Comparative advantages, taxes

[Baruch Menachem]

Every year Forbes publishes a tax misery index. It lists all the taxes the TOP marginal taxpayer would pay in each locale.

There are lots of surprises here. China is the state with the highest tax rate.
The US, for all the whining of us on the right, is actually pretty far down on the list. (though if we added in the cost of insurance, we might zoom way up...)


the weakest European states are pretty near the top. (Greece and Spain and Portugal) As are powerhouses like Norway and Sweden. Israel, for all its socialist talk, is way down near the middle. Communist Vietnam is lower yet, not a whole lot higher than tax rates in Texas, supposedly very business friendly. And Russia is a great deal lower than that.

Ireland is also in trouble, but it is pretty far down on the tax rates.

An interesting part of the tax picture is the geezer support taxes, which are huge in some places, like Ukraine, mexico, china, pretty much all of europe except Switzerland. In Asia, South Korea, Vietnam, and Japan all have low Geezer support taxes, but cultural mores mean this is shifted on to the citizens in a very large way. In Asia, four generation households are normal. All this cost is a real part of the expense of raising a family, so there is a huge tradeoff here that we don't see. The US has the lowest taxes to support the elderly in the west. Even the UAE, which has no other taxes, still has higher geezer taxes than the US. In most places, this tax falls on the employer, rather than on the worker. In the US, it is equally shared. Israel and the UAE are kind of weird in that the employee pays the larger share.


It is a cool chart.

 

[william the wie]

Basically a bump, nice topic I would like to follow.

 

[loosecannon]

Nice chart, too bad the values are not expressed as some kind of % rather than as some mystery unit called "misery".

Got a link to the source?

 

[Baruch Menachem]

You can find it here, but all they have on this page is just the chart.

There is a collection of charts here.

One of the problems of the chart is it adds taxes on different income sources together, so you get numbers that are don't make a whole lot of sense, but the point of the exercise is to have some basis of comparison where countries are compared to each other

Standardization is hard. The Economist tries to make for a standard idea with PPP and the big mac, but even here, getting a handle on reality is hard.

PPP argues that a big mac should cost the same in all countires, but in china, labor costs for a worker are 40 cents an hour, in the US, wages are (net to the employer after taxes etc) somewhere in the region of $11 an hour. Though why the big mac costs nearly $6 in Brazil is a mystery. The big mac index assumes all inputs are pretty much equal. Which is just not the case. But this is best handle on currency issues I have yet seen

 

[loosecannon]

well this one is actually pretty good, Baruch

 

[Baruch Menachem]

Would be cool to stack it against the unemployment rates

 

[antagon]

interesting, indeed. i wonder what explains the discrepancy between the OP chart and cannon's oecd-derived one. check out mexico.

 

[Baruch Menachem]

They are both from Forbes.

It is explained here.

This chart takes into account the total taxes, including "stealth" taxes (green and carbon taxes, for example) imposed by a country at all levels, national and local, as a share of GDP. It includes as well overall government spending, which will only get worse in reaction to the economic meltdown and contracting economies around the world. Some countries, such as Norway, are running large surpluses because of North Sea oil taxes. Others, such as France, are spending more than they're taking in. The resulting deficits are covered by public debt repaid through future taxes and stealth taxes. This breakdown is available only for OECD member countries (smaller than our Misery set) and uses the latest official 2008 data from the OECD for the year 2007, except where noted.

 

[loosecannon]

interesting, indeed. i wonder what explains the discrepancy between the OP chart and cannon's oecd-derived one. check out mexico.

2 years and the fact that the second chart didn't list MXs social security values?

 

[william the wie]

Bribery is such a huge component of the Mexican economy that the tax bill is a joke.

 

[loosecannon]

Would be cool to stack it against the unemployment rates

I would like to see it stacked against all the stealth taxes, including inflation.

 

[william the wie]

Would be cool to stack it against the unemployment rates

I would like to see it stacked against all the stealth taxes, including inflation.

LC, I don't think that is even possible and inflation is the most identifiable stealth tax. The folks doing the CPI survey don't have the budget to keep track of which vendors are used and what quantities of goods and services are being purchased and readily admit that such is the case. Other stealth taxes include ethanol subsidies and sugar quotas that increase US fuel costs by 150% or more. Quotas on cotton raise the cost of clothes astronomically (Mali and the central Asian stans can produce cotton in greater quantity and quality than the US can.) This list can go on forever.

 

[loosecannon]

It probably isn't all that hard to do Willie. While inflation itself is a phantom, exchange rates and commodity prices are really easy to use in comparative analysis.

Those are actually pretty accurate imo.

Other stealth taxes have to be calculated, which the study has done, but that's real dicey stuff. Hard to be objective.