In France, the rate is 42 percent; in Germany, it is 39 percent; in Italy, 40 percent; and in Spain, 37 percent.
That is from Diana Furchtgott-Roth and Jared Meyer Disinherited: How Washington Is Betraying America’s Young. I see it as saying “left-wing economics is bad for children and other living things,” but they are trying to position it differently. In any case, they are suggesting that we could be headed for much higher payroll taxes ourselves.
I had not realized that these tax rates are so high. I find it hard to reconcile Germany’s relatively low unemployment rate with this high payroll tax rate.
Do these figures fold in the charge for socialized healthcare in these countries – or are those charges separate?
If you subtract out education, healthcare, and retirement costs, on top of defense spending, that we have to shoulder, it probably doesn’t feel too bad.
What real difference does it make whether the marginal tax is implemented through government or though industry? Efficiency you may claim but in these areas, government is often more efficient, albeit at costs of choice and flexibility few want or are in a position to make anyway.
Two thoughts regarding Germany’s low unemployment rate:
a. The payroll taxes have been this high since the 1950’s I believe. So employers have gotten used to them, just like American employers have gotten used to our Social Security taxes.
b. Germany has a low birth rate and few immigrants. Until fairly recently, most women were not in the job market. As such the country did not need to create very many new jobs.
From the American side of the comparison:
-How does total cost of compensation compare? Health insurance and other fringe benefits add significant costs to the American employer.
–As a corollary: Does this explain more high paid workers in the US? Insurance and benefits decrease as a fraction of compensation as total pay increases, but a payroll tax is a constant fraction of pay.
From the German side of the comparison:
-They have pro-small business incentives out there: Ensuring a year of income to anyone starting a business, I believe, and policies that favor small shops over big box retailers.
-A school system that provides vocational training for their non-college bound students. Also, don’t they still require national service after high school graduation? Not just military service, but civilian jobs as well (a friend of mine worked as an EMT for a year or two) effectively providing internships for all/most/many high school graduates. Might these policies lead to higher skilled workers, especially at the lower end of the spectrum?
–Of course, this should show up in productivity numbers for comparable professions/people.
-More automation: Another friend of mine was amazed that the US, in 2005, had actual people manning parking lot pay kiosks. He’d never seen that in Germany, and it’s still the norm of what I see in 2015 in the upper midwest. Increased capital increases the marginal product of labor.
-How’s labor force participation? Though, I think Germany is close or even higher than the US now.
One minor detail to correct: Payroll tax is not a constant portion of salary in the US. The federal payroll tax stops applying at $117,000 (as of 2014). The Medicare portion of it (which is the small part on your pay stub) now has no cap.