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From Tax Hell to Tax Haven
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
Eurozone countries are falling like dominos. But bailouts—funded by taxpayers in other countries—keep banks from collapsing, governments from defaulting, and investors from incurring well-deserved losses. Bailout money that no one has. And so it's borrowed. Borrowing is pain free, and easier than collecting taxes. Until it’s impossible. Hence a debt crisis.
In the US, we talk about “revenues” instead of taxes. President Obama’s budget is circulating, and it has that word in it, causing heart palpitations and conniptions left and right. But how do countries stack up against each other when it comes to taxes?
In the graph below, the 34 countries of the OECD are ranked by the amount of taxes they collected from all sources in 2010—income, consumptions, assets, etc., at local and national levels—as a percent of GDP.
Denmark, perched precariously at the top of the list, extracts nearly half of its GDP in taxes, followed by Sweden, followed by 10 of the 17 Eurozone countries—plus Hungary. We used to live in Belgium and can confirm that much of what you earn is taken. While it may be a tax haven of sorts for rich foreigners with unique tax problems who get taxed to death in their own countries, Belgium is a tough place for people who make and spend their money there!
And there are disparities: France confiscates 42.9% of its GDP in taxes—and that was before a slew of tax increases were passed in 2012. Germany takes 36.1%. Yet, France’s deficit is ballooning while Germany had a nearly balanced budget in 2012.
The bailed-out debt-crisis countries are all in the lower tax-extraction category: Spain (32.3%), Portugal (31.7%), and Greece (30.9%)—Greeks at all levels, particularly independent professionals such as doctors and lawyers, and of course the elite, have figured out how to avoid paying taxes. Then there’s Ireland (27.6%). Bailed-out Cyprus isn’t on the list because it isn’t a member of the OECD; in 1995, its application was vetoed by Turkey. However, in 2010, Cyprus was the second richest country in the Eurozone! With its 10% corporate income tax and other tax advantages, it would have one of the lower tax burdens.
Alas, these five countries that have relatively low tax burdens now expect taxpayers in other countries—countries that have much higher tax burdens—to bail them out. Hapless taxpayers in Belgium, for example, are tasked to pay twice: once to keep their own governmental apparatus greased and to bail out their banks, such as Dexia; and a second time to bail out countries whose taxpayers refuse to do it themselves.
The graph shows the ranking of the 34 OECD countries (data from the OECD via the Center for Tax Justice). And who is near the very bottom?
The biggest fiscal basket case of them all, the real one, the one that is blowing up in slow motion right now, Japan, whose gross national debt will exceed 240% of GDP by the end of this fiscal year, has given its people and companies a free ride for years. All manner of huge subsidies and handouts for Japan Inc. on top of a welfare state par excellence for the people add up to a majestic tab. The way they’ve paid for much of the tab, given the relatively light tax burden of 27.6%: borrowed and printed money.
Near the very bottom of the list, in third place, is the US (includes federal, state, and local taxes). Among OECD countries, only Mexico and Chile have a smaller tax burden. Over the last thirty years, taxes in the US have ranged from a high of 29.5% of GDP in 2000 (capital gains!) to a low of 24.2% in 2009. The noble rank of 32 out of 34 was first achieved in 2009, after a long uneven progression from 16 out of the then 24 OECD countries in 1979. If Congress could just hold spending down to that level! But that’s the hard part. Cutting taxes, any idiot can do that.
As the value of a Bitcoin soars and dives and soars and dives even more in mega-percentages, and as perfectly sane people wonder what the heck it is and then suddenly jump on the bandwagon with both feet, a computer security researcher and software developer pokes around in its ugly innards. Read.... Bitcoin: Bait-And-Switch?
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The tax rate has to be looked at in conjunction with the ease of doing business... In Mexico it is difficult to open a business as you have a swarm of civil servants crawling over your arse looking for 'licences', 'certificates', bribes etc...so you need to add that to the 'taxes'.
