The Electric Commentary

Sunday, July 16, 2006

Taxes 'round The World

From Greg Mankiw:

Here are the marginal tax rates as estimated by Ed Prescott for the 1990s:

Germany .59
France .59
Italy .64
Canada .52
United Kingdom .44
Japan .37
United States .40

These figures include both income taxes and consumption taxes, such as the VAT. Both types of tax distort the consumption-leisure tradeoff (and the tradeoff between market work and home work).

If a person earns a dollar in the marketplace, she gets to consume 60 cents of goods and services in the United States, but only 41 cents in Germany and France, and 36 cents in Italy. These are large differences in incentives to work.


  • Interesting thanks.

    Japan beats us, but they spend less than 1% of their GDP on military, whereas we spend around 4%.
    On the other hand, we are running a huge debt, so we aren't being taxed for the full cost of our government.

    By Blogger Scott H, at 6:46 PM  

  • That was for the 90s, scott h, when we didn't always run a deficit. Now, of course, we're running one and will be for the forseeable future. Bush really accomplished something remarkable by running up an enormous deficit while losing jobs. That's nearly impossible, but he found a way.

    By Blogger MDS, at 10:02 AM  

  • Yeah, he's been sort of a Bizarro Jimmy Carter (double digit unemployment and inflation simultaneously).

    By Blogger PaulNoonan, at 11:25 AM  

  • One comment I would like to make, listing the marginal rate can be a bit misleading and trying to figure the total tax is really hard. The total rate is better, but much harder to figure out, because even someone who is taxed at the highest rate still pays the lower marginal rates for his income up until he hits the highest bracket. Prescott seems to have made a valiant effort at attempting to adjust for this though.

    By Anonymous Phil, at 12:51 PM  

  • Good point mds. The gist of that point still stands though, we're actually worse on cost. At least now and historically.

    You made me remember that during Clinton's Presidency
    "Federal income taxes as a percentage of income for the typical American family dropped to their lowest level in 35 years."

    By Blogger Scott H, at 1:10 PM  

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