Let's start with a labour budget of $300,000 to hire a lead programmer or other critical person.
France: 41.35% of the gross salary is paid to the Government in payroll taxes, leaving $175,938 paid as income to the employee.
After income taxes, $90,167 is left for the employee to spend.
That employee then wants to spend their entire salary on flat-screen TVs? They have an effective spending power of $75,139 after 20% VAT.
Government taxes account for about 75% of this labour budget! As you can imagine, this creates a huge incentive for tax evasion.
The US, for the same original budget:
4.09% is paid as payroll taxes, leaving $287,717 as income.
After (Californian) income taxes, $178,773 is left for the employee to spend. 7.25% sales tax then gives $166,300 finally.
So, an extra $91,161 ends up with the American worker (much more if they are married to a zero-income spouse and move out of California). Sure, you have to pay things like property taxes, 401K contributions, health insurance in the US - but would those account for $91,161?
Europe needs to completely scrap its payroll taxes and replace them with income taxes. Employees should not have to pay anything merely for hiring an employee, as it places a disincentive on using labour. On a global level, it also makes France uncompetitive - American companies hiring globally will be much more attractive.
> much more if they are married to a zero-income spouse
In France it's the same, but here's a major difference once you add kids to the equation:
Each kid of a couple counts the same as "0.5 zero-income spouse", up to 3 kids. After the 3rd kid (or if the kid has handicap), they count the same as "1 full zero-income spouse"
So for a couple with one spouse with a salary of X , one spouse without job, and 2 kids, the taxes would be calculated as if there was 3 persons making X/3 each, instead of 2 people making X/2 in the US.
Given that the tax brackets are even more progressive than in the US, the impact seem huge.
> Given that the tax brackets are even more progressive than in the US, the impact seem huge.
And that's why income taxes revenue pale in comparison with payrol taxes. Presidential candidates can claim to lower those every time they want better polls because they know it is not where the money is coming from.
2017:
- income taxes = 78 billions
- business taxes = 60 billions
- VAT = 203 billions
Let's start with a labour budget of $300,000 to hire a lead programmer or other critical person.
France: 41.35% of the gross salary is paid to the Government in payroll taxes, leaving $175,938 paid as income to the employee.
After income taxes, $90,167 is left for the employee to spend.
That employee then wants to spend their entire salary on flat-screen TVs? They have an effective spending power of $75,139 after 20% VAT.
Government taxes account for about 75% of this labour budget! As you can imagine, this creates a huge incentive for tax evasion.
The US, for the same original budget:
4.09% is paid as payroll taxes, leaving $287,717 as income.
After (Californian) income taxes, $178,773 is left for the employee to spend. 7.25% sales tax then gives $166,300 finally.
So, an extra $91,161 ends up with the American worker (much more if they are married to a zero-income spouse and move out of California). Sure, you have to pay things like property taxes, 401K contributions, health insurance in the US - but would those account for $91,161?
Europe needs to completely scrap its payroll taxes and replace them with income taxes. Employees should not have to pay anything merely for hiring an employee, as it places a disincentive on using labour. On a global level, it also makes France uncompetitive - American companies hiring globally will be much more attractive.
Sources: http://www.uhy.com/employers-now-pay-average-employment-cost... https://www.francetaxcalculator.com/?salary=149508