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Perspectives on what is a high tax rate
mrondeau
Montréal, CanadaRegistered User regular
Montréal, CanadaRegistered User regular
In the Sander thread, I mentioned that, from my point of view, Vermont had essentially no taxation. @Shadowfire objected:
So, for comparison, in Quebec, we have an income tax:
Taxable income of 41,935$ or less: 16%
If the income is more than 41,935$, 20% on the slice between 41,935$ and 83,685$,
the slice between 83,685$ and 120,040$ is 24%,
Anything above 102,040$ is 25.75%.
The federal slices are different:
Up to 44,701$: 15%
44,701$ to 89,401$: 22%
89,401$ to 138,568$: 26%
And 29% above 138,568$.
That after deductions, of course, of which the main one is the personal exception of about 10K$ (it's different for the provincial and federal taxes).
There's also a sale tax of 5% for the Federal and 9.975% for the provincial.
Also, there's the usual payroll deductions:
Pension (RRQ): 5.25%
Unemployment insurance: 1.88%
I don't own a home, so I'm less familiar with property taxes, but it's on the order of 1-2% in Montréal.
That's just used for municipal services. Major roadworks are usually financed by the province.
In other words, from my point of view, there's almost no taxation in Vermont in the first place, even if it's apparently one of the most taxed states.
I would like to know how those tax rates is perceived in the United States.
One thing I noticed is that states seems to avoid having income taxes in favour of regressive property taxes. Am I missing anything ?
Shadowfire wrote: »
You ah... taxes here are rough. We pay 25% of federal for state income taxes which isn't too bad, and sales tax is only 5%. Again, not terrible. But you'll never buy a house unless you've got tons of cash coming in. Around here a 1000 square foot house can cost around 100k, and you'll be paying 3-4k in taxes on that. Contrast that with my parents in Georgia getting a 3000 square foot home (too Fucking big, but that's another thread) for 250k and only paying around 1k in taxes.
Living up here makes things real tough on the budget.
So, for comparison, in Quebec, we have an income tax:
Taxable income of 41,935$ or less: 16%
If the income is more than 41,935$, 20% on the slice between 41,935$ and 83,685$,
the slice between 83,685$ and 120,040$ is 24%,
Anything above 102,040$ is 25.75%.
The federal slices are different:
Up to 44,701$: 15%
44,701$ to 89,401$: 22%
89,401$ to 138,568$: 26%
And 29% above 138,568$.
That after deductions, of course, of which the main one is the personal exception of about 10K$ (it's different for the provincial and federal taxes).
There's also a sale tax of 5% for the Federal and 9.975% for the provincial.
Also, there's the usual payroll deductions:
Pension (RRQ): 5.25%
Unemployment insurance: 1.88%
I don't own a home, so I'm less familiar with property taxes, but it's on the order of 1-2% in Montréal.
That's just used for municipal services. Major roadworks are usually financed by the province.
In other words, from my point of view, there's almost no taxation in Vermont in the first place, even if it's apparently one of the most taxed states.
I would like to know how those tax rates is perceived in the United States.
One thing I noticed is that states seems to avoid having income taxes in favour of regressive property taxes. Am I missing anything ?
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Personally, i think sales taxes should be reduced to sin taxes (only tax stuff that is a net burden on society like alcohol and tobacco), and most of the rest should go to income and financial services fees.
I'd compared between there and here, but I don't know what marriage and kids do to your rates.
My total tax burden, not counting sales or property tax, is around 25%. This is for a family income of about $70k for a wife and two kids who rent. (We're a bit below median family income for our state, to put that in context.)
If we imagine that our health care was state run and cost us the same out of pocket in taxes, that would bring our total to about 35%, which seems reasonable to me for a middle class family in a country that provides free health care.
But dude, you folks need to do something about your sales tax. 15% is stupidly regressive.
50K$ would be about 38.13%, including payroll taxes and the personal deduction.
I'm not a fan of the sale taxes, but at this point reducing them would only result in a coincidental increase in price weirdly matching the reduction in taxes.
It's hard to really compare tax rates, without considering things like total deductions, and also what your tax money buys you.
Like here, the top federal income rate is 35%, but the wealthiest people here pay an effective rate closer to 15% because of deductions and because most of their income is investment, which is taxed much lower. We have high rates on corporate income, but none of them actually pay corporate taxes, so it's kinda moot. (Though it's great fodder for corporate shills to complain that we have the Highest Rates In the World.)
