Tuesday, September 1, 2020

How Severe Is The National Sales Tax Overseas? -- September 1, 2020

We were stationed overseas for fourteen years -- I say it was thirteen years, my wife says it was fourteen. In addition to that, I spent another half dozen years overseas on various "short" duty assignments. Our family literally grew up with a national sales tax, something we (fortunately) don't have in the US.

How severe is that national sales tax? It's called a value-added tax, and it's not just a tax at the final point of sale but at each point where value is added to the product. Whatever.

Consumers simply see the "bottom-line VAT":

  • Germany: 16%;
  • France: 22% plus a new digital services tax of 3% on top of that 22% for "digital" products;
  • Italy: 22% plus the new digital services tax of 3% on top of that 22% for "digital" products;
  • UK: 20% plus the new digital services tax of 2% on top of that 22% for "digital" products;
  • Chile: 19%
  • Mexico: 16%
  • Saudi Arabia: 15% (recently increased from 5%)
  • Turkey: 18% plus the new digital services tax of 7.5%;

There is nothing more regressive than a sales tax. The rich can complain about it but probably seldom notice it except when buying a new car or a new yacht, but the middle class face it every day. 

See comments at the linked article. It's "fun" to see how Europeans try to justify VAT -- call it what you want, I see it as a sales tax. And whatever it is called, it is a most regressive tax.

2 comments:

  1. I agree; a sales tax (by whatever name) is a most regressive tax. However, a state income tax can also be. Consider the following where Oregon, with no sales tax, has an income tax of 9.9% on about everything over $5,000 if single. The State income tax is within a hair's breath of the Federal take. If one spends everything that it one earns, it makes no difference if the tax hit is a 7.45% sales tax or an effective 7.45% income tax. To illustrate: https://smartasset.com/taxes/oregon-tax-calculator
    Overview of Oregon Taxes

    Oregon has a progressive income tax that ranks among the highest in the nation. The average effective property tax rate is about average, though, ranking as the 22nd-highest rate in the country. Oregon has no sales tax.

    Filing Status: Single
    Household Income: $68,915
    Your 2019 Estimated State Income Tax: $5,132
    Your Income Taxes Breakdown
    Tax Type Marginal Tax Rate Effective Tax Rate 2019 Taxes*
    Federal 22.00% 12.10% $8,336
    FICA 7.65% 7.65% $5,272
    State 9.00% 7.45% $5,132

    Total Income Taxes 27.19% $18,740
    Income After Taxes $50,175

    Just showing that you can "Pay me now or pay me later"...

    ReplyDelete
    Replies
    1. Shame on any state that has a regressive state income tax.

      Delete

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