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Why We Hate Taxes, and Why Some People Want Us To (behavioralscientist.org)
41 points by headalgorithm 74 days ago | hide | past | web | favorite | 74 comments



I live in a country that's one of the highest taxed in the world, the Netherlands, paying up to 51.75% tax on my earnings. And I actually think it's fair and would not lobby for lower tax rates.

It's probably because of how taxes and the government works is different in many ways to the US:

1. You feel it on your own wallet how your tax is spent and redistributed. Even though I pay a large amount in tax, being a high earner, I also get support from the government, paid monthly, for childcare and mortgage interests. Also, the government supports programs like no-downpayment mortgages, that are unheard of in many countries.

2. Public services are visible and efficient. This is true from healthcare to garbage collection and schools. Schools are actually a good example: while daycare in amsterdam would cost around $2,000/month for a child, schools are "free". Of course, once you paid for daycare, you know that it's not free, but paid for from tax, and have a good idea how much goes back into it.

3. Tax returns are ridiculously simple. They can also be done up to five years in the past, in case you forgot to claim refunds.

4. Thanks to how taxes are spent, there is less inequality across society. The government invests in social housing nationwide and has strong social net support, redistributing wealth via taxes from high earners to the low earners. For example, the $2,000/month childcare costs: for low earners the government pays up to 97% of this, dropping to 33% for people well off. Contrast this with places that don't have any of this and the inequality can be seen in all parts of life.


Taxes can be just as high in the US, but without the services. Top rate for California is 50.3% (37% federal + 13.3% state), and New York City is 49.7% (37% fed, 8.82% state 3.876% city)

The US government actually spends more per capita on healthcare($4,197/person/year) than most countries with free excellent healthcare (Switzerland $4178/pp/y, Canada $3074/pp/y, UK $2802/pp/y). Netherlands govt spends barely more than the US govt at $4495/pp/y.

https://www.visualcapitalist.com/u-s-spends-public-money-hea...


I'm really baffled at the lack of understanding of marginal tax rates amongst otherwise educated adults (assuming you're not being deliberately deceptive here.)

> The US government actually spends more per capita on healthcare($4,197/person/year) than most countries with free excellent healthcare (Switzerland $4178/pp/y, Canada $3074/pp/y, UK $2802/pp/y). Netherlands govt spends barely more than the US govt at $4495/pp/y.

This is an unbelievably important thing to bring up. The US government already spends enough to have fully socialized, excellent health care. The only reason taxes have to go up for an M4A proposal is because enormous amounts of protectionist legislation and regulatory capture make the same services cost double in the US. If we had sane health care costs (which could be accomplished pretty quickly by opening the local market to foreign competition), taxes wouldn't have to go up at all.

edit: Dean Baker made a suggestion that stuck with me years ago; instead of a public option, just allow Americans to buy into other countries' health systems, for example, France's. They could provide services at a nice rate on US soil, and use US payments and addition to the risk pool to subsidize their own citizens' health care at home. Other countries would start competing with each other for US business, and would so radically undercut local providers that health care prices would be vaguely economically justifiable in no time.


> instead of a public option, just allow Americans to buy into other countries' health systems, for example, France's.

One problem is if this is opt in, only the elderly and sick will want to buy in and the foreign government would balk at the large number of high risk signups. Young and healthy individuals who are accustomed to the freedom of not buying insurance and just going to the emergency room will be reluctant to pay for something that they believe they don’t want. There’s also a mismatch between therapies permitted by the FDA, religious freedom laws, etc.


The problem mostly comes down to patents and licensing... I think eliminating extension patents, and requiring dual sourcing for all medications for FDA approval would resolve a lot of that side. Forcing open-books for medical practices and making it illegal to charge more than 20% difference for the same procedure between two payees within 2 calendar years would help a lot as well. Last would be requiring insurance companies to negotiate as a fiduciary to the benefit holders would wrap it up.

All these things really need to happen to close a lot of the loopholes in the US system.


You have to make over $500k to hit 37% and that's a marginal rate so your total effective rate is nowhere near 50% unless you're making several million dollars.

