Today's Buggy Topic Continues The . . .
. . . same topic treated a couple of days ago. What it boils down to, as you'll see with more detail and new analysis in the latest buggy post, is a significant difference in the way the advanced European welfare-states raise their tax revenue compared to the tax system in this country.
The USA Side
American government at all levels --- federal, state, and local --- rely heavily on either visible income tax and visible property taxes for its revenue, with sales taxes averaging across the 50 states about 5-6% . . . some states, four or five anyway, not even having a sales tax. In the upshot, the Federal government fiscal year for 2010 is expected to raise 50% or so of expected total revenue of around $2.2 trillion by income taxes . . . with, to boot, the bottom 50% or so of American income-earners not paying any federal tax at all. Social security contributions will likely generate another 40% or so of total revenue. And as you'll see, state and local governments hope to raise another $2.2 trillion by a combination in large part of income-taxes and taxes on real estate and private property, plus business taxes and fees.
The European Side
To finance larger governmental spending, especially social spending of various kinds, the EU countries rely, of course, on income tax and to an extent property tax as well, but they have all instituted a half-concealed, easy-to-raise VAT --- value-added tax --- that is fairly similar to American sales taxes, with the end consumer paying the tax.
Enter the difference. VAT taxes --- which vary in West Europe between about 19-25%, not 5-6% as sales taxes do here --- contribute about the same percentage of total government spending as income taxes do: roughly, 30-33%. It's a huge contrast, this percentage. And the reasons for its existence, and its downsides --- it's highly regressive despite some exemptions or lower VAT on certain essential goods and services, and it has encouraged a large and growing underground tax-evaded economy that is about two to four times higher in Europe than in the USA . . . our country estimated in the best studies to have the smallest underground economy, roughly 8% of GDP.
All These Differences, Along With A . . .
. . . systematic analysis of other causes of these tax differences across the Atlantic --- not to forget recurring tax rebellions in the USA historically and at present --- are set out in the prof bug post that can be found here.