Portugal ranks about 140th out of 150 countries for 'ease of doing business'... so while 'taxes' might be low... paying for permissions and permits is high. I remember the incident a few years ago of a british expat who killed himslef after investing his life saving in a restaurant butt the local council kept refusing a licence. they kept spinning him around for 7 years..
everyone in these 'low rent' countries wants to work for the government.. and all are socialist.
Does the above chart include taxes, fees, licenses, etc. from all state and local governments? If not, it would be much more interesting to see the real amount of taxes extracted from GDP. The U.S. number seems low.
Another interesting chart would be total Federal+state+local government spending (actual, not budgeted) as a percent of GDP.
Why not let the banks fail, get rid of the Federal Government (since they are attacking the States,) and kill two birds with one stone? Or, do we have to wait until they do it for themselves. In any case those fools are like a capsized ship: At first it lays over; then the water fills in; it stays there for some time; then poof, it blows its final bubbles.
Imagine the opportunites without the banks and the Federal Gov't.
Imagine if the Bitcoin block chain file was corrupted, or a worm inserted. OUCH!
So the politicians in all these countries bailed out their bankers, and continue to send our tax dollars to foreign banks, but then are supposed to ask us to take less of already promised and taxed entitlements.
Deal breaker!
What's Bitcoin?
Someone suggested I go to MtGox or btc-e.com to find out.
There is nothing there.
People make up shit on the Internet all the time.
The U.S. tax rate uses GDP which is totally fictitious. U.S. citizens (other than welfare recipients and billionaires) derive almost no useful benefit from the government. In Sweden, Denmark, etc. the citizens get a great transportation system, free health care, 8 weeks of vacation, shorter work weeks, free education through college, and numerous other benefits. U.S. citizens get bank bailouts, supercarriers, F35s, and enormous bureaucratic burdens.
Median family income in the US: $49,445.00
Amount spent by federal/state/local governments per family: $50,074.00
http://www.sumnerbooks.com/books/view/completely-predictable
The government is now spending more than citizens earn.
We're f***ing doomed...
The US number is distorted to account for the 50%+ who pay NO taxes. I can tell you that the median income federal taxes + state + property taxes plus sales taxes plus bullshit fees/taxes confiscate at least 40% of the median person's income.
40%-try over 55%. I don't even sit down and figure it out because it is so fucking depressing
This article distorts.
The US is the world's largest debtor - this terribly distorts taxation by putting its cost tp the future.
Yet this debt feeds foreign aid, military, agricultural subsidies, etc. that feeds into the GDP calculation to boost the denominator, to lower the percentage, to paint a pretty picture today.
Taxes/GDP is a poor way to look at the US - it doesn't account for runaway debt.
What about the Inflation Tax? All that printing reduces the value of the savers/pensioners savings. Is that not a tax too? Doesn't that change America's rank as a taxer? Italy, for example, doesn't get to print euros like America prints dollars. She has to extort the money directly from her citizens.
How long until the citizens demand no taxes? If you are going to borrow massive money anyway, why am I paying any taxes at all? If borrowing trillions does not cause harm then borrow more and let me keep all my money. Right now govts borrow massive money to help the few then make the many pay for it. Why not borrow for the many so they directly benefit. Most of the time it would be far cheaper to just do that then the slow motion train wreck we see now.
+1
But, if politicians couldn't get votes by promising free stuff/entitlements without making someone other than themselves pay for it, then how on earth would they ever get elected!!??
"We" must have politicians! Right!?! How could "we" possibly live without politicians!?!?
If "we" are going to have representative democracy through electoral politics, then, "we" must borrow massive amounts of money in order to pay for the politicians that "represent" us.
But don't worry. According to N.Y. Mayor Michael Bloomberg there's nothing to fret about.
“WE are spending money WE don’t have,” Mr. Bloomberg explained. “It’s not like your household. In your household, people are saying, ‘Oh, you can’t spend money you don’t have.’ That is true for your household because nobody is going to lend you an infinite amount of money. When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money. … Our debt is so big and so many people own it that it’s preposterous to think that they would stop selling us more. It’s the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem. And that’s a problem for the lenders. They can’t stop lending us more money.”
