People in the USA who want to have a European-style welfare state don't realize that American high-earners already pay European levels of tax. The American lower and middle classes pay a lot less of their incomes - that would be the group that would have to pay for an American welfare state. That won't go over well...
Having a single payer healthcare system would increase taxes but could decrease overall costs by 50% (since US pays 2x what other equivalent countries pay).
Beyond that, we have an issue where corporations and high-net worth individuals aren’t paying taxes, which could prevent onerous taxes on the middle class. No nation really taxes the rich (cf. the Panama Papers).
We are talking past each other: I'm saying there are lots of ways that the wealthy avoid taxes, such as borrowing against equities for expenses (https://www.wsj.com/articles/buy-borrow-die-how-rich-america...). Trump had a private jet but paid $750.00 in income tax for a couple of years. Additionally, capital gains taxes are lower than many income brackets (cf. Buffet's famous quote about being taxed more than his assistant). Finally, carried interest loophole allows private equity managers to classify services as capital gains.
Basically, if you have enough equity, a bank will loan you the money you need, while you can leave those stocks untouched. You don't have to pay any tax, let alone the extremely preferential capital gains tax.
US has a tax gap of perhaps $1 trillion, and much of that is wealthy Americans who are too hard to pursue: https://www.nytimes.com/2021/04/13/business/irs-tax-gap.html. That could be 50% of the bill if we were able to cut healthcare expenses by dropping insurance companies, removing pharma control of prices, etc., to try to attain similar OECD healthcare costs.
The US is in a unique situation. We have to both reduce the amount of rent-seekers within the healthcare system while increasing the taxes we levy on the wealthy. Universal care might mean an increase in taxes on the middle-class, but universal care will ultimately reduce their expenses since it's more efficient.
PS. Please don't attack people personally: it's much better to say, "This comment does not account for X," than "You seem very uniformed [sic]?"
PPS. If you need a poignant example of the failure of the US healthcare system, look no further than maternal mortality rates. What a disgrace.
It's not necessary about amount, but about distribution. Let's say a medical tax in Germany is 14.6% (correct me if I'm wrong), my medical insurance here in the US for a family of 2 is around 14% (yes, it's paid by my employer, but there is no free lunch and I consider it _my_ tax). The only problem here is that payment is fixed, so if I had 50% of what I have now (and that would be a median salary in my state) it would be 28%. Also if I lose my job I will have to pay it in full myself, from after-tax money. Unlike Germany. Oops. So I'm already paying on par with Germany (when I'm employed), and I would pay twice, of even triple of that if I was an average worker.
The tax rate in Germany is 42% on income over 62000 euros. That covers everything, but doesn't include any local or municipal taxes. The VAT is 19% on top of that.
In other words, a 42% federal income tax plus (roughly) a 20% federal sales tax.
You are conveniently leaving out payroll taxes which constitute another ~35%. So 42% becomes ~77%. 19% doesn't technically apply to the payroll, but it does apply when you buy something.
The maximum payroll tax is 42% for incomes above 62k Euros. The part of income below has a tax excempt amount of ~10k, then a linear progressive tax. (There is an rate of 45% for incomes over 250k, but let’s skip that for the argument.)
There are also some tax reducing things, but let’s say you have a taxable gross income in the range of 60k. The deductions are as follows:
- 25% payroll tax (which is the tax _average_, only the amount above 62k is taxed with 42%)
- 7.3% healthcare (or 14.6% if you are self-employed)
- some percentage for other public insurances
Gives you around 65% net income, from which you pay 19% VAT for most things you buy as consumer. But e.g. rent doesn’t have a VAT.
If your income is higher (as I wrote in my other comment), the healthcare / public insurance cost is capped, so every Euro above 62k is taxed with 42 (or 45) percent. If your income is lower you simply pay less taxes (relatively) and might have 80% or more net income.
Yep, but you need to count employer paid taxes too to get the whole picture. Tax base will be different (+ 7.3% healthcare + 9.3% pension + 1.5% unemployment), so if your base is ~1.17 of your "official" base, the effective tax becomes (0.35 + 0.17) / 1.17 = 45% (leaving you with 55%). Which is in line with the chart I posted.
Now here's how it works in the US. Let's take my $170K household income (it's 2x of state median in Massachusetts, but 1x in my town). My effective tax rate (without medical insurance and without employer part of payroll taxes) is 33%, but with employer taxes and after tax base adjustment it's going to be (0.33 + 0.08) / 1.08 = 38% (I'm ignoring social security cap here, but it won't make a big difference). But we left out a very important part, and it's medical insurance. Let's add 24K/year (14%) to the mix, then it becomes (0.33 + 0.08 + 0.14) / 1.22 = 45%. Oops! Sounds like I'm paying the same percentage as in Germany. Sure, I have 2x of median, but for 1x things are getting even more ugly, because 24K will stay the same, and while the income tax is lower, medical will take its part and more.
