Friday, March 25, 2011

Progressive

Tax rates. For those that claim the infamous "rich" don't pay their share (click to enlarge):



Out of OECD countries, the richest 10% is the U.S. take down the 3rd largest percentage of all income at 33.5%. We trail only Italy and Poland. Other developed countries are not materially different, but lower - U.K. @ 32.3%, New Zealand 30.3%, Germany 29.2%, Japan 28.1%. France is among the lowest at 25.5%. I would argue that the U.S. is so high because of the outlier effect. The top .01% of income generators in the U.S. generate huge amounts of money, and that effects the group as a whole. That's not such a bad thing for two reasons, 1. that is what our capitalist system is based on, and 2. those in the top 10% is a constantly varying population pool. The ability of participants in a capitalist system to migrate between income brackets is a good thing - it is the American Dream. As Milton Friedman said many times (and I'm paraphrasing), the capitalist system isn't a perfect system, but it's the system that has made the most societal advancements and largest increases in communal prosperity of any economic system in the history of the world.

The first column above shows that same population pool's percentage contribution of the overall tax burden. The U.S. tops the list at 45.1%. So the largest earners in the U.S. generate 33.5% of the income, but pay 45.1% of the taxes. There is no OECD country in the world where the highest earners pay a larger share of the taxes. The only other country in the 40s is Italy, a country (like Greece) known to "tax" people without effective collection. The U.S. has the greatest burden of taxes to income at 1.35x.

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