Are European Taxes REALLY Oppressive?
by Fig
Letters on car mirrors sometimes says “Objects may be closer than they appear.” Some emails circulated on the Internet should have the advisory “Some emails circulated on the Internet may not be as accurate as they appear.” For instance, this one:
Current European Tax Rates
United Kingdom
Income Tax: 50%
VAT: 17.5% TOTAL: 67.5%France
Income Tax: 40%
VAT: 19.6% TOTAL: 59.6%Greece
Income Tax: 40%
VAT: 25% TOTAL: 65%Spain
Income Tax: 45%
VAT: 16% TOTAL: 61%Portugal
Income Tax: 42%
VAT: 20% TOTAL: 62%Sweden
Income Tax: 55%
VAT: 25% TOTAL: 80%Norway
Income Tax: 54.3%
VAT: 25% TOTAL: 79.3%Netherlands
Income Tax: 52%
VAT: 19% TOTAL: 71%Denmark
Income Tax: 58%
VAT: 25% TOTAL: 83%Finland
Income Tax: 53%
VAT: 22% TOTAL: 75%If you’ve started to wonder what the real costs of socialism are going to be – once the full program in these United States hits your wallet, take a look at the table. As you digest these mind-boggling figures, keep in mind that in spite of these astronomical tax rates, these countries are still not financing their social welfare programs exclusively from tax revenues! They are deeply mired in public debt of gargantuan proportions. Greece has reached the point where its debt is so huge it is in imminent danger of defaulting. That is the reason the European economic community has intervened to bail them out. If you’re following the financial news, you know Spain and Portugal are right behind Greece.
The United States is now heading right down the same path. The VAT tax in the table is the national sales tax that Europeans pay. Stay tuned because that is exactly what you can expect to see the administration proposing after the fall elections. The initial percentage in the United States isn’t going to be anywhere near the outrageous numbers you now see in Europe.
The emailed article says the tax rates grew by starting out smaller and grew and to expect the same thing here.
It is the very notion that with hard work and perseverance, anybody can get ahead economically here in the USA . Do you think that can ever happen with tax rates between 60% and 80%? Think again. With the government taking that percentage of your money, your life will be exactly like life in Europe …
You will never be able to buy a home.
You will never buy a car.
You will never send your children to college.Let’s not shuffle the battle cry of the socialists under the rug either. It’s always the same cry. Equalize income. Spread the wealth to the poor (whoever they are). Level the economic playing field. Accomplish that and everything will be rosy.
It’s time to take a hard look at reality.
Greece is a perfect example. Despite the socialism system that has ruled this country for decades, with a 65% tax rate, they are drowning in public debt, would have defaulted without hundreds of billions in bailout money from the EU, and still. . . 20% of their population lives in poverty. What has all that socialism money bought, besides ultimate power for the politicians running the show?
Do you think these people are “free”? They are slaves to their economic “system.”
Instead of spreading the wealth around, spread this info around. It might wake up some people.
If you agree with this, forward it, if you do not agree with it, read it again
And the reality:
The first reading gives the impression that the current economic woes of European countries are due to their high tax rate, and cites the bailout or impending bailout of Greece, Spain and Portugal as evidence. The author warns that the US will fall into the same kinds of economic despair if we allow our tax rates to go up to European levels. That “with tax rates between 60% and 80%”, our “life will be exactly like life in Europe”. We will “never be able to buy a home”, “never buy a car”, and “never send (our) kids to college”. Rereading, as the author suggests, raises a few questions which demand answers. One of which is, “Is life in Europe really that bad?”
Additional research shows that the above 3 claims about the current lives of Europeans are false. With regard to buying a home for personal occupation, the US ranks # 12 among 22 countries, at 68%. Three countries from the author’s list of those whose taxes are too high to allow buying a home have higher home ownership rates than the US (Spain—78%, Norway—77%, and UK—69%) The other countries on the author’s list have home ownership rates ranging from 49 % to 67%. (Ten references in Wikipedia) So much for high taxes causing inability to buy a home!