The Netherlands income tax is also marginal but the 51.75% rate kicks in at €68,507, and the lowest rates are already over 30%.


Once you take into account sales tax, property taxes and other taxes that are not income tax, it's probably in excess of 50% much much sooner than $500k.


I don't think it's useful to look from an individual standpoint at taxes aside from income tax. If you keep going you can say you pay 'tax' when you buy something on sales tax, but also on a companies profits which you are contributing to.

When you get to this point I think it's ,more useful to look at what proportion of a countries GDP is taken in by the government.


Sales tax does not apply to most grocery purchases, so you'd have to be eating out or buying lots of stuff for sales tax to become a large percentage of your total tax liability. You must also then compare the 0%-15% US sales tax rates to the 25% Norwegian VAT rates.

Property tax rates are in the single digits (or very rarely, the low double digits). And only apply to property owners.

Payroll taxes are distinct from income taxes but reduce taxable income so shouldn't be split out separately...

So, TLDR: you'd still need to be making more than $300k+ each year for your annual total tax % (all inclusive) to exceed 50%. That puts you in the 0.1% of Americans.


This is misleading. Top tax rates can be as high as 50.3%, but the parent comment says they are paying 51% of their earnings. These are two different things, because of tax brackets. I was both taxed a marginal rate of 48.3% and had an effective tax rate of 40.6% (CA resident).


While you obviously have an above average income, there really are people that pay very close to the marginal rate ($10M income etc). Asymptotically, the marginal rate is the top rate.


For those curious, IRS reported that in 2016, just over 16,000 people in the U.S. reported an adjusted gross income of $10 million or more.

555 of them took the standard deduction instead of itemizing!


Interesting. Where did you come across that stat?


IRS provides statistics about federal taxes:

https://www.irs.gov/statistics/soi-tax-stats-individual-stat...


I would bet you most of those people are paying a lower tax rate than I am, as they're smart enough (and have the means) to shift most of their earnings to capital gains and take advantage of other tax avoidance strategies.


"Those people" are usually folks with a onetime windfall. For example a startup employee with options not stock. And I don't see what bearing that has on the top rate.


Most people who's earnings are over $1mm a year are spending significant time & resources planning their tax strategy and are not paying 50% effective tax rates.

Source: Trump's tax returns.

Actual source: https://www.nytimes.com/2011/08/15/opinion/stop-coddling-the...


Stop coddling the rich? The top 20% of earners in the U.S pay a total of 87% of all tax revenue for the government, and their return from that in terms of value of government services relative to taxes paid is much smaller than it is for those in lower brackets. There are many wealthy people who use numerous legal (and in some cases illegal) means to avoid "their fair share" but overall, the numbers show that they pay far more than what most people would call fair in any other context.

One source (there are many others with like 20 seconds of google searching): https://www.wsj.com/articles/top-20-of-americans-will-pay-87...


Is there good analysis on the differences in where the money goes?


With FICA and the 0.9% Medicare surtax in the mix, in California, I think you'd need an income of about $2,300,000 to have an effective tax rate of ~50%.


exactly. Then (on top of that) there are real estate taxes (huge in CA, unless you bought 25 years ago), sales taxes, medicare and social security taxes.


See that's the trick. To make the high tax economies function, you have to tax even the lowest income earners at the high rate. Instead, in the US, we have greedy low earners who don't want to pay their share and just want the feds to steal more money from the rich Other and give it to the Good people like me.


Same for Sweden. Even higher taxed. Now, if we had 5% GDP on defense spending (especially if it looked like money wasted on wars or projects missing budget goals) I'd be fuming. I'm not getting rich (which my job would make me in the US) But I have a great work/life balance, have had 2 kids delivered free, spent 1.5 years off with each (shared with my wife) and now I use the remaining days off to pad my summer holiday from 4 to 7 or 8 weeks. Every year until the kids are 8. Daycare and schools including higher ed is free. My kid was born with an illness and has had 3 ambulance trips and 20 other ER visits with hospitalization in 6 years - still ZERO out of pocket, regardless of whether I was employed at the time. I'd have a comfortable life in the US too (even more comfortable) but what makes me happy to pay the 50%+ taxes is that the nursing assistants tending to my daughter in hospital also afford daycare, higher education and healthcare for their kids just as easily as I can.


a lot of these things are also investments in the sense that healthier, better educated people earn more (=> pay more taxes) and are less likely to develop chronic conditions that the state then has to pay for in some form or another ("welfare", crime, etc.) on the back end.