They would be right...provided this was 1953-1964
~ Buckaroo Banzai
http://www.forbes.com/sites/robertwood/2014/05/10/forget-frances-75-and-100-tax-hawaiian-tax-rate-hits-367000/
Not nearly that high. Also Quebec is kinda different in that the province gets more tax and there's a rebate on federal taxes specifically for Quebec taxes. The other provinces have lower rates. Ontario, for example, is
5.05% on the first $40,922 of taxable income, +
9.15% on the next $40,925, +
11.16% on the next $68,153, +
12.16% on the next $70,000, +
13.16 % on the amount over $220,000
Deductions work a bit differently too, they don't take income off the top as in the US, but they are done at the lowest tax bracket
As a general rule, things like groceries, medical expenses, child care, education are sales tax exempt, so it's not as bad as it might seem. There is also a credit which can pay out up to about $400/year for lower income people to offset the sales tax
https://simpletax.ca/calculator can be used to do quick calculations, though it's after tax calculation doesn't include either CPP or EI which will take about 6-7% more (up to about 3.5k total)
$50k taxable income (after 401k-style saving)
In Quebec it would be ~11,191 in income tax, plus about ~3200 for payroll taxes
In Ontario it would be ~8,571 in income tax, and about the same for payroll
That leaves you 35-40k for a 20-30% effective tax rate
Effective tax begins to approach 50% once you get into 200k+
I've heard the Mall of America gets a decent amount of visitors from other states for favorable tax rates (It's around 6.5% in MN, with liberal exemptions for food, clothing, etc.).
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Actually the current tax rate at the mall is 7.8%, and the big draw is that all clothing is tax free.
Also many outlets have free personal shipping anywhere
Doc: That's right, twenty five years into the future. I've always dreamed on seeing the future, looking beyond my years, seeing the progress of mankind. I'll also be able to see who wins the next twenty-five world series.
Ah, okay.
That strikes me as pretty reasonable.
I really wish the political discussion about tax rates in the US would involve effective overall tax rate. Instead of the conversation consisting of largely "The highest federal tax rate is 35%, and the highest state income tax rate is 15%, plus 5% each for the payroll taxes, and 2% property tax, and 10% sales tax, therefore everyone is paying 75% of their income to the government, git yer hands outta mah pocketbook, big gummint bloat, also let's double the size of our military."
Huh? Are the businesses of Canada all royal monopolies or something?
People inability to understand marginal tax rates is as infuriating as it is seemingly universal.
That being said, the raw number of deduction seem to be lower in Canada compared to the 'States, but since my source is the same kind of people who complain about the top marginal rate...
Of course, the trade off is that we have more welfare programs not based on tax deductions.
For example, medical expenses are deductible. They are also (relatively) low, since the largest costs are payed by the government.
Same for child care and tuition, in Québec. Both are tax deductible but the main contribution of the government is direct funding, especially for tuition.
Income - roughly 160k combined
Federal Tax - roughly $32,000
State Tax - roughly $6,000
NJ Sales Tax - 7.0% - non prepared food is exempt so that is something
House - 1,344 sq ft
Lot - 35x150 ft
Cost - $330,000 - paid last year
Property taxes - little over $9,000
So the mortgage figures out to $2450 with taxes included.
Not exactly a palace, definitely a working class town - neighborhood is very diverse and there are multiple multi families (mostly 2 family houses) on my block.
But its a 30 minute train ride to the city, although the station is a 5 minute drive and not walking distance.
New Jersey is pretty expensive overall.
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No, they just are not stupid. Consumers were willing to pay X (including taxes), they will still be willing to pay X even if it includes less taxes.
Normally, this would be hard to synchronize without obviously breaking quite a few laws, but in the case of a sale tax reduction, that's rather easy.
See "gaz, price at pump" for another example of the same phenomenon.
There are fewer deductions, and they're generally less valuable since most credits are refunded at the lowest rate - though if your income is low it's the same as a complete refund, so I like that system
The really valuable ones are the RRSP (401k accounts) deduction since that affects taxable income and you can save up to 18% of gross income that way, and capital gains which only taxes half of the overall gain (or loss) at your marginal rate
There is no mortgage deduction at all, nor any weird standard deduction / itemized thing, if your stuff applies to one of the categories you claim it (in addition to the basic amount), otherwise you don't
There is a credit / payment for children, but I don't know how that works. Marriage is handled very simply - you file separate returns. If your spouse has very low income you can claim some extra credits on your return
People can hold government accountable to the extent that they understand what it does. To the extent that they do not, they are going to go by their experience, and my personal experience with the government is bad. I will lose a working day every other year or so to a DMV trip, that day is completely wasted just so that I can continue to enjoy the "privilege" of driving. Occasionally most people might get a ticket for speeding or parking their car in a way they were not supposed to. That and an occasional conversation with some government bureaucrat or another is the extent that most people I know interact with the government. Those interactions are pretty much always poor.
