Posted on 04/14/2012 8:40:51 AM PDT by Kaslin
Why are taxes so much higher in Europe, consuming 46 percent of economic output compared to 32 percent of GDP in America? Is it because nations such as France, Greece, and Sweden have adopted the kind of class-warfare policies that Obama wants for the United States?
Surprisingly, the answer is no.
As explained by Veronique de Rugy, the United States actually has a more progressive tax code than European nations. The corporate tax rate is higher in the United States than in any European country, and the double taxation of dividends and capital gains also is far above the European average. Western European nations tend to impose higher tax rates on personal income, so the overall tax burden on the rich is roughly comparable on both sides of the Atlantic.
Since the United States and European nations impose somewhat similar tax burdens on upper-income taxpayers, what accounts for higher tax collections in Europe? Simply stated, the Europeans collect a lot more from the middle class.
The Europeans squeeze the middle class because thats the only way to finance big government. Thats the point I made in this interview on Fox News.
To elaborate, European politicians have learned that theres a limit to the amount of revenue that can be obtained by taxing the rich. In part, this is because there arent enough rich people to finance a bloated public sector.
But its also because Laffer Curve effects are very powerful at higher income levels. Simply stated, rich taxpayers usually have much more control over the timing, level, and composition of their income.
Its quite likely that European nations maxed out on the amount of revenue they can collect from the rich, which is why they started going after the middle class.
The same is true in the United States. The New York Times already has admitted they want higher taxes on the middle class. And as you saw in the clip above, Senator Schumer views higher taxes on the rich as a start.
People probably get tired of me warning against the value-added tax, but thats going to the key fight at some point in the future. If the left (with the help of foolish Republicans) succeeds in imposing this hidden tax, I fear that the fight will be over and that America is doomed to become another Greece.
After all, why would politicians reform entitlements if they have the option of slowly but surely pushing up the VAT rate?
That's because the Ponzi scheme hadn't gotten to the "collapse" point yet, where there aren't enough new suckers to cover the payouts to the early participants.
Thanks sickoflibs.
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