Of course I still bring home more than an average German family, yet expenses are different too so it's hard to compare. Sure, I can buy more junk, and I have a bigger home so I still have some place to live after I placed all that junk :) But to the original comment:
> The American lower and middle classes pay a lot less of their incomes - that would be the group that would have to pay for an American welfare state. That won't go over well...
No, American lower and middle class doesn't pay "a lot less of their incomes", it's simply not true.
Now do the VAT. Almost everyone who does the math on this (counting healthcare as a tax in the US) finds that only considering the income portion of your taxes, it's about equal. In most places in Europe, you also have the VAT acting as an extra tax. Your tax burden would be a lot higher.
Also, you must be thinking of your marginal rate being 33% - your federal taxes should be under 20% of your income at $170k, even if filing as single. In Germany, your tax rate would be about 27%.
Agree on VAT, but MA also has 6.25% sales tax which I didn't consider, that is if you want to start from revenue. So the difference will be less than 19%. Also VAT in Germany is not 19% on everything, there are exemptions and low rate of 7%.
33% is not a marginal rate, it's an effective tax rate (filing jointly) including payroll taxes which are deducted from my wages, I mentioned it. Also we have a state tax in MA which is also included in 33%.
In any case there are other taxes too (e.g. gas excise, vehicle excise, property tax etc.), so I'm not trying to compare the whole tax burden, that would be too much for HN. But regarding payroll taxes -- they are pretty close even if you consider VAT, certainly not a "lot less", it's a myth propagated by politicians. So the question is: we pay (almost) "welfare state" taxes, where is my part of a welfare state?
Yeah, you live in a high-tax state - counting that and payroll tax would make it to 33%. However, you can deduct a good fraction of that tax (actually all of it) from your federal taxes. Also, you included the cost of your healthcare in your calculation, so you are getting "welfare state" benefits for that cost. As to your taxes, those are paying for a welfare state for people who are less well off than you. I'm pretty sure you are in the 90th percentile on income, by the way, so you're not actually in the lower class, and arguably not even the middle class (although that level of income in a rich state like MA feels middle class).
All those other taxes exist in Germany too, by the way, and are much higher.
MA is not a "high-tax state", it's in the middle by an overall tax burden (depending how you count), so it's another myth. Check this for example: https://wallethub.com/edu/states-with-highest-lowest-tax-bur.... Also I'm not in the top 10% percentile, more like in the top 20% in MA. Give me your definition of the "middle class". Also I explained that for the "lower class" medical payments are even higher.
No, I'm not getting "welfare state" benefits, I'm getting a pretty crappy medical service for a price which is waaay higher than in Germany. And if I lose my job I will be paying 2K/month + copays and co-insurances, not mentioning deductibles, unlike in Germany. And God forbids you get into a hospital without insurance, your jaw will drop to the floor when you see the bill.
Have you ever been in the Boston subway? Compare it with almost any city in Europe, hell, even with Montreal. Tell me which welfare state has subways like Boston or NYC? Commuter rail like in Boston? NYC commuter rail is a bit better, but still is not even close to German railways.
And all of the above we get for taxes which are very similar to Germany. No, they are not much lower, it's something with your math. And in absolute value we pay waaay more than in Germany given higher salaries.
Here's some comparison, but it is misleading when it comes to the US. Technically medical insurance (de facto mandatory) can be from ~15% to >25%, depending on the income. It's not reflected on the picture, so in reality tax burden in the US might even be more than in Belgium (VAT aside).
https://upload.wikimedia.org/wikipedia/commons/4/49/Payroll_...
The public healthcare rate is indeed 14.6% but half of that is paid by your employer. Of course in the end it doesn’t matter, just that only 7.3% from your gross income will be reduced (also there are rates for nursing care insurance, pension insurance, unemployment insurance – a middle-class income pays 35–50% for tax and insurance).
Public healthcare is obligatory for all employees except you’re earning more than ~65000€/year or are a civil servant. In which case you are entitled for private health care which might be (or in fact is) more expensive but has more options for treatments and some prioritizing on waiting lists and doctor’s appointments.
Family (husband, wife and children) is always insured for free except they are also employed. Children have to pay seperately after reaching age of 25, and if they still study they pay only a low flatrate.
The rate is always 14.6% of gross income except for very low incomes, in which case the employer pays everything, or very high incomes. There is a cap: everything above 65k is not rated – which seems unfair to me.
