Categories
tax policy

Regressive Europe

Some folks love to compare the U.S. to Europe unfavorably.

Not me.

Though I’m fine with learning from European states and cultures (hey: I like Switzerland!), I shudder when I hear someone suggest that America should be “more like Europe.”

Obviously, I’m not with our current president on this. He says we should tax the rich more, make them pay “their fair share.” And his left-​leaning admirers append the phrase, almost under their breath, “like in Europe.”

Ugh.

But reserve some of that “ugh” not at the proposal, but at the assumption that European states tax the rich with higher “progressivity.” Veronique de Rugy, reporting on a new book by Bruce Bartlett, says that view is off base. European states tend to rely on the VAT, which is heavily regressive. Additionally, Europe’s high income tax rates kick in at lower incomes, so that Europeans lower down on the middle class ladder feel the bite of high taxes.

De Rugy concludes that America is a lot like Europe, on the whole, but that America’s “tax framework may be worse.… It disproportionately relies on the top earners to raise revenue, it exempts a large class of taxpayers from paying any income taxes, and it conceals spending in the form of tax breaks.”

This is all very interesting. But my take-​away is not to emulate Europe, but — instead — the distinctively American policies we’ve let slip away. Our limited government principles don’t require us to endlessly chase new revenue streams.

This is Common Sense. I’m Paul Jacob.

Categories
tax policy

Fair Share Laid Bare

President Barack Obama says “it’s only right that we ask everyone to pay their fair share in taxes.”

Rich folks must be wondering when their refund checks will start arriving in their mailboxes.

The current income tax is progressive, requiring those making more to pay a higher rate. Thus, those earning a million dollars pay, on average, 29 percent of their income to Uncle Sam, while those taking home $50,000 to $75,000 a year pay an average of 15 percent. This progressivity can be seen in wide angle, too: Figuring credits and exemptions, 47 percent of Americans pay no federal income tax at all. Meanwhile, the top ten percent in income pay 73 percent of all income taxes collected.

And Obama’s idea of taxing “the rich” would only make it more unfair.

But, wait, what about billionaire Warren Buffett? Doesn’t he pay a lower percentage of his income in taxes than does his secretary?

Most of Buffett’s income comes off his investments, not in salary. That’s capital gains, taxed at 15 percent. Obama decries it, but doesn’t propose any specific increase in capital gains taxes. Why? He doesn’t want the stock market to crater. As he put it two years ago, “The last thing you want to do is raise taxes in the middle of a recession.”

So, when President Obama says the rich should pay their fare share, what does he mean? Simple: “If you’re not rich, vote for me.”

This is Common Sense. I’m Paul Jacob.