Yeah, but that only works if you view your citizens as your "property" that works for you and doesn't move in and out of your country. If you view them as autonomous agents that move between jurisdictions to optimize their benefits in their current situation it doesn't.

For example (as a German citizen) you can go to university in Germany for free and move to a low tax country afterwards for work. When you are old and fragile you come back and use the healthcare system since your foreign insurance becomes too expensive (I'm not entirely sure about that loophole, but I heard it existed).

Of course there is some friction involved (friends, family in the home country). But which percentage of the population has to act rationally for the system to become unsustainable in the long run?

Most countries haven't adapted their policies to the reality of globalization yet. I fear some might go the way of the former GDR and try to keep their citizens from leaving. I heard even the US is doing something like that, it's said to be quite hard to get rid of a US citizenship (and the IRS).


Once you add in Norways's VAT (equivalent to a sales tax) of 25%, which applies to most purchase and services, the effective tax rate is significantly higher than 51.75%. For most Norwegians, the effective tax burden is close to 75%!!!


Had a similar experience in Switzerland, except the taxes were lower.


I don't hate taxes.

I like having education, roads, community services, a safety net for those less fortunate, a strong military, infrastructure and the myriad other things that governments (should) spend money on.

What I do hate is the obsessive hatred of taxes. No wonder governments get into massive debt - they don't have money.

I also hate large companies avoiding and shirking tax and leaving it to people to pay - I really hate that. Apple, Amazon etc etc all guilty of this - they want our money, they want profit from our community, they don't want to contribute back - at all, if they can possibly avoid it.


I also don't hate taxes. And I agree with all of your points.

But I also hate when taxes are raised inefficiently. Don't make me pay taxes by sending me a fee in the mail and requiring me to send a check to some government office (sure, this is not a "tax" it is a "fee", whatever, get with the times). Use taxes to price in externalities. Use VAT instead of sales tax, if at all; use personal income tax in lieu of regressive sales taxes. Use land value tax rather than property tax. Redesign "well-intentioned" tax schemes which subsidize the rich like Prop. 13. Make inflation tax deductible on capital gains but also create higher capital gains brackets. Stop making people guess how much our taxes are and just tell us (specifically, the IRS already knows how much we owe so just charge us that!).

Close tax avoidance loopholes.

I also hate when my taxes are spent inefficiently. Stop with the pork barrel spending. Stop spending so much to subsidize the price of oil. Spend on transportation and renewable energy. Redirect military spending which theoretically could develop technology that could be useful for civilians, and instead fund the civilian-applicable technology directly. Fix the corrupt and broken government contracting system. Redesign welfare (for example, SSI) so that it's always in the recipient's benefit to work if they can.

We need to make our system more efficient. We in the US often pay effective tax rates on par with countries that seem to get so much more bang for their buck when it comes how those taxes are spent. I don't mind taxes in theory at all but I want to feel like I'm getting my money's worth


The problems, inefficiencies and personal objections to the tax system and government expenditure are all valid.

What is not valid is to use those objections to justify not paying tax.

Too many people use these objections to justify avoiding tax.


I agree. I still pay my taxes even though I dislike the tax system. Half the politicians in this country, as the article notes, want people to look at the objections I listed and say "whelp, guess that means we ought to cut all the spending and taxes!" when that is not what I want at all. I just want it to be more efficient


> I also hate large companies avoiding and shirking tax and leaving it to people to pay

I agree with you, but I don't think we can blame "companies", but who should blame the politicians (or people who voted for them maybe, or the people who buy stuff from these companies). Politicians are the ones who set up the laws allowing companies to avoid taxes. I see corporations as complex autonomous entities whose behavior isn't dictated by any single person, but rather by a "system" that lets them operate.