I think I've been waiting all my life to meet "Mr. We". Can anyone introduce him to me?
"Thank you Mr. Bloomberg. It all makes so much sense now. Can I borrow $50 million?" -Patrick Carraher
When the US govt pays for its military, in wages and purchases of ammo, planes, etc. is that counted as GDP? I think so ... so there is churn in military operations that is not present in countries that barely spend anything on military force.
The conservatives in the US always ignore the fact Swedish and Danish citizens, among the highest taxed in the world, are also the happiest.
Maybe because they get something for their money.
Hopium induced sugar high. The viking may be slumbering, and may even have overslept, but he is by no means dead.
Those people may be behaving like the biggest flock of sheep on the face of the planet, but - at heart - they are also very fierce about their freedom. When it becomes clear to them, that their surrender of freedoms is not for the benefit of their local bretheren, but to the benefit of a globalistic cabal, you just may see some fireworks still.
It is brewing under the surface.
Does this chart only include Federal Taxes? I don't think these European countries have state taxes, so if these aren't included in the US figures, the chart is garbage.
His numbers are crap. US taxation overall is way over the percentage he has in his chart.
The Tax Foundation shows TOTAL US taxes at 29.4% in 2012, down from a paek of 33.1% in 2000.
http://www.nowandfutures.com/images/total_us_taxes.png
The Tax Foundation lies! They aren't including the printing of dollars which is also a tax, the largest tax of all now.
It's more a redistribution of wealth from the middle class to the upper class so they can retain their monetary advantage and thus systemic influence and control. If they were prohibited from doing this, the market correction would have caused a lot of bankruptcy level events for very influential and powerful people and that was never going to be an option when stealing from the passive middle class is so much easier and powerful relationships can then be remended and restored.
Better metric: Total Government Spending as a % of GDP
If the government spends it, that much of the GDP has been consumed - whether it's paid for now (current taxes), or not (bonds).
For example: Total US Government Spending is $6T / US GDP is $15T = 40%
40% of the entire national output is taken from the productive and spent on the politically connected to buy votes for the career perpetuation of the scheming non-productive (politicians).
And some wonder why the economy sucks...
You have to add in state and local government spending for the number to be meaningful.
Not quite the whole picture. How much is spent on interest? Who is collecting that interest? What is the interest on the creation of our own money now anyway, 500 billion? That's a whole lot of money for nothing going somewhere, or to someone.
That is exactly right. Why should any interest be paid at all? If you are simply creating money out of thin air then why should you be entitled to interest? Why do we even need a bond market - you can just print what is needed to pay bills - what is the actual point of the middle man in the markets if printing has no negative consequences? Remove govt debt markets, remove interest, print what is needed as needed.
I always thought Spending/Income put things in better perspective. $6T/$2T or we spend four times what we collect in taxes. 40% looks so..... possible. 400% somehow seems more of an issue...
40%, I don't think so.
$4tn on the books plus $6.8tn(at least) in accruals off the books.
Think thats 70% +.
National Value added Tax is distorting that table.
Still an indicator , but not as to scale.
This chart proves:
no matter the tax rate, mismanagement of a country trumps all.
Thanks for adding some common sense to the discussion. I've said it before, if higher taxes were the solution to the problem then Europe should be a bed of roses. Instead, they continue to punish future citizens by borrowing for a lifestyle they can't afford with the highest taxes on Earth. It is not how much or what percent is collected, it's how it was collected (political or economic sense) and what was done with it.
History is replete with examples. Spain, Portugal and gold, Nigeria and oil, China, Arabia and spices, Italy and banks - all floundered despite seemingly favorable conditions. On the other side, war-torn Korea, Japan, Singapore, post-Soviet Estonia and Poland, Chile, Hong Kong - proved successful despite a seeming lack of resources. Superior management is the key and perhaps this is related to being wiling to face the hard truths.
