The vast majority of people in Europe pays nowhere near half our salary in taxes. Only a few countries have total tax wedges (including employer payroll taxes) that reach that level for more than small minorities of the population.
So I guess at least for my country the statement above is somewhat true.
To be fair, 17% of the payroll and income tax are pension contributions (up to earning around thr $56k, after that it's just a tax).
Sweden reaches 50.3% for a single person earning 167% of average salary in total tax wedge (including employer payroll taxes) with no substantial deducations. An average earner has a total tax wedge of 42.4%. Sweden is one of the highest in Europe.
The average earner pays 24.3% in income tax and employee social service contributions.
The VAT adds up to less than you'd think, because for starters you won't buy anything VAT rates with the money you've already paid to tax, nor what you pay on housing, or food. Last time I added up what I actually paid in tax it was around 4%, both in Norway with similar tax levels to Sweden, and in the UK.
For example, in Malmö, Sweden the top tax rate is 52% and starts at 45k, but even at 70k your actual tax load is something like 36%
Not counting VAT of course.
While I agree that some taxes are a bit too high and opportunities of building wealth without tax evasion are inexistent in Austria, but your tax percentages don't scan for me.
If I use the online calculator of the chamber of labor, on a 70k/year gross salary, you take home 45k/year NET, so you pay 25k/year in total combined taxes, meaning approx. 36% of your gross income is the tax load on 70k salary. That's not that terrible, seems in line with most developed EU countries more ore less.
The only thing missing is the taxes paid by the employer which also add up and increase the tax load, but are not listed on your payslip, which IMHO is a fault with the system due to this lack of transparency.
However, contrary to the title of this topic, it doesn't make "everyone's wealth go faster" it just supports the lower classes from falling into poverty and crime.
They quoted marginal rates, not effective rates, which is usually the case when people start talking about these high numbers.
I'm confused. What's the difference?
Let's say a country has only a single 20% tax band that kicks in at 20k.
If you earn 40k, your marginal tax is 20%, but only 20k of your earning is above 20k, so you pay 20% * 30k = 4k in tax for an effective rate of 10% (4k of 40k).
Most countries will multiple tax bands plus deductions which complicates this, and most places very few people have enough of their income taxed at their marginal rate for their effective rate to approach their marginal rate.
So if you have a marginal rate of 50% but it only kicks in when you earn over a certain amount, you will be paying less than 50% overall (your effective rate).
If you made $100k, paid $25K in income taxes, and were in a 33% bracket, your effective rate was 25% and your marginal rate was 33%.
What do you mean? I gave you the exact percentages. You can see them on the homepage of the Austrian finance ministry as well:
https://www.bmf.gv.at/themen/steuern/arbeitnehmerinnenveranl...
[1] https://worldtaxpayers.org/2019/10/austria-tax-freedom-day-w...
I cannot confirm this (I live in Vienna, Austria) but I've never had a serious health issue. I go to different doctors every year for checkups. What kind of doctors are you talking about?
I think because Vienna is not as underfunded as other states. In Styria I had to go private for quite a few things If I didn't want to wait 3 months to see a public specialist.
Wife used to live in Vienna, Austria, and always had private doctor insurance. Her fears came true as she had a serious medical situation and was asked to wait for weeks (with pain managed by painkillers) until the surgery she needed could be done. Her private insurance stepped in, and like magic she was treated in 3 days.
Now, I believe that healthcare should never be considered optional/treated like a business, and must be equally available to all without pre-conditions on their financial well wing, but inefficiencies in the system are not to be wish washed away.
Those are marginal rates, not your effective rate which is what matter overall.
Austria has one of the higher tax rates of OECD countries, reaching 38.3% effective rate for a single person earning 167% of the average wage (source: OECD Taxing Wages)
Again the 20% when counted towards your income is marginal in that you only pay 20% on the price of covered products and services you buy. For starters you only spend of your net income, and only then after mortgages or rent and exempt products. When I last added that up for myself, VAT added up to around 4% of my gross salary.
So I stand by what I said. Most people in Europe pay nothing like 50%.
With respect to healthcare spending, Austrians do spend a lot, but your total healthcare spend, including private payments is far below what Americans pay in tax towards healthcare (source: OECD Health). PPP adjusted you spend an average of around $7.3k vs. around $12.5k in the US. About 2/3's of your $7.3k is taxes.
At 90k GBP you are paying 45%. I guess it depends on what “nowhere near half” means. 45% is close imo. Especially with VAT added in on purchases. Yes the average London wage is more like 50k GBP, but from that perspective it’s also only double the average wage before you hit 45%+ tax take.
The top UK tax rate (including employers NI etc) is ~59%.
1. https://listentotaxman.com/?year=2022&taxregion=uk&age=0&tim...
> for more than small minorities of the population.
covers that situation. Simply put, only a small minority of people in the UK pay that much tax.
Not to mention the classic error you’ve made
> hit 45%+ tax take.
that tax take only applies to persons income that’s above 120k. The actual total tax burden across their income is substantially lower, given everything below £120k is taxed at a much lower rate.
Actually I didn’t error. This is the total tax paid expressed as a percentage. It is not the marginal tax rate. See the link I provided as evidence (add total deductions + employers NI together).
Why would anyone do this? Employers NI is a business tax, why would consider that a tax paid by individuals?
