Comment by rayiner | Hacker News Reader

Comment by rayiner | Hacker News Reader

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> what is a bigger problem is that the us is seen as a place where companies (the wealthy) can avoid the cost of public services like universal healthcare, public transportation, and government backed pension that all other modern countries have.

“Other modern countries” don’t pay for these services through taxes on “companies.” Of the big 5 EU countries (which together comprise 70% of the EU population), 4 countries rely less on corporate taxes than the US. The UK is the only exception, with corporate taxes making up 8.3% of revenue, versus 7.6% in the US: https://www.oecd.org/tax/tax-policy/revenue-statistics-highl... (page 3). By contrast France is 4.5%.

Nor do corporate taxes fund the Nordic welfare states. Corporate taxes make up between 4.9-6.2% of tax revenue (less than the US) in Denmark, Sweden, Finland, and Iceland. Norway is the only one that’s higher than the US, and that’s only because of the special 55% tax on oil company profits (the normal 23% Norwegian corporate tax is in line with the other Nordic countries, and lower than the US).

In Germany, 65% of tax revenue comes from social insurance and consumption taxes, which are paid for by the middle class. (Those who make more than about $70,000 per year are exempted from having to purchase the mandatory health insurance, and from the corresponding payroll taxes.) In the US it’s under 40%.

Put another way, Germany’s higher consumption taxes amount to 3.7% of GDP, and its higher social insurance taxes amount to 5% of GDP. That’s almost all of the difference in total tax burden between the US and Germany.

your response reads like a right wing conservative talking points. maybe technically correct but very misleading due to the lack of context.

> In Germany, 65% of tax revenue comes from social insurance and consumption taxes, which are paid for by the middle class.

that's wrong half of the social security contributions comes from the employer in germany. and is close to 50% greater than the contributions required in the US.

vat (what your talking points refers to as consumption tax) largely exempts everyday expenses that people need to pay in order to live. however, it does increase the cost of doing business greatly as all transactions are taxed.

look at just germany and the us from your documents.

US

24% for ss

0% for vat

total portion of tax revenue = 24%

Germany

37.6 for ss

18.5% for vat

total portion of tax revenue = 56.1%

my point is proven. it's cheaper to run a business in the US because there's a huge discount from not having to pay for public services. and companies are further reducing their cost by hiring foreigners who are willing to game the system by taking advantage of their own country's social policies and in exchange giving their US employers a discount on their salaries.

Who bears the burden of a tax is different than who pays for it legally. (The actual effect of a 20% total payroll tax shouldn’t change depending on how you allocate it between employer and employee.) That is because employers can simply decrease wages to cover the tax. Payroll taxes are primarily borne by employees: https://taxfoundation.org/what-are-payroll-taxes-and-who-pay....

Another important point is that these social insurance contributions are deliberately regressive. In the US, the Medicare payroll tax is paid on all income, and Social Security is paid on the first $130,000. There is a big push in the US to eliminate the Social Security cap. In Germany, by contrast the pension contribution is only paid on income below about $70,000, and workers making more than that are exempt from the public insurance system. (So someone making $10,000,000 per year pays almost nothing in social insurance taxes.)

Likewise, VAT is primarily borne by consumers, and consumer-facing small businesses. Even though the business pays it, some of the tax is passed onto consumers through highs prices. Who bears the VAT depends on relative elasticity of supply and demand. In highly competitive industries like restaurants, the owners and workers can bear most of the VAT. But large corporations m in high margin businesses have the pricing power to pass on most of the VAT to consumers. (E.g. an iPhone is 25% more in Germany than the US, more than enough to completely cover the VAT.) VAT is not paid on investment income, nor on banking services. So the wealthy, who invest most of their money rather than spending it on consumption, pay little (as a percentage of income) on VAT.

Combined with low corporate taxes, the end result is rather right-wing. American Republicans would prefer to have a low overall tax burden because it boosts the economy. But if we had to raise taxes to say 35% of GDP, they would much prefer to have the European system, where the middle class bears most of that burden, than scaling up the US system, which would cause businesses and the rich to bear most of the burden. Notably, the only serious proposals for a VAT in the US has come from conservatives like Ted Cruz, Herman Cain, Saxby Chambliss, etc.

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