Individuals and companies cut back spending to match income when it comes down to it... some will leverage until they no longer can, but this is generally accounting hacks in practice. The government does not do so.

The U.S. govt from the top down, and even state and local governments will create a LOT of bureaucracy that provides no added value. Beyond that, they create purchasing systems that force higher spending. When states have tried to create different systems to stop corruption in those lines, the corruption just shifts and it winds up about the same.

There are usually solutions that can work at least as well as what we have with less government incursion and less bureaucracy. Personally, I'd rather see the gov't cut most programs, and allow taxpayers to take roughly half of their own tax burdens and direct them to charities directly. Let people fund what they actually care about directly and advocate themselves.

Also, corporation shouldn't be paying taxes (except as part of trade). They should be limited in terms of holdings and un/underused asset terms and forced to payout to owners/shareholders who would then be liable for taxes. Likewise, non-living entities should have severely restricted "rights" ... this would take a constitutional amendment at this point though.


The U.S. govt from the top down, and even state and local governments will create a LOT of bureaucracy that provides no added value. Beyond that, they create purchasing systems that force higher spending. When states have tried to create different systems to stop corruption in those lines, the corruption just shifts and it winds up about the same.

There's a good episode of the West Wing about this. Everyone thinks that all of the government bureaucracy is useless until they confront the reason that it exists: to deal with specific issues within the government's scope of authority. Some bureaucracy is wasteful/far outlived it's purpose, but that is the exception not the norm.

I'd rather see the gov't cut most programs, and allow taxpayers to take roughly half of their own tax burdens and direct them to charities directly. Let people fund what they actually care about directly and advocate themselves.

If you think government is wasteful just wait until you see how much administrative overhead is wasted at charities and (for-profit) companies. You'd immediately demand for all of that spending to go back to the government.


> If you think government is wasteful just wait until you see how much administrative overhead is wasted at charities and (for-profit) companies.

Do you have any ideas around empowering small charities / non-profits to do more with less?

There are a ton of companies that offer services for free/cheap for a non-profit. Example: YouTube gives (gave?) $10k/month in donated/subsidized advertising to non-profits. Salesforce has a free service for non-profits.

Zapier/IFTTT could be used to stitch products together to automate tedious workflows. I suspect just a little bit of hand-holding for the technologically averse would go a log way.


I've worked at a number of different companies over my career from education/learning, government and private companies including banking. Nowhere have I seen more wasteful spending than in/with govt agencies by a large margin. This money ALL comes at the expense of the populous and we spend more and get less as citizens than most countries with similar or smaller tax burdens.

The difference is people volunteer their money to private companies and charities... that's not the case with the government.


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It's broken in the U.S. because government is not for the people - government is for the vested interests who have warped government policy by giving money to politicians and parties.

That's why companies sometimes are in fact given money by the government in the U.S. rather than paying money to the government.


What openly socialist country has lower income taxes in the US?

I work in (international) tax, and I don't know of any, especially not once you take effective income tax rates into account (i.e., meaning the actual taxes paid as a % of income).

I'm also unfamiliar with any socialist country having schools remotely as good as the University of California, VTech, UT, Ohio State, etc. I won't even try to list the many hundreds of amazing public K12 schools in this country.

I'm also not familiar with any socialist country that has roads better than the US with anywhere close to the same level of utilization. Sure, roads in the US may be relatively bad, but they're also 1000x more utilized.


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In terms of universities, I'd agree the US has a very competitive edge, but in terms of the equivalent of K-12 I've seen a rather alarming lag across multiple states compared to the education I and my siblings had growing up.

Every openly socialist country in the world is the size of a small state or middle-sized US city. You're literally comparing apples to carrots.

If you were to name the country, I could pull the same type of statistics showing how bad the schools are in that country, how poor the roads are, how long the wait is for medical treatment.

And in the elementary schools I work with (and mind you I live in a district with a good reputation in the region in a relatively wealthy area), I'd say it's less than 10% of the kids are reading even close to their grade level.

