In an article appearing online at the National Review Rich Lowry, National Review Editor, wrote:

Experience shows that raising taxes on these earners [top 5%] doesn't produce as much revenue as expected, thanks to what economists call “the elasticity of income” — i.e., people find ways around the Tax Man. Regardless, there’s simply not enough money to be had from “the rich.” This is why socialistic European countries have tax systems arguably less progressive than ours. To fund their extensive welfare states, they must resort not only to onerous income-tax rates, but to high payroll and sales taxes paid by everyone.

That got me thinking.  What are the tax rates for the wage earners of our European Allies?

Comparison of Tax Rates around the world is a difficult and somewhat subjective enterprise. Tax laws in most countries are extremely complex, and tax burden falls differently on different groups in each country and sub-national unit. The lists below give an indication by rank of some raw indicators(1) Many countries have a full pallet of taxes that range from corporate, individual, payroll and VAT (Value Added Tax) / GST (Good and Services Tax).  Understanding the tax burden is not a simple math exercise at all, but let's look at Individual (income) Taxes.

Country	Income Tax	Payroll Tax	Sales Tax
United Kingdom	0%, 20%, 40%	23.8%	17.5%
Sweden	29% - 59%	32.5%	6-25%
Italy	23% - 43%	0%	20%
France	10% - 50%	45%	5.5% - 19.6%
Switzerland	0%-13.2%	0%	2.4$ - 7.6%

USA

0% - 35% fed 0% - 10.3% state

15.3%

0%-10.3% state

That may make you feel like we are under taxed compared to our European allies.  But until you see where those tax brackets fall and what percentage of revenue they represent, you don't get the whole picture.  These are not taxes on the "wealthy" or even on the "middle class" they are taxes on "the average".

France, as an example, has a progressive tax structure similar to the USA, with five total income brackets that cap out at an income of only E66,679 ($86,916):

Taxable Income	Rate
0 - 5,614e	0%
5,614 - 11,198e	5.5%
11,198 - 24,872e	14%
24,872 - 66,679e	30%
66,679e +	40%

When you add the mandatory cost of "social insurance" or "payroll taxes" here are the adjusted marginal rates:

Taxable Income	Total Rate
5,614e	45%
11,198e	55.5%
24,872e	59%
66,679e	75%
66,679+	85%

Income tax revenue for the French government only accounts for 16% of their total revenue! French taxes account for 45% of GDP.(2) Compare that to the revenues of the USA where "only" 27.3% of GDP is consumed by taxes.  France's GDP growth rate is significantly lower than the USA.  In 2007 alone the USA out paced France by 20% in GDP growth. (3) USD 2007 GDP was $13.8 Trillion compared to Frances $2.6 Trillion.  Our federal spending for 2008 will be more than Frances entire GDP! (2007 CIA World Factbook)

Most countries determine poverty by individuals living below a certain, "living standard".  In the USA it is calculated as income disparity.  This has no impact on "living standard" but on the difference between the "Top 20%" and the "Bottom 20%".  Only in the USA could a person be considered to be living in poverty when they have an automobile, cell phone, cable television and a full belly.  To achieve statistical improvements in US Poverty, Barak Obama does not have to lift the poor up. There would still be a the same poverty in America if you gave every man, woman and child living $1,000,000 since poverty is a measure of income disparity. All Barack has to do is what France has achieved and bring the top quintile down, thus reshuffling the top to bottom ratios to show a decline in disparity.

In France, the income disparity between the "top 20%" and the "bottom 20%" was 36.7% in 1967.  That is after nearly a full generation of welfare state socialism.  In the United States the disparity was 34.6%. (4) So even after the oft lauded success of France in leveling out income disparity and providing "social and economic justice" the USA with its "rich get richer and the poor get poorer" capitalist economy (pre-LBJ) had a better record of "social and economic justice".  Today, after the "Great Society" programs of the sixties our income disparity has risen, not fallen to over 54.7%, while in France the number has fallen to 32.7% (1995).  Frances top quintile is no-where as productive as the USA's top-quintile and the bottom two quintiles have remained fairly static as "guaranteed income" has sapped drive for upward mobility,  unlike the USA where there is greater mobility between income quintiles.

How does this relate to Barack Obama and his "spread the wealth around' policies? It shows that this approach does not work to lower the  gap between  the bottom earners and the top earners, it only makes things worse. Lowering the top 20% wealth will not bring the bottom 20% any closer to their dreams.  This is a failed economic experiment.  The fact is that "all boats are lifted by a rising tide". France is a prime example of an attempt to level our results by having the State guarantee a "living wage".

The following table shows the relationship to federal spending as a percentage of GDP compared to tax revenues as a percentage of GDP.  Tax structures have fluctuated wildly from lows of 10% to highs of 90% for personal income tax. Take notes as to how the receipts line does not proportionately follow tax policy increases but tracks with GDP growth.




Barak Obama will not turn us into the stagnant welfare state that is France overnight, but he can have just as big an effect on our "long march" toward this goal as FDR and LBJ had.  The pre-LBJ Great Society Gini Coefficient of Income Inequality was .346 (1967 earliest year available)  The last Census Bureau figures available were for 2001, the Gini Coefficient of Income Inequality had risen to .457.  Historically, the concept of the welfare state does little to decrease these disparities, but does decrease both opportunity and mobility.





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1.  en.wikipedia.org/wiki/Tax_rates_around_the_world
2.  en.wikipedia.org/wiki/Taxation_in_France
3.  en.wikipedia.org/wiki/List_of_countries_by_GDP_(real)_growth_rate#Lists_of_countries_by_their_GDP
4.  The French Welfare State, Martin A. Schain, New York University