Are Europeans really unable to buy cars? According to a recent paper from the Carnegie Endowment for International Peace, “In Search of the Global Middle Class: A New Index” (The Atlantic, September 15, 2012), the US is now ranked 25th in the world in per-person car ownership. Car ownership “is higher in nearly all of Western Europe”, including (again, from the author’s list of countries where people are unable to buy cars) UK, France, Spain, and Greece. So much for high taxes causing inability to buy a car!
Finally, with regard to sending kids to college, all of the following nations have a larger percent of college graduates than the US: Australia, Belgium, Canada, DENMARK, FRANCE, Ireland, Israel, Japan, South Korea, Luxembourg, New Zealand, NORWAY,SWEDEN, and the UNITED KINGDOM. (capitals mine). Obviously, high taxes do not keep Europeans from sending their kids to college. (Education at a Glance 2011 –Organisation for Economic Co-operation and Development )
Another question; how is it that other members of the European economic community, also having high tax rates, have economies strong enough to bail out the three that are failing? In fact, (from the author’s own figures), the tax rates of the three countries cited as failing, Greece, Spain, and Portugal, have significantly LOWER tax rates (average 62.6%) than 6 of the other 7 listed (average 75.9%). If high tax rates doom a country’s economy, how can countries with higher tax rates be wealthy enough to bail out those with lower tax rates? This is at least partial evidence against the main thesis of the author; that high tax rates destroy a country’s economy.
But for the best evidence against the above imaginary inverse relationship between tax rates and the economic condition of a country, we can cite the example of our own country. Our maximum income tax rates, (married, filing jointly) have remained at 35% since 2003—much lower than those in Europe. In practice, because of loopholes, deductions, exemptions, tax credits, and tax shelters, both foreign and domestic, and hidden foreign accounts—the wealthy members of our society pay even LESS than 35%. Governor Romney, for example, announced recently that he has “never paid less than 13%” Yet his 2010 and 2011 tax returns list a combined gross income of over $40 million (Boston.com, “Mitt Romney’s 1040 Tax Return—“). Internal Revenue Service records reveal that, in 2007, the four hundred richest Americans paid an average of 16.6% in taxes (see “The Betrayal of the American Dream”, Bartlett and Steele, 2012). Furthermore, we have learned recently that some persons and corporations are paying taxes at lower rates than their employees—and some pay no taxes at all! SUCH LOW INCOME TAX RATES HAVE NOT PROTECTED THE US from the same financial disasters that occurred in Europe, including; near failure of a world-leading industry; bank bailouts; high unemployment; rampant home foreclosures; increased homelessness—and even a downgrading of our bonds.
Additional evidence against the author’s contention that high taxes damage the economy is the comparison between unemployment rates in the US and Europe. We hear over and over that the wealthy will create more jobs, thereby solving our economic problems, if we just keep their tax rates low. This doesn’t even pass the “common sense” test. If I were a multimillionaire, busy enjoying and gambling with my money, and got a big tax break? I can’t imagine saying, “Oh boy, this is just what I’ve been waiting for. Now I can hire more people!”
But more persuasive than “common sense” is a look at the unemployment rate in the 10 countries cited by this author as bad examples of tax policy, from a “job creator’s” point of view. From “Trading Economics ” (2012), the unemployment rates this summer were; United Kingdom—8.1%; France—10.2%; Greece—24.4%; Spain—24.6%; Portugal—15%; Sweden—7.5%; Norway—3%; Netherlands—6.5%; Denmark—4.5%; and Finland—7.9%. The latter 4 countries have unemployment rates significantly lower than ours (8.1%) in spite of their much higher tax rates. This alone fails to support the supposed inhibition of job creation when the wealthy are taxed heavily. Furthermore, a study published in May 2012 by PRIME (Policy Research In MacroEconomics), reviewing the income tax and unemployment rates for all 27 EU members, concludes, “there is no evidence from these comparisons that higher top rates of income tax are correlated with higher rates of unemployment.” Don’t the wealthy and powerful in this country know about this lack of connection between their tax rates and jobs? These are world-wise and intelligent people; they must know!