Going to call bullshit on that one. My district wasn't all that great growing up and it was embarrassing when only 70% of my 5th grade class was reading at grade level. There are a few school district where less than half of students read at grade level, and they're almost all urban school district with large % of poor, ESL, immigrant student populations.


"Shirking tax" is one of the weirdest moral calls I see regularly. Everyone structures their finances to avoid tax - if you can blame companies for anything it's that they lobby for extra loopholes. Further, sending money to the government is far from an effective way to help society, this blog post argues well for that: https://slatestarcodex.com/2019/07/29/against-against-billio...

Further, the government is one of the few entities that can spend money to make the world worse. You can donate to charities to help people in countries you haven't heard of, you can buy a yacht and leave them alone, but if you pay that money in taxes then part of it will go to blowing them up for some inscrutable reason.

Again, it's not that companies are saints or that they couldn't do better, it's that hammering them for tax avoidance is probably not the best thing to pick from the long list of corporate ethical failures.


> I also hate large companies avoiding and shirking tax and leaving it to people to pay - I really hate that. Apple, Amazon etc etc all guilty of this

The method by which most of these companies avoid paying taxes does more to help their local and state communities than is appreciated.

It's profits that are taxed and they reduce profits by reinvesting those profits. Reinvesting profits results in more jobs. More jobs allow those that are employed as a result to put food on the the table for their family and a roof over their heads. It also allows those people to pay local, state and federal taxes and participate in those communities.

As a member of the communities where these companies operate, I'm happy that they do what they do to reduce federal taxes because much of what would have been federal taxes ends up in state and local coffers and increases employment opportunities for my neighbors and friends.


There's any number of words that are used to rationalise companies paying little or no tax. I'm not interested in any of those words.

It's a fair system if corporations are paying tax contributions proportional to their profit as reported to the stockmarkets.

Anything else is just rationalisations and excuses. Citizens pay the money - companies should too.


Oh ho and remember -- companies ARE people now, at least with regards to political donations.

If corps have people-ish rights then they absolutely have people-like obligations. Instead they're getting to have their cake and eat it.


Reinvesting profits results in more jobs.

This would be true, if companies actually did this when confronted with lower tax bills. However, with rare exceptions (like Amazon), companies haven't done this in decades.

I'm happy that they do what they do to reduce federal taxes because much of what would have been federal taxes ends up in state and local coffers and increases employment opportunities for my neighbors and friends.

Corporations also skip out on state and local taxes. In fact they probably skip out on a larger % of their SALT taxes than they do their federal taxes.


>It's profits that are taxed and they reduce profits by reinvesting those profits. What percent of Apple's profits are reinvested in California?


I don't hate paying taxes. I hate that I have to "decide" how much I owe. I hate the persistent, nagging feeling that I did it wrong and the IRS may come after me a few years later.

I really wish the legislation allowing the IRS to actually tell you how much you owe would have survived...


It works like this in many places. You log on the website, and all the fields are already filled in by default based on the employer's declarations. Only if you have had special extra income or you want to subtract expenses you have to spend more than 10 minutes on it.


I hate taxes because I'm getting poor service for my dollar and I have no choice of alternative service providers.


The federal government does too many things, and does them poorly. Our entitlement programs are broken by design, we spend an insane amount on our military, and there are countless federal programs that fritter away taxpayer money. The government should do more with the money we give them instead of constantly demanding more from our citizens.


I don't hate taxes, I hate rich and largely old people asking for taxes to be cut -- but wanting the same services -- such that the buck is passed on to us.


I think the spirit of what Syon is writing about is the root issue of taxes. It's not about paying for education, roads or safety. Syon is addressing the root issue of taxes in his view is about force. Why must citizens of a free country be coerced? Thats the premise he things most struggle with. If you want to solve for paying for education, roads or safety toss this issues into the private sector and Syon can agree the quality of those services would go up and the USA would be more free. So it just depends if you believe in freedom. Some do. Some do not.


I often wonder about a system where a given percentage of the budget, say 10%, would be allocated by people voting directly for it on their tax returns. So individuals can decide that x% of their taxes should go towards education or military or whatever.

Has this been tested anywhere, even locally?


