Taxes are fiendishly complex, so this post might have some errors. I’m trying to see where America ranks in terms of “top income tax rate.” Just to be clear, I am not including wage taxes, or corporate income taxes. Nor am I interested in the maximum MTR associated with benefit and deduction phaseouts. You’d have to be a rocket scientist to figure all of those out. I’d like to rank countries according to the MTR as one’s income goes out towards infinity. I believe the top 6 countries are:
1. Aruba 58.95%
2. Sweden 56.6%
4. Netherlands 52%
5. Spain 52%
6. US 51.4% (but only in California.)
Our top rate in a typical state is about 48%, which is roughly 10th in the world. The top federal income tax rate is 43.4% (39.6% plus the 3.8% medical income tax.) I got the California number by assuming their 13.3% top rate was deductible against the 39.6% federal rate, but not the 3.8%.
Update: Mark Sadowski points out that California also trails Belgium and Portugal.
Update#2: Steve points out that with the Pease phaseout California’s top rate is actually 52.6%, still number 6, but trailing Portugal and Belgium, not Netherlands and Spain.
Canada seems to have a top rate of 54.75% in Quebec, but only about 45% in a typical province, and about 42% in populous Ontario. Their top federal rate is 29%. (I assumed local taxes are not deductible at the Federal level, otherwise their rates would be lower.) Progressives want Canada’s health care regime. I want their banking system, military, and income tax regime. And their sound public finances. Oil-rich conservative Alberta’s top rate is 39%, versus 43.4% in oil-rich conservative Texas.
Recently a lot of zombie ideas have been resurrected by progressives (and even some conservatives.) These include 75% tax rates, much higher minimum wages, and guaranteed annual incomes. I realize that lots of people are worried about inequality. But there are sensible ways to address the issue (i.e. wage subsidies.) Let’s not shoot ourselves in the foot. There’s a reason that Aruba is the only country in the world with a top rate above 57%.
PS. The New York Times did a story on the Swiss referendum on a proposal that would pay every Swiss couple $67,ooo/year to do . . . nothing at all. Just for existing. They left the impression that it was a good idea. How did they accomplish that seemingly miraculous task? Simple, they “forget” to mention the size of the guaranteed annual income.
PPS. I have a better idea for the Swiss. Instead of giving $33,500 to each Swiss adult, at a total cost of $200,000,000,000, why not give $50/year to each human adult?
Regarding the minimum wage, here is some data for Western Europe:
There are nine countries with a minimum wage (Belgium, Netherlands, Britain, Ireland, France, Spain, Portugal, Greece, Luxembourg). Their unemployment rates range from 5.9% in Luxembourg to 27.6% in Greece. The median country is France with 11.1% unemployment.
There are nine countries with no minimum wage (Iceland, Norway, Sweden, Finland, Denmark, Austria, Germany, Italy, Switzerland.) Five of the nine have a lower unemployment rate than Luxembourg, the best of the other group. The median country is Iceland, with a 5.5% unemployment rate. The biggest country in Europe is Germany. No minimum wage and 5.2% unemployment.
Still want to raise our minimum wage to $10? Germany used to have really high unemployment. Then they did labor reforms to allow more low wage jobs, combined with subsidies for low wage workers. Now they don’t have high unemployment.
Still want to raise our minimum wage to $10?