6 replies to this topic

[biknut]

News To Obama: The OECD Says The United States Has The Most Progressive Tax System

October 29, 2008

by Scott A. Hodge

Barack Obama's admission that his policies would "spread the wealth around" has ignited a nationwide discussion of how progressive the tax system should be and how it should be used to redistribute income among Americans. Obama has been very successful in bolstering the conventional wisdom that the U.S. tax system does not place a significant enough burden on wealthier households and places too much of a burden on the "middle class."

But a new study on inequality by researchers at the Organization for Economic Cooperation and Development (OECD) in Paris reveals that when it comes to household taxes (income taxes and employee social security contributions) the U.S. "has the most progressive tax system and collects the largest share of taxes from the richest 10% of the population." As Column 1 in the table below shows, the U.S. tax system is far more progressive—meaning pro-poor—than similar systems in countries most Americans identify with high taxes, such as France and Sweden.

Even after accounting for the fact that the top 10 percent of households in the U.S. have one of the highest shares of market income among OECD nations, our tax system is second only to Ireland in terms of its progressivity for households.

The table also shows that the U.S. collects more household tax revenue from the top 10 percent of households than any other country and extracts the most from that income group relative to their share of the nation's income.

Of course, these measures do not include the litany of other taxes households pay in each country, such as Value Added Taxes, corporate income taxes and excise taxes, but they do give a good indication that our system places a heavier tax burden on high-income households than other industrialized countries.

The study also shows that while most countries rely more on cash transfers than taxes to redistribute income, the U.S. stands out as "achieving greater redistribution through the tax system than through cash transfers."[1]

Overall, the study finds that income transfer systems (social insurance, welfare) are "significantly more efficient than tax systems at reducing inequality, as well as more effective..."

Obama has started an important debate for America, but it is too bad he did so with less than one week before the presidential election.

Table 4.5. Alternative measures of progressivity of taxes in selected OECD countries, mid-2000s

Concentration of household taxes and market income
Percentage share of richest decile

Source: Computations based on OECD income distribution questionnaire.


http://dx.doi.org/10.1787/422013187855

1. The concentration coefficient is computed in the same way as the Gini coefficient of household income, so that a value of zero means that all income groups receive an equal share of household transfers or pay an equal share of taxes. However, individuals are ranked by their equivalised household disposable incomes.

http://www.taxfounda...show/23856.html

[lightowl]

I wonder whether they have taken into account that many of the countries they compare have free universal health care. That means that overall taxes are higher, but rich pay comparatively more towards the health care system. In the US, as I understand it, you need insurance to be covered. That means the cost of health care might be close to the same for everyone (those who have insurance). Since health insurance probably account for a significant portion of middle class peoples expenses, it seems those expenses should be taken into account (counted as a tax) for a comparisons to be accurate.

As an American, how large a percentage of your wages goes towards health insurance?
( the question is not directed at the thread author, but at any american who wish to reply )

Edited by lightowl, 31 October 2008 - 11:12 AM.

[inawe]

I wonder whether they have taken into account that many of the countries they compare have free universal health care. That means that overall taxes are higher, but rich pay comparatively more towards the health care system. In the US, as I understand it, you need insurance to be covered. That means the cost of health care might be close to the same for everyone (those who have insurance). Since health insurance probably account for a significant portion of middle class peoples expenses, it seems those expenses should be taken into account (counted as a tax) for a comparisons to be accurate.

As an American, how large a percentage of your wages goes towards health insurance?
( the question is not directed at the thread author, but at any american who wish to reply )

A number that's being thrown around is 12 thousand dollars a year for health care for a family of 4. Guess that includes health insurance plus different
copayments.
As for taxes in the US, marginal rate for rich people is now 35% and will go up to 46.5% under Obama. Actually the rich can hire
creative accountants and lawyers to come up with loopholes and end up paying much lower taxes. McCain supporters constantly warn people
that Obama's high taxes will destroy our country.
Seems that the maximum rate in Denmark is 59%. Your VAT of 25% is much higher than any sales taxes in the US.
I understand that in Denmark you have universal health care mainly run by the government. We cannot do this in the US, people are told that
this would be socialism and "evil". In the US the main focus of health care is not health, it is profit for insurance companies, drug
companies, hospitals, doctors, etc. Due to this health care in the US is very expensive and very inefficient.
It will be very instructive if you can tell us whether people in Denmark like their health care system. What are the strong points and
what are the complains.

