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

At Risk of Drowning

To those who hold that government should be all things to all people at all times, the prospect of cutting back the ever-​escalating level of government spending is a non-​starter. Like their chief spokesman in the White House, they propose a different solution: Make “the rich” pay more. 

Never mind that while President Obama talks about socking “millionaires and billionaires” who “can afford it” with higher taxes, the hikes are actually designed to wallop folks making $200,000 a year. That’s actually a tad less than a million. In many areas, such a salary hardly qualifies one as rich. 

We’re supposed to ignore the fact that federal income taxes remain progressive. The richer you are, the more you pay. That’s why the top five percent of earners pay 59 percent of federal income taxes, while roughly the bottom half pay nothing at all. 

“Fair” becomes slippery.

Also slippery? The real-​world outcomes. Say tax rates were raised enough that deficits might be covered. What would happen?

Just recently I had dinner with a couple of millionaires. “You know, we don’t have to work,” they told me. “We already have enough money to live out the rest of our lives, so if we’re going to be punished tax-​wise, we’ll simply retire.” Comfortably, in fact.

But what about those they employ? What about the enterprises and jobs they won’t create?

Maybe punishing productive folks with even higher taxes isn’t such a great idea.

This is Common Sense. I’m Paul Jacob.