Richardcyoung.com

The Online Home of Author and Investor, Dick Young

  • Home
  • How We Are Different
  • About Us
    • Foundation Principles
    • Contributors
  • Investing
    • You’ve Read The Last Issue of Intelligence Report, Now What?
  • Your Survival Guy
  • The Great Reset
  • COVID-19
  • My Rifles
  • Dividends and Compounding
  • Your Security
  • The Swiss Way
  • Dick Young
  • Debbie Young
  • Key West
  • Paris
  • Dick’s R&B Top 100
  • Liberty & Freedom Map
  • Bank Credit & Money
  • Your Survival Guy’s Super States
  • NNT & Cholesterol
  • Work to Make Money/Invest to Save Money
  • Your Health
  • Ron Paul
  • US Treasury Yield Curve: My Favorite Investor Tool

Why Work When Taxes Take It All?

June 28, 2022 By E.J. Smith - Your Survival Guy

By Ollyy @ Shutterstock.com

Your Survival Guy witnessed firsthand on my recent fact-gathering trip to Paris just how taxes can impact the labor force. Obviously, the business world is wiping the Covid crust from its eyes, but there’s a fine line between government assistance that creates value, and that which does not. When taxes are high, and assistance discourages work, there’s much less incentive to rejoin the labor market. When speaking with locals in Paris, they told me some workers will never come back to the workforce if they can help it.

Do they feel their taxes are allocated well? It’s a simple question. It’s the young, single worker without children who is penalized most by high taxation (see table below). Encouraging these workers to work is the stepping stone to a strong labor force. But that’s the opposite of what’s happening. In France, they’re being taxed nearly 10 percentage points more than their friends who are married with children.

My gut feeling is many in Europe are rethinking the equation. Daniel Bunn of the Tax Foundation writes, “To make the taxation of labor more efficient, policymakers should understand the inputs into the tax wedge, and taxpayers should understand how their tax burden funds government services. This will be particularly important as policymakers explore ways to encourage a robust economic recovery.”

He continues:

Governments with higher taxes generally tout that they provide more services as an explanation, and while that is often true, the cost of these services can be more than half of an average worker’s salary, and for most, at least a third of their salary.

Individual income taxes, payroll taxes, and consumption taxes like value-added taxes (VAT) make up a large portion of many countries’ tax revenue. These taxes combined make up the tax burden on labor both by taxing wages directly and through the tax burden on wages used for consumption. This so-called tax burden on labor reflects the difference between an employer’s total cost of an employee and the employee’s net disposable income.

Payroll taxes are typically flat-rate taxes levied on wages and are in addition to the taxes on income. In most OECD countries, both the employer and the employee pay payroll taxes. These taxes usually fund specific social programs, such as unemployment insurance, health insurance, and old age insurance. Although payroll taxes are typically split between workers and their employers, economists generally agree that both sides of the payroll tax ultimately fall on workers.

In 2021, single, average-wage workers paid about one-third of their wages in taxes. In most Organisation for Economic Cooperation and Development (OECD) countries, families had smaller tax burdens than single workers without children earning the same income, but how much less varied. Accounting for consumption taxes reveals higher tax wedges than when just accounting for income and payroll taxes.

Changes to income tax systems directly impact the tax burden on labor: Some individual countries have made substantial changes to their income and payroll taxes in the last two decades. Hungary, the OECD country with the highest tax burden on labor in 2000, has had the most notable decrease in its tax wedge, from 54.7 percent to 43.2 percent in 2021. This is partially due to the introduction of a flat tax on income, which lowered the income tax burden relative to total labor costs. Additionally, Hungary reduced its payroll taxes relative to total labor costs. Denmark, Sweden, and Lithuania have also lowered their tax burden on labor substantially, with a reduction between 6 and 8.1 percentage points each.

Europe specifically: Although the tax wedge in Europe is generally high, there is a relatively wide range. The following map illustrates how European countries differ in their tax burden on labor.

Belgium has the highest tax burden on labor, at 52.6 percent (also the highest of all OECD countries), followed by Germany and Austria, at 48.1 percent and 47.8, respectively. Meanwhile, Switzerland had the lowest tax burden, at 22.8 percent.

It’s important to note that all European countries provide some targeted tax relief for families with children, typically through lower income taxes. In Germany, a single worker earning the nation’s average wage faces a tax wedge of 48.1 percent. A family with two children and one earner adult would face a tax burden of 32.7 percent. Mexico is the only country in the OECD that does not tax families at a lower rate than single workers (at the average wage).