[luv2increase]

35% and will go up to 46.5%

This is incorrect.

http://www.cato-at-l...ocial-security/

The top marginal federal tax rates would effectively increase to 50.3% from 37.9%

He wants to take over half my hard earned money. That is unfathomable and sickening.

[lightowl]

A number that's being thrown around is 12 thousand dollars a year for health care for a family of 4. Guess that includes health insurance plus different copayments.

What is the average income for a middle class family?

Seems that the maximum rate in Denmark is 59%. Your VAT of 25% is much higher than any sales taxes in the US.

Most people in Denmark pay their taxes gladly, as most understand that a society needs to share common problems (health, education, infrastructure, economy, etc). Health care is seen as a net-good for society because it removes a significant worry burden from workers who are low income and are subject to increased risk of work related injury and disease.

I understand that in Denmark you have universal health care mainly run by the government.

What are the strong points?

The most obvious benefit is that people are free from worrying about getting sick. This is a significant benefit because sickness in a family can dramatically affect the welfare and productivity of the whole family, not only the victim of the disease. Nobody needs to worry about insurance companies doing everything they can to evade their responsibilities. Addiction and disability is covered under universal health care, so those who really need help can get it for free.

There is a treatment guarantee that ensures treatment within a set period. If public hospitals can not accommodate you in this period, you are allowed to take your health care support to a private hospital either in country or any other country.

What are the complains?

The main complaint is long waiting lines for treatment of common but complicated diseases such as cancer and heart-disease. The main problem here is a lack of doctors and nurses to take care of these patients. With our current conservative government deregulating the health care sector, many doctors and nurses have been seeking private work because the rich are increasingly seeking private practices due to quicker treatment. Private hospitals give their workers significantly higher wages. This is a vicious circle that can only be solved by increasing the number of educated health care workers and by pumping additional resources into wages. Additionally, advances in technology to treat/cure patients will probably also do a lot to remedy this situation.

[lightowl]

He wants to take over half my hard earned money. That is unfathomable and sickening.

There are plenty of people in the world who work much harder than you in horrible conditions. These people make much less money than you too. I find that sickening. The fact that people like you complain about your condition just reveals a complete lack understanding for the problems of the world. In fact I would go so far as to say such people probably don't care about other people at all. I don't see how the world could become a better place with such people electing those in power. Fortunately the world seems to be changing. Thank you America.

[inawe]

lightowl,
From a website of a university I see that "the middle class is grouped around the national average, in the range of $21,300 to
$63,300". Some people would argue that the upper limit of what's considered middle class is higher than that.

The US is the richest country in the world. But as far as the nominal per capita GDP we are 17th with %45,725, Denmark is 6th with $57,136.
I bet that in proportion, there is a much larger middle class in Denmark than in the US.
In the US the middle class is shrinking fast. A good question is: how come the rich manage to get richer while the rest is getting
poorer? Responsible for this situation is the number of idiots who allow themselves to get fooled by the system set up by the powerful.
Emblematic of this is the notorious Joe the plumber. He's probably making $30,000-$45,000/year but is worried that people making over 250
thousand/year will have a tax increase under an Obama administration.
He was immediately grabbed by the McCain team and paraded as an example of idiots McCain needs to get elected.
Another example. There is this guy here affected by posting incontinence. He's worried that Obama will take over half his money. The closest it
can get to that is if he makes a million dollars a year. And then if he's not smart enough to find loopholes.

Let's compare a single payer universal health care system with what we have in the US. In the US in most cases the Employer (E) is supposed to be
in charge of health care. E contracts a company to Manage (M) health care. M contracts a health Insurer (I) and another company to handle
Prescriptions (P). I bargains with hospitals, doctors, etc. P hires yet another company to buy (B) from the different pharmaceutical companies.
How come such a crazy system is still in place? Again the idiots. Idiots are told that anything else would be "socialism". All of this
is done so the huge army of intermediaries can make money. That's what health care in the US is about, profits. We have to fight to try to change this crazy situation.