Comment by alex7734 | Hacker News Reader

Comment by alex7734 | Hacker News Reader

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I don't know how it works in the US but in the EU the working class pay a lot more tax, proportionally, than the rich:

In Spain if you work and you cost your company 26430 euros:

- The company pays 6430 for social security (calculated as a % of your salary, so this is effectively your tax even if on paper it's the company that pays it.)

- You pay 1270 for social security (on paper you pay it but the company gives it to the tax office directly)

- You pay 2338 for income tax (on paper you pay it but the company gives most of it to the tax office directly)

- You end up getting 16390 euros, or an effective tax rate of 38%.

This goes up if you pick a higher salary, obviously. If you work and you cost your company 67000 euros:

- The company pays 16300 for social security

- You pay 3101 for social security

- You pay 11582

- You end up getting 36016 euros, or an effective tax rate of 46%.

If you're a freelancer and you work for yourself it's more or less the same but there's also a fixed tax that while not being very high it's hard to deal with when you're earning 0 when starting out. In practice most people just risk it and don't report their activity at first for this reason.

But if you're truly rich, you don't work, you have assets that appreciate for you. Tax rate for capital gains is capped at 26% no matter how many millions you're earning.

This does not take into account that as a rich person you're going to be spending less of the money you earn than a poor person so you're paying less VAT (sales tax) as well.

> The company pays 6430 for social security (calculated as a % of your salary, so this is effectively your tax even if on paper it's the company that pays it.) > - You pay 1270 for social security (on paper you pay it but the company gives it to the tax office directly)

A contribution towards your pension is not a tax. It's a deferred payment. You will get that money later, with interest.

> Tax rate for capital gains is capped at 26% no matter how many millions you're earning.

Capital gains taxes charge you for the nominal increase in the value of the assets you sell, which means that you pay taxes for inflation. For example, if you bought an asset for 100EUR and sell it one year later for 103EUR, you will pay a capital gains tax on that 3EUR difference, even though you may not have actually obtained any benefit if inflation was 3% that year, so you are actually worse off than you were.

> But if you're truly rich, you don't work, you have assets that appreciate for you

You will pay taxes if they appreciate, but you won't get your money back when they depreciate. You are taking a risk.

> This does not take into account that as a rich person you're going to be spending less of the money you earn than a poor person so you're paying less VAT (sales tax) as well

If two people buy the same asset for the same price, they both pay the same amount in VAT. If the rich person ends up buying more stuff, they pay more VAT than the poor person.

And at the end of the day, most of the income taxes obtained by the government are paid by the upper quintile of the population. Which is to say, the working class enjoys social services they can't afford thanks to a small percentage of the population that pays on their behalf.

Not only that, Spain is one of the few countries in the world with a wealth tax, which starts once you reach 700k EUR, so it's not exactly taxing billionaires, either.

> A contribution towards your pension is not a tax. It's a deferred payment. You will get that money later, with interest.

That's quite a naive take. European public pension systems don't work like that. The money is not invested, it is spent immediately to pay pensions to those who have already reached retirement age. What you get is a promise that some day you'll also get paid pension. But there's no guarantee that this will happen, since, as I said, this money is not invested, or set aside in a vault, it's spent immediately. And given current demographic trends you have very slim chance of ever seeing that money again.

> European public pension systems don't work like that

People should have voted for a better system, then. In Spain I've heard the same people complain about the unsustainability of the pension system while also complaining about the "Austrian backpack" approach, which is one way to address that problem.

Personally, I would prefer something like every person born in the same year contribute to the same pension fund, to be invested and redistributed as they turn 65, sort of like a mandatory annuity. It would avoid introducing these sort of inter-generational tensions.

> And given current demographic trends you have very slim chance of ever seeing that money again

That can be solved via immigration. People may not like the solution, but it is available to them, should they choose it.

>People should have voted for a better system, then. In Spain I've heard the same people complain about the unsustainability of the pension system while also complaining about the "Austrian backpack" approach, which is one way to address that problem.

Spain is a... pathologically left-wing country, I would say. That indicates, among other things, a profound lack of knowledge of economics, which explains what you say (and some other stuff).

>That can be solved via immigration. People may not like the solution, but it is available to them, should they choose it.

Spain's youth unemployment rate is at around 28% right now. As long as there is a single unemployed Spanish person, especially young people, we shouldn't be accepting any more immigrants.

> Spain's youth unemployment rate is at around 28% right now. As long as there is a single unemployed Spanish person, especially young people, we shouldn't be accepting any more immigrants.

You can expect commenters on HN to interpret this as racism, but actually, it is just a simple logic: First you need to fix the economy so that it can create jobs, then you invite potential workers to immigrate.

Take Poland as an example of this: they way are ahead of Spain on "demographic collapse" curve, but also have a blooming economy - unemployment rate is one of the lowest in EU at 2.7 percent. Two millions of Ukrainian refugees came in there in the past year, and you know what? Most of them found jobs.

> That indicates, among other things, a profound lack of knowledge of economics

The assumption here is that economies led by right wing governments are more successful, which is hilariously untrue.

Having strong social protections and higher taxes does correlate with higher living standards, though. No social protections and no taxes correlate mostly with failed countries, so there is that.

People complaining about the current social security ”demise”, and people claiming that the Austrian backpack is the solution, are the same, i.e. people who believe that individualized plans are preferable to socialized ones, but fail to understand that it creates more disparity, and less security.

The Austrian backpack is extremely beneficial to large companies, thus is of no surprise that it gets touted in the news from time to time.

They don’t talk that much about its biggest drawback: in a market where wages are already low and talent is rarely valued, it would make firing people so cheap, companies wouldn’t really have any incentive to keep highly paid employees, even if they are excellent performers.

In the US federal taxes look like this:

The top 1 percent’s share of federal income taxes paid rose from 38.8 percent to 42.3 percent in 2023.

The top 50 percent of all taxpayers paid 97.7 percent of all federal individual income taxes, while the bottom 50 percent paid the remaining 2.3 percent.

I do believe that is taxing the rich

The top 50% of taxpayers control 97.6% of the wealth.

Yep, and they pay lots of taxes. Actually a staggeringly close percentage When You See It side by side

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