We can't have much in the way of taxes if people don't have some trust in their government, and frankly few people I know do have any level of trust in it. I tend to think that because the government can't properly fund programs and actually do good things, or won't because of political reasons, we are in the process of a kind of vicious cycle where lack of funding leads to a lack of faith in the system that leads to a political impetus to further cut funding. I think that even if it's unfair the only way to fix this is to simplify the tax system even if that means raising the taxes on poor people.
If people can't understand the system and they just see big tax numbers like a 35% marginal rate, and add that to the rate of all the other taxes they pay and come up with a belief that they pay more than half their income in tax, when their effective rate is probably under 20%, that's a problem, and it won't be fixed by education. But for me it all comes down to this, as society becomes larger and more complicated it will be more difficult for people to really understand what's going on, and as long as they don't understand it we won't have effective government.
Personally I'd rather see more of a reliance on property tax than sales at the local/State level (and a VAT instead of sales tax for convenience) since you can't really hide land overseas to shelter it from taxation. No, my backyard is actually Swiss just doesn't work as easily.
The fuck is wrong with your State? The longest I ever spent at SecState was 40 minutes, and that was in downtown Chicago over lunch (I was not the only person with this idea). Plus that wasn't even mandatory since I could have done it online, but I wanted a better picture.
You guys need to work on that.
Unless your prices already include tax by law, people will most certainly notice when a $9.99 item abruptly has an $11.49 sticker instead. Also, "Your margin is my opportunity." Someone will undercut businesses that try to double or triple their margins, Amazon if no one else.
Sales taxes are politically tempting but economically atrocious. I guarantee the tax incidence for your current VAT tax is not 100% on business profits.
I think the real phenomenon is that people 1) tend to remember bad experiences over good ones, and 2) will remember the things that reinforce their preexisting notions.
If I get a $500 check for unemployment after spending only about 10 minutes submitting an application, visit an immaculately maintained park, borrow five books for free from the library, and then spend 60 minutes at the DMV when I feel it should only have been 30 minutes, guess which one I'm going to remember? (Even if I'm spending 60 minutes because I didn't have the foresight to schedule an appointment in advance.)
Also, if I spend that 60 minutes at the DMV, and later that day I spend two hours on the phone with Comcast because they fucked up my cable bill for the sixth time that year, but I'm predisposed to consider government expensive and ineffective, guess which one in going to bitch about?
It's really not.
As much as American lefties tend to argue about the regressiveness of sales taxes, they are heavily employed by many far more socialist or left-wing countries then the US for funding purposes. And it generally leads to better outcomes overall because the extra revenue is folded into better all around services for people.
There was a paper all about this a few years back or something, I'll see if I can find it. I swear the EconoDog linked it.
And who's first thought was not "That's a perfectly reasonable tax rate" but rather "Are you seriously complaining about those housing prices and tax rates?".
Cause man, I would kill for those prices and rates. Like, literally. A hobo and his pet dog. Without hesitation.
Regressive taxes can fund progressive services, but they are still regressive. We could institute a 5% national sales tax in order to have universal daycare, or to invade Brazil. Either way that is going to be more of a burden on the poor than hiking the top marginal income tax rate in order to pay for it.
Now, you could argue that regressive taxes are more politically palatable because they're universal. And that allows for more progressive policy overall since there is less antagonizing about where the money comes from. Which is a good chunk of why Social Security and Medicare are payroll taxes and have not only survived 75 years, but been improved upon. But that's different than their overall economic impact.
Yeah, the only way I can get a house for $100k is if its a 'fixer upper' in a high crime neighborhood. A 3bdr close to the L and in a nicer part of town is 3x that easy.
Sales taxes are regressive. Unless you're going to argue that poor people do not spend a higher percentage of their money than the wealthy, or that consumers bear little of the burden of a flat sales tax. Socialist countries turn to them for the same reasons that liberal cities get lots of revenue from ticketing, liberal states have lotteries, and liberal universities will advance legal arguments that blame rape victims for their rape. The forces driving the decision makers have little to do with the broader liberal climate. Sales taxes are specifically tempting because they're easy to collect, hard to avoid, and produce less outcry than income taxes - in part precisely because they are regressive. There's a reason every presidential campaign brings Republican proposals to introduce a national sales tax, and it isn't because their donors think it's going to shift the tax burden up the income ladder.