> ...arranged for the checks to prominently display the funding source—“UNITED STATES GOVERNMENT.”

The funding source is not the United States Government. The funding source is US taxpayers.


> The funding source is not the United States Government. The funding source is US taxpayers.

The right wing likes to proclaim this in support of their dislike of taxes and of government generally (at least when government is telling them what they can and can't do; it seems quite different when they control government and get to tell others what they can't do).

But if we're going to work our way backwards through the chain of funding sources, why stop there? Seems to me that taxpayers' employers could make the same argument about being the funding source — and then the employers' customers — and so on, stretching all the way back to the Big Bang ....


nothing is free. there are other ways to pay for things than government and taxes.


I don't hate or love them, I see them as a necessity but I always remember that at the end of the day taxing is taking money by force from people, so it should be limited to whatever is deemed necessary and should be used in the most efficient way. Therefore it is important to keep a watchful eye and be vigilant when people want to raise it and in general to be strict on the definitions of what is necessary.


I would like to see where my tax $’s are going -itemized. I would like to see where any donations for any non profits are going - itemized...


A) You can. The US government generates an itemized budget every year. It's several thousands of pages long, and usually the result of several large pieces of legislation. All of these are freely available online.

To a lesser extent, the states also generate itemized budgets. Most but not all of the state-level budget information is available online.

B) You can, to a lesser degree of detail, since non-profit tax returns are made available for public viewing by law. You can use Charity Navigator (fee required) or visit your nearest IRS office to view them. Many states also require non-profits above a certain size to make their financials available upon request.


You mean you can’t see where the money is going? If you know how much money you pay on different levels (local, national and so on) surely also those governments have itemized budgets? You can roughly say what amount you paid for different services then. Transfers between different levels of government could complicate it though.


[flagged]


The taxation-as-theft argument has never satisfactorily addressed the free-rider problem (among many others).


Do you seriously think that taxation solves that problem?


Solves it in an absolute sense? No.

Solves it better than a non-tax solution would? Yes.


Do you seriously think eliminating taxation wouldn't trigger a race to the bottom? Ayn Rand was, how shall I put this ... misguided.


We did not have income taxes - or any other individual taxes - for the first 100+ years, and yet we managed not to bottom out. As for Ayn Rand, she was echoing John Locke, among many many others throughout history. [1] [1] https://en.wikipedia.org/wiki/Taxation_as_theft


Your Wikipedia cite brought back memories of undergraduate poli-sci. But the notion that government rests on the consent of the governed is at best a pious aspiration — or, in the case of the American Declaration of Independence, a polemic — because as the American Revolution itself demonstrated, government rests on the acquiescence of the governed.

The brute fact is that there will always be government — and there will always be taxation, because human nature is such that some people won't pay voluntarily if they think they can get away with not doing so (hence my mention above of the free-rider problem).


so the solution to the free-rider problem is...force. ergo, theft. QED


You put your finger on it when you said we didn't have individual taxes. People still paid the taxes indirectly because those taxes (tariffs, customs duties, fees, etc.) were built into the price of the goods and services they bought. You can argue that those were somehow "voluntary" taxes because people had the choice not to buy the goods or services, but that argument breaks down when you talk about essentials (however one defines that), so that you're indirectly paying the tax whether you like it or not.


interesting - what "essential" was covered by tariffs in the early days?


[Citation needed]


[flagged]


The gravamen of the linked argument is that if you get paid for doing something, you're supposedly entitled to keep all of it, because somehow all of the hidden costs of your doing what you did have been taken care of by others. That's a flawed assumption. Elizabeth Warren's famous 2012 campaign talk hit the nail on the head: You shipped your goods to market on roads the rest of us paid for; you employed workers that the rest of us paid to educate; you didn't have to worry (excessively) about marauding bands stealing your stuff because of police and military that the rest of us pay for.


An argument which implicitly assumes that the status quo is the only possible solution. Nice try.


> An argument which implicitly assumes that the status quo is the only possible solution. Nice try.

I'm not at all opposed to considering changes to the status quo. But libeling (yes, libeling) taxation as theft is not going to persuade very many people to consider such changes.




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