It does not mean that lower and middle income earners end up paying a higher tax rate than high earners do.
If the progressive tax rate is high enough on those high earners (59% seems to be high enough), then their effective tax rate remains higher than low or middle income earners.
And all those European countries have BOTH progressive and regressive tax collections.
Marx and Rand both have terrible ideas. The difference is that Democratic Party doesn't take Marx seriously, but the Republican Party does take Rand seriously.
Another difference is that one was a fictional character....one wasn`t.
The net effect is that the government's income is derived from regressive taxes more than from progressive taxes.
Exactly. Who does regressive taxes impact the most: low and middle earners? Or high earners?
Quote:
If the progressive tax rate is high enough on those high earners (59% seems to be high enough), then their effective tax rate remains higher than low or middle income earners.
If that were so, the net effect of ALL taxes wouldn't be regressive, it would be progressive. But according to actual data, that's not the case. The net effect of the combination of taxes is regressive.
Exactly. Who does regressive taxes impact the most: low and middle earners? Or high earners?
If that were so, the net effect of ALL taxes wouldn't be regressive, it would be progressive. But according to actual data, that's not the case. The net effect of the combination of taxes is regressive.
Why would the net effect be progressive?
Let's actually do some math, okay?
I live in the Country of Ridge. In Ridge, I have 30,000 people who make $50,000/yr, and 75,000 people who make $100,000/yr, and 1000 people who make $500,000/yr.
I charge a VAT tax on everything sold in the country at 40%. That's a regressive tax.
I also charge a progressive income tax: the poor people ($50,000) pay no income tax, the middle class people ($100,000) pay 30% of everything they earn over $50,000, the rich people pay 55% on everything they earn over $50,000.
Everybody in the country spends $50,000 a year on goods, and pays the VAT taxes.
So, in income tax, I collect no income tax from the poor, I collect $1.125 billion from the middle class, and I collect 247.5 million from the rich, for a combined income tax/progressive tax collection of $1.3725 billion.
And in VAT tax I collect $2.12 billion dollars.
I collect a total tax revenue of $3.4925 billion dollars. 39% from progressive tax sources, 61% from regressive tax sources. Close enough to the models you are describing?
Now, I look at the tax rates.
If I earned $50,000, I paid no income tax, I spent all my money, and I paid 40% of my income in regressive taxes. So my effective tax rate is 40%.
If I earned $100,000, I paid $15000 in income taxes ((100,000-50,000)*.30), and I paid $20,000 in regressive taxes (50,000 * .40). My effective tax rate is 35%.
If I earned $500,000, I paid $247,500 in income taxes((500,000-50,000)*.55), and I paid $20,000 in regressive taxes. My effective tax rate if 53.5%.
Because Ridge's tax revenue is primarily from regressive tax sources, it's considered a regressive tax system overall. But because my progressive tax schedule taxes so steeply, the rich still pay a higher tax rate.
I've read it. The majority of taxes collected came from regressive tax sources. That's all. Regressive taxes have a greater impact on the poor. Progressive taxes have a greater impact on the rich. European countries have a combination of both. The progressive taxes are so steep in Europe, that the rich still have a higher tax rate than the poor or middle class. But they are so outnumbered by the poor and the middle-class that the regressive taxes represent a greater amount of revenue in the European tax systems.
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