For that matter, the Bush Era tax cuts of 2001 and 2003 gave about $1.6 TRILLION
(Congressional Budget Office, June 7, 2012) to the “job creators”—so where are the jobs? Why did the economy crash in 2008? What more evidence do we need that tax breaks for the wealthy help only the wealthy?
On the other hand, tax breaks for small business owners DO make sense. They are the real job creators, because they aspire to becoming wealthy also.
Of course, it’s the wealthy and powerful, through dismemberment of acquired companies, terminating and raiding pension plans (see “The Betrayal of the American Dream”, Bartlett and Steele, 2012), outsourcing, and financial speculation, who are responsible for most of our job losses. So why does the author make this obvious attempt to help the wealthy and powerful spread the erroneous impression that high tax rates for the wealthy result in economic collapse of the country? Is this simply hysteria among the super-rich that they may have to pay more taxes? Or are there other reasons?
One suggested purpose of such scare tactics is explained in Naomi Klein’s book, “The Shock Doctrine” (2007). Those in power who want to get more control of a country (as those in power usually do) will fabricate or create a financial crisis as a way to convince the people that draconian measures must be instituted to save the country from total collapse. Those measures, of course, accomplish the goal of those in power. In the 70’s and 80’s this technique was applied in many countries in Central and South America, to the near total destruction of their economies and, more importantly, their loss of personal freedom. Only recently have those countries begun their recovery; by breaking their ties (and loans) with the World Bank and the International Monetary Fund— two organizations that were “enforcers” of the “shock doctrine”. AND IT’S HAPPENING NOW IN THE USA! (How’s that for a scare tactic?)
At this point it seems appropriate to review the history of US income tax rates, to see if any additional light can be shed on claims that higher income taxes for the wealthy will destroy an economy. This information is available through taxfoundation.org.
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MAXIMUM US FEDERAL INCOME TAX RATES, 1913-2011 (married, filing jointly) (begins with 1913 when the income tax was made permanent)
1913-1915—7%; 1916—15%; 1917—67%; 1918—77%; 1919-1921—73%; 1922-1924—58%; 1924—46%; 1925-1931—25%; 1932-1935—63%; 1936-1940—79%; 1941—81%;
1942-1943—88%; 1944-1945—94%; 1946-1951—91%; 1952-1953—92%; 1954-1963—91%; 1964—77%; 1965-1981—70%; 1982-1986—50%; 1987—38.5%; 1988-1991—28%;
1991-1992—31%; 1993-2000—39.6%; 2001—39.1%; 2002—38.6%; 2003-2011—35%
It’s interesting to look at these rate changes with contemporary national and world events in mind. Tax rates first started going up in 1916 during WW 1 (1914-1918), averaging 56% over a 9 year period. This increase may have helped pay for the US war effort.
Tax rates were sharply reduced to 25% in 1925, and stayed at that level for 7 years. Note that the Great Depression began officially 4 years later with the stock market crash in 1929, lasting until the early 1940’s. (Could there be a connection?)
Tax rates rose sharply in 1932, averaging 81% over the next 14 years. (FDR’s presidency was 1933-1944). This tax increase may have helped us get out of the Depression, and finance our efforts in WW 2.
TAX RATES REMAINED ABOVE 90% FROM 1946 TO 1963. THIS WAS A PERIOD OF RAPIDLY EXPANDING US ECONOMY.
From 1964 through 1982 tax rates remained at or above 50%, averaging 65% during that 22 year period. These were the years of the greatest growth of our middle class, our greatest prosperity, the realization of the “American Dream’, and the ascendancy of the US to world leadership in nearly every desirable category.
In 1987 tax rates started dropping, averaging 35.8% during the next 16 years. During this time the productivity of American workers continued to grow, but the middle class share of this increased productivity leveled off or even declined. This was the era of mergers and acquisitions, and the beginning of “golden parachutes”, “globalization”, huge CEO incomes and bonuses—and a rapidly increasing disparity in wealth distribution. To try keeping the American Dream alive, two -income families became the norm, and credit card and housing debt expanded rapidly.
