The common refrain from Democratic presidential candidates proposing massive spending programs is that only the rich will be heavily taxed. They insist we could afford a European-style welfare state if only we taxed the rich like they do in Europe. The editors at the Wall Street Journal have an answer to that: “Europe’s beleaguered middle class knows better.”
First, let’s admit that most European nations do have larger welfare and entitlement programs than in America. Part of the reason is these countries don’t have to spend as much on defense because the US spends enough on defense to defend this country and the European countries.
But high spending in Europe has to be funded by more taxes. The editors explain that, “Europe has learned the hard way that the rich aren’t rich enough to pay for their entitlements, so the Continent duns the middle class.” These European nations have found lots of ways to tax their citizens. Let’s count some of them.
European income tax rates are higher than in the US because the highest marginal rates kick in at much lower levels. And it is also true that the progressive tax rate is much higher in those countries than in this country.
Higher income tax rates, however, are not enough to fund these welfare states. Governments also impose payroll taxes that are called “social insurance contributions.” Again, these rates are much higher than what Americans pay for Social Security and Medicare.
Europe also imposes a value-added tax called a VAT tax with a flat rate that averages around 21 percent. Add to that excise taxes on fuel that are at least twice the percentage of what is paid in the US. And I might add that Britain takes more from the middle class with a stamp tax on property purchases.
Don’t believe the rhetoric that only the rich will pay. Europeans know that the middle class will pay because they are being taxed on everything.