You can use sales taxes to fund better services. Or you can use an instrument that isn't regressive and doesn't discourage consumption.
Not in aggregate, which is the whole point and really the only thing that matters. This is why they are used and why they work quite well.
That is a very weird absolute statement to make. Of course a tax can be regressive and still fund progressive policies. As an extreme example, I could take a tax that only targets the bottom quintile of incomes and funds a social program that benefits the bottom two quintiles. Boom, regressive tax and progressive policy.
Like was said, they're used because they're easily collected and easily sold to the public, not because they're super-double-secret progressive.
every fox news host apparently has never heard of an accountant
like, Stuart Varney says he pays 60% taxes or something
see the problem must be education, all these rich people don't realize deductions exist!
America is packed to the brim full of less noticeable taxes because the public is so resistant to taxation. Everything from sales tax to court costs to lots of municipal ordinances to ... well every single bullshit bill the poor get dumped on them if they ever interact with the legal system in any capacity
they're all regressive as fuck too, half the red states make you pay for public defenders
I think there is some confusion over the definition of terms. Regressive and progressive have specific meaning in regards tax policy and a sales tax or VAT is going to be regressive without modifications that most countries don't have, however in theory a regressive tax does not necessarily imply a larger burden on the poor when benefits are taken into account if the money used from the tax funds benefits that primarily target lower income households.
I haven't shopped for a home in a while, but yes I should have clarified, most of the homes we looked at in this range had significant things that need correction. One was still on fuses and needed a conversion to a circuit breaker system, as well as having almost no wiring upstairs. Another had a buried oil tank still, which would have needed to be dug up and replaced with something indoor. This is on top of the interior problems and likely structural issues on 100+ year old buildings.
They were not move in ready. The crime rate is minimal, but that's part of what you pay for living in a tiny town of 2500.
@RedTide mentioned New Jersey earlier, and yeah, I think that's the only state that had more terrifying property taxes when we looked.
As for comparisons with other countries, I certainly wouldn't mind paying more in taxes if we had single payer. But as it is, tack another 20% "tax" on for our family's insurance, and we still have to pay for medical expenses.
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I explained that we made so little that she'd be able to keep almost all of it. She countered with the example of the time her husband (who also made sub 30k a year) worked at a Wendy's once for extra money, and how the government took every penny of that. So, there was absolutely no point in working any more, since the government would claw it all back.
I tried explaining that the likely problem was that the Wendy's pay checks weren't taking off an appropriate amount of tax, and that they needed to look at their total tax picture, and that if they somehow ended up owing $4k on their salaries then they made a mistake in doing their taxes and should have paid a professional to look at their taxes. I tried to explain marginal rates to little effect.
She used a lot of angry words about leaches, government, and how I had no idea what I was talking about.
I'm sorry, I feel this is potentially an obvious question, but when would the above not be the case? - I've always just assumed everywhere with GST / VAT arrangements did this.
Canada does not. I have no idea why.
Here in Norway sales tax is 25% (with some exceptions; e.g. books (but only physical, not ebooks) have 0%). Since this is nationwide, all sticker prices include sales tax.
A few years back the government decided to reduce sales tax on food to 12.5%. Within a few months the prices were back to the level they were before the sales tax were cut.
On the other hand, it seems other countries sometimes have a bunch of non-tax mandatory payments which there's not much of here. Plus the things the tax buys etc in combination with high wages mean that disposable income for the average family isn't that different from the US probably.
Norway has the highest food prices in Europe due to lack of competition. In such a case it's not surprising that grocery stores would respond by simply raising prices, because they can: food is a life necessity, and no one's going to undercut them. I'm assuming this is not the situation for the entire Canadian economy.
True; I was contemplating pointing out that fact. And I also concede that the Norwegian situation might not be applicable to all other countries.
For the record:
In Norway, four grocery store chains control a combined 99% of the marked. They also own about the same of distribution; meaning that if you were to start up a competitor, you'd have to rely on one of the big 4 to supply groceries to your store.
Since I brought up books as an example of a good with no sales tax (in Norway): The situation is the same as with groceries, except worse. The big publishers make the books, distribute the books, and sell the books; they own the distributors and all the book stores. The publishers bought the book stores shortly before ebooks became a thing; as a result, the publishers are fighting tooth and nail against the adoption of ebooks. The lack of sales tax on books is effectively a governmental subsidy.