If you’re gonna start attributing employer taxes to individuals, then why not start including business rates and other random taxes, then you can gin up any level tax burden you want.
Likewise if you have options/shares as part of remuneration it is often specified that the employee pays the employers NI for it.
Honestly it’s just a cheeky way for the govt to hide income taxes.
Why not include business rates? Because it’s not linked to the employees salary. It doesn’t change based on the employees salary.
The fact that it was taxed above some line rather than below it doesn’t matter. (Of course that means it needs to be added to both the numerator and denominator when calculating the total tax burden, something that is often skipped.)
It further only tend to be included when complaining about high tax countries, and conveniently forgotten when people compare w/e.g. US taxation.
Nevertheless, even with them included, only a few European countries have total tax wedges above 50% for more than small portions of the population.
If you make money by your labor hours directly being billed and the buyer of those hours pays VAT on that labor, then I agree.
So long as there’s a direct and 100% link between your labor and the taxed amount, it’s value you created and was taxed away, without regard to who stroked the check to the tax authorities.
It's irrelevant to me, because it's not a tax on your contracted income.
You can make an argument that it is tax.on the value you created, sure, but not on your income because for most employees there is no direct link between value created and income.
I’m looking at it as a tax on direct labor. Which is also a consistent lens to use.
However, my initial claim that only a small portion of people in Europe approaches 50% holds for total tax wedge as well.
I’m talking about taxes that have a direct relationship to your income. If your income changes and the taxes paid change in proportion to your income change then that should be counted as taxed against your income.
Doesn’t matter if you call it labor, wage, salary.
This is so misleading.
At £90K you get a £12,579 tax free allowance leaving £77,421 taxable. You will pay £7,540 from the 20% band, £15,888.40 from the 40% band and nothing from the 45% band for a total of £23,428.40. National Insurance will be £5,318.60 making the total deduction £28,747.
So approx 32%.
Edit: which yes takes it to 43% not the 45% I originally wrote.
Now enjoy paying another 20% VAT on any goods and services
Only the part of that that would actually be passed through to you as salary in the absence of the tax could reasonably be considered part of your tax burden. Hard to say how much that is without any information about your field or employer, but I guarantee it's less than 100%.
The average UK salary is <35k GBP. At that level total deductions are 20%, and your employer pays 10% employer NI.
When people outside more socialist countries say they pay far less tax, they never include any of this, so I don’t either.
That's not to say you can't. Some certainly do. And some countries are much higher. Belgium in the very significant outlier, with Germany not far behind.
Those "employer payroll taxes" are still part of your salary. It's just an accounting trick to fool you.
That it is part of the calculation for the employer is irrelevant - so is office costs, admin overheads, software licenses, equipment, yet we don't consider those costs deductions from an employees salary and bump the "real" salary up accordingly.
Then add on top VAT rates of >20%.
It wouldn't surprise me it hits 50% of income for an awful lot of Europeans.
Effective rate is far lower, and you can't spend money you've paid in tax on VAT, nor money you've spent on housing, or the multitude of zero rated goods which usually includes food, so the proportion of your money you pay VAT on is usually small.
Last time I actually did the math, I paid about 4% of my gross pay in VAT, and despite being in the top 1-2% or so in the UK my effective rate including VAT is still only just approaching the 50% mark.
The point is, if your effective income tax rate is 35%, you also need to add up all the taxes that aren't income tax, like the 20% VAT, gasoline taxes, alcohol taxes, property taxes, stamp duties, etc, etc.
Add all that up and I wouldn't be surprised if many people had an effective tax rate >50%
I've done the calculations in the past - the effective rate of VAT as a proportion of gross income added up to around 4% for me, because most of my money does not go towards VAT rated products.
Nor does it for anyone.
Because before you spend on VAT-rated products (or alcohol, gasoline etc.), you first pay income taxes, then you pay for housing, and food which most places is zero rated or at a discounted VAT rate, and debts. The higher you earn, the lower proportion of your income tends to go towards spending, partially because you tend to put aside a larger proportion for pensions, partly because you pay a higher rate of tax, so VAT contributes less to your overall tax burden - it's a deeply regressive tax.
Most people don't have enough money to spend on highly taxed items for it to be possible for them to get to an effective tax rate of 50%+, and most of those of us who might be able to spends our money otherwise - bigger house, bigger pensions, more investments.
I earn many times the UK national average, and so pay income tax and national insurance far closer to the 50% mark than the vast majority of the UK population. Despite that I still don't cross it when other taxes are added on. Including VAT, property taxes/council tax and similar. I'm in the top 1-2% income earners in the UK - people earning less than me are certainly getting nowhere near 50%.
Even when I lived in Norway, which has wealth taxes, some of the highest gasoline and alcohol taxes in the world, and higher income tax, and high VAT (25%), did I reach 50%.
In some of the highest tax countries in Europe, like Belgium (an extreme outlier) and Germany, higher proportions will cross the 50% line, but overall for Europe this applies to a vanishingly small proportion of people. UK is "low tax" for Europe, but closer to the average than e.g. Belgium and Germany.
Which is why the "half goes to taxes" crowd almost always ends up forced to start bringing up the total tax wedge instead of other taxes. Even then most people will never hit 50%, though more do.