Since 2003 the tax rate has remained stable at 35%, even though we have been fighting our longest and most expensive wars in the Middle East (beginning in 2001), as well as “police actions” all around the world. Finally, the bottom fell out of our economy in 2008, and we still haven’t recovered. The financial industry had to be bailed out because of unregulated high-risk gambling, our auto industry came close to dying, and millions of people couldn’t find jobs. It was assumed that bailing out financial organizations would allow them to make loans to small businesses; thus improving the jobs problem. Instead, those financial organizations used this money to buy up other organizations and continue paying huge bonuses to their executives! This didn’t help our economy at all!
But wait–there’s more! In 1925 it took only 7 years of low income tax rates (25%) to lead us into the Great Depression. The current period of low tax rates (average 35.6% since 1987) required a little longer, 21 years, to lead us into the Great Recession!
So what effect did the catastrophic events of the past 11 years have on our income tax rates? FOR THE FIRST TIME IN OUR HISTORY—INCOME TAX RATES HAVE NOT GONE UP IN RESPONSE TO WAR AND IMPENDING ECONOMIC COLLAPSE. NO WONDER WE’RE IN TROUBLE—AND IT’S NOT DUE TO OUR MAXIMUM INCOME TAX RATES!
There have been 26 tax rate changes since 1913, averaging 57%. But who do we hear screaming about a possible tax hike to 39.1%? Only the super-rich, who achieved that status by grabbing all the profits of increased American productivity for themselves; by takeover and liquidation of functioning companies, by defrauding American workers of their pension and health plans; and by gambling with middle-class money in commodities and housing.
The last paragraph of this article uses Greece as an example of how the high tax rates (65%) of a “socialism system” have not prevented the high poverty rates (20%) they were supposed to prevent. The United Nations Children’s Fund (UNICEF) report, “Measuring Child Poverty (Report Card 10, May, 2012) states that the childhood poverty rates in the countries on the author’s list of high-tax countries are; United Kingdom–12.1%; France—8.8%; Greece—16%; Spain—17.1%; Portugal—14.7%; Sweden—7.3%; Norway—6.1%; Netherlands—6.1%; Denmark—6.5%; and Finland—5.3%. Once again the US has moved down on a list of economic success indicators, this time near the bottom—with a childhood poverty rate of 23.1% !
In one sense, however, we can agree with the dire predictions of the author of this article. You and I can remember when our country had the highest ratings in the world in nearly every desirable measurement of a country’s economy and quality of life. Now we have slipped far down those lists. (see “Third World America”, Huffington , 2010). If the present demand of the wealthy and powerful that we lower their taxes, or allow them to continue avoiding taxes, we most certainly will, “never be able to buy a home”, “never buy a car”, and “never send —kids to college”. But of course the wealthy and powerful, REGARDLESS of the taxes they have to pay, will ALWAYS be able to afford those things.
The last two sentences of this article, (Do you think these people are “free”?) and (They are slaves to their economic “system”), deserve a final, somewhat philosophical response. In one sense, all people who have to work to have the kind of life they want are “slaves to their economic system”. It makes no difference whether that system is Socialism, Communism, Capitalism, Fascism, Feudalism, Totalitarianism, or Corporatism. The only people who are not “slaves” are those wealthy enough to not have to work—and that’s because they usually control, or try to control, whichever economic system is in place.
We often hear that we must choose between the present economic system of corporatism or “socialism”. But there are other possibilities between those two extremes. Are we Americans gullible enough to buy the false claims of the wealthy and powerful? This coming election will help answer that question.
The challenge we face in the months and years ahead is how to regain the kind of society we had in the 4 decades beginning with the 40’s, when our income tax rates rose to solve the country’s problems. Fortunately, we no longer have to swallow the unsupported opinions of others; the internet gives us access to the facts we need to help us make important decisions.
There were statements in this article that screamed out for attention.
top graphic and bottom graphic via shutterstock.com