While you listen to the normal posturing about how “the rich” (generally undefined) aren’t paying “their fair share” (also generally undefined) in taxes, it might help to bear in mind that, while the U. S. tax system overall is sligntly regressive the tax systems in other OECD countries tend to be very regressive, particularly when you take value-added taxes into account.
As you can see from the chart above payroll taxes in the U. S. are pretty closely aligned with other countries in the “Anglosphere” with which we have much more in common culturally than we do with, say, France or Germany which have significantly higher payroll taxes than we do. Plus VATs which are highly regressive.
Following up on my previous post one of the ways in which the U. S. is an outlier is that we tend to trust our government much less than people in other Anglosphere countries or major economies. Opinions may differ on that but I think one of the factors is that our government is less trustworthy than theirs.
Just for the record I think we should move to a tax system that resembles the one described here. That would, however, deprive politicians of an issue on which to campaign so I don’t expect it to happen.
Countries such as Greece are notorious for high levels of tax evasion and lax enforcement.
Probably reflected in their nominal rates.
IOW probably evens out.
I continue to be troubled by the payroll taxes as regressive label.
When people make an explicit deal that if they pay SS or Medicare taxes and then later get SS and Medicare benefits they are in effect pre-buying services, or, forced saving for future return payments. If a person privately saved a portion of their earnings to be used later for retirement expenditures or medical services (or private insurance premiums) we wouldn’t be describing that as regressive. We’d call it saving for retirement.
The biggest issue with the payroll tax/SS and Medicare situation is its efficiency. Why send your money to Washington in the first place? (There are reasons people don’t like to talk about). Returns stink and time value clouds the issue. Pay in and pay out are imbalanced. And administration costs high.
If the cap on payroll taxes was raised or uncapped while the benefits remained unchanged then what we are really talking about is a bald faced transfer payments/wealth redistribution scheme. That’s a marketing problem for the politicians as the rich already overwhelmingly fund other government services.
From where I sit, describing payroll taxes as regressive is a politically driven label, not one based in financial reality.
The main source of regressivity is the VAT as it is implemented in European countries.
VAT
Indeed. Similar to our sales tax.