To make the taxation of labor more efficient, policymakers should understand the inputs into the tax wedge, and taxpayers should understand how their tax burden funds government services. This will be particularly important as policymakers explore way to encourage a robust economic recovery.

Action Line: Live somewhere you won’t be treated like a piggy bank. Move to a Super State and avoid the punishing taxation of the big blue blobs. If you need motivation in your fight to do what’s best for your family, click here to subscribe to my free monthly Survive & Thrive letter. I’ll push you to make the right decisions in your life, and help you succeed where others might fail.

Originally posted on Your Survival Guy. 

If you’re willing to fight for Main Street America, click here to sign up for the Richardcyoung.com free weekly email.

Related Posts

  • Warren's Wealth Tax Won't Work
  • Why work?
  • Taxes on Dividends
  • Chainsaw the Tax Code
  • Author
  • Recent Posts
E.J. Smith - Your Survival Guy
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998.

E.J. has trained at Sig Sauer Academy in Epping, NH, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention.

E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris.

Please get in touch with E.J. at ejsmith@yoursurvivalguy.com

Click here to sign up for my free monthly Survive & Thrive letter.
Latest posts by E.J. Smith - Your Survival Guy (see all)
  • What Your Survival Guy Invested in Today - February 6, 2023
  • Your Retirement Life: Adventure Awaits - February 3, 2023
  • Early Advice from Her Dad on Tipping at Charlie Trotter’s - February 2, 2023

Dick Young’s Must Reads

  • My Smith & Wesson Revolvers Home Defense Team
  • Robo-Advisors: When You Have a Lot More to Lose than Money
  • CONSTITUTIONAL CARRY: Alabama Becomes 22nd Permitless Carry State
  • Being Fully American Means Americans First
  • Vermont Abandoned, Dairy Farm Economy Devastated
  • Gold’s 50-Year Price Explosion
  • Your Best State on Guns, Plus the 8th Wonder of the World
  • What to Do about China?
  • Sen. Hawley Makes the Case Against U.S.-China Relationship
  • Rich States, Poor States this State is Dominant Once Again

Our Most Popular Posts

  • Will Western Tanks Be a Game Changer in Ukraine?
  • SEN. KENNEDY: This Is How to Fix Biden's Border Disaster
  • Europe Should Protect Itself
  • “I Will Veto Everything They Send Me”
  • US Debt Now Exceeds Annual GDP?
  • How to Fight Wokism Idiocy
  • Why Don’t These Mayors Seem to Care?
  • Warren Miller: If You Don’t Do It This Year, You’ll Be…
  • The Neocon Russia-Hoaxers of Hamilton 68 Must Be Held Accountable
  • What Kind of Life Are You Investing For?

Disclosure

RSS Youngresearch.com

  • What Your Survival Guy Invested in Today
  • AI SEARCH WAR BEGINS: Google and Microsoft Join AI Battle
  • Your Retirement Life: Adventure Awaits
  • UK Takes Aim at the Cryptocurrency Industry
  • Early Advice from Her Dad on Tipping at Charlie Trotter’s
  • Do You Trust This Rally?
  • Reagan’s America Remembered by Your Survival Guy and More
  • What Happens if the “Fed Put” Is Over for Good?
  • Tom Brady Retires, Again. Should You?
  • What Kind of Life Are You Investing For?

RSS Yoursurvivalguy.com

  • What Your Survival Guy Invested in Today
  • You Invest, They Win: FTX Edition
  • Your Retirement Life: Adventure Awaits
  • Zumwalt-Class Guided Missile Destroyers to Get Hypersonic Weapons
  • Early Advice from Her Dad on Tipping at Charlie Trotter’s
  • Treasury Bonds Ready to Rock and Roll
  • Survive and Thrive February 2023: 4 Life Changing Words: “You Should Try This”
  • Tom Brady Retires, Again. Should You?
  • Reagan’s America Remembered by Your Survival Guy and More
  • America’s Unprecedented Debt Problem

Trump Channeled Pat Buchanan to Win GOP Primary

Hang Tight or Hang Alone

What Your Survival Guy Invested in Today

COVID: Demand Accountability for the World’s Biggest Ponzi Schemers

Will Biden Start Wars with Both Russia and China?

Price Controls Won’t Work in Any Country

Copyright © 2023 | Terms & Conditions | About Us | Dick Young | Archives