Ah yes, I see that Wolf the "I made and hid my millons but god damn it yours aren't taxed enough" paper-pusher is still posting shit that lacks any critical thinking. Prosecute the fraud, put those that profitted from the fraud in a real prison, bankrupt the bad companies and make the fucking owners pay the fucking debt, not the fucking taxpayer. Nothing changes until the moral hazard is put back in the bottle and real consequences for bad behavior return at all levels of society. Fuck you and the Bernanke.
"put those that profitted from the fraud in a real prison, bankrupt the bad companies and make the fucking owners pay the fucking debt..."
Confiscate all their assets. ALL OF IT! This includes the assets they've transferred to their friends and relatives too.
Their wealth is the result of their racketeering at the expense of the taxpayers.
Mozillo and Ken Lay's wife should have to fight each other and the rest of America's homeless for a place to sleep on a park bench! They should be fucking penniless forever.
There is a far greater honesty to the people who advocate for higher taxes. And I mean "on everyone" of course. Taxes were through the roof in the 40's, 50's and 60's...I don't recall the massive social dislocations of that Age. Having said "combining massive taxes, wealth transfers and inflation" really did prove the undoing of it all. "When the Chinese crossed the Yalu it was every man for himself" as they say. This time around I think the implications of the biggest debt monetization in "War by Choice" history is only now dawning on people. "How do I fund ANY State program" comes to mind. You can't print. You can only borrow so much. Federal mandates are budget busters. When last I (un)checked we still had a Federal system. As Newton posited "every action has an equal and opposite reaction." massive assertions of Federal authority say hello to the "jobless prosperity."
"There is a far greater honesty to the people who advocate for higher taxes"
Yup. I agree. The greatest honesty is to say "if we want to spend like Denmark we gotta tax like Denmark"
The even greater honesty would be to stop bitching about increasing or decreasing the state and agree on a number - just fucking agree on how mucht percentage of the economy is supposed to be private and how much is supposed to be public - the tax level follows this discussion
33% in peacetime and 50% in wartime would be fine, for me - and this is the next honest discussion: peace or war? because Uncle Sam is at...
"There is a far greater honesty to the people who advocate for higher taxes. And I mean "on everyone" of course. " What a delusional crock of shit. If one understands that government is just a criminal band of thieving thugs then one understands that taxes are just plain ol' theft. Theft via extortion--"pay us or else!"
Taxes are just the stink, government is the shit. The time is now for people to eliminate this band of thugs and I promise you that taxes will follow suit. hujel
Those who advocate higher taxes as a solution have yet to point to a successful example. If they were correct, Europe iwould be a glowing success instead of the waning, tired, capital-poor land it has become. The argument about the "good old days" of high rates when "things were OK" is like apples and oranges. In 1951, year of my birth, the budge was 12% GDP (and balanced). The State was smaller and demanded less. Second, the puchasing power of the dollar was far greater. Third, "social taxes" (SS, Medicare, etc) and personal debt was both shameful and rare. Finally, revenues were broad-based - not exclusively from 20% of the citizens.
"There is a far greater honesty to the people who advocate for higher taxes. And I mean "on everyone" of course. " - Maybe, provided that they were not part of the fraud to begin with. In any case, so long as fraud remains the status quo, and there are no consequences or accountability for the bad behavior of anyone, but especially our leaders and elites, then absolutely nothing will change and the exponential entropic decay will only accelerate things. Fine with me. I have a damn good tribe.
We the people could assist the elite in that if you pay politicians and lobbyists then it's obvious that you think more of your money needs to go to Washington; thus, your taxes should be increased precipitously until you feel enough of your money has gone to Washington cause it doesn't seem right that they can buy their politicians with the money they save from the politicians cutting their taxes and installing loopholes with no additional cash outlay.
Kapital Kontrols coming to Kountry near you!
Time is to go off-grid.