From: baker@Xenon.Stanford.EDU (Andrew Baker)
Subject: Re: Ruling parties in Norden
Organization: Computer Science Department, Stanford University.
Date: Mon, 13 Apr 1992 23:14:13 GMT

In article <1992Apr13.184032.23175@walter.bellcore.com> nielsen@bellcore.com (Jakob Nielsen) writes:
>This is unfortunately not necessarily an easy question to answer.
>Consider the example of Denmark. One of the parties in the government is
>Venstre which is sometimes called the Moderate Liberal Party in English
>(there is also a Radical Liberal Party in Denmark). The very word Venstre
>means Left in Danish, by the way.
>
>You would now think that this party was a slightly leftist party. In
>Denmark, it is considered to be somewhat on the right, however. If one
>considers the politics of the party, the situation becomes even more
>complicated. I do not think they have come straight out and said what
>taxes they want, but it would seem that they are in favor of a marginal
>tax rate of about 50%. In the U.S., such a tax rate would indeed be
>considered a wildly leftist tax increase (the marginal tax rate in New
>Jersey is 38% when adding federal and state taxes). In Denmark this same
>tax proposal is considered a dramatic rightist change from the current
>marginal tax rate of 68%.
>
>Thus, the exact same politics can be considered either leftist or
>rightist. It is all relative. 
>--
>Jakob Nielsen, nielsen@bellcore.com, fax (201)  829-2645
>Bellcore, MRE 2P-370, 445 South St., Morristown, NJ 09792-1910, USA

I am not disagreeing with the point you are making, but before anyone
decides that New Jersey (or anywhere in the US) is some kind of tax
haven, I would like to note several things.  The top federal tax rate
is 31% right now, and presumably you have added the top New Jersey
tax rate to get the 38%.  However, there are also other taxes:
(1) The U.S. Social Security Tax comes to around 15% (when you include
both the employee and employer contributions).  If you make enough money,
this marginal rate will eventually drop to 0%, but few people make this
much.  There are also things like unemployment insurance and so forth,
but these don't usually amount to very much.
(2) New Jersey has a sales tax.  When I lived there, it was 5%; on general
principles, I would guess that it has gone up since then.
(3) Most towns have property taxes.  If you have a nice house, this can
come to a lot of money.
(4) A few big cities charge wage taxes to people who work there (so you
get taxed where you live and where you work).
(5) Corporate income is taxed twice.  First corporate profits are taxed,
and then any portion of these profits that are passed through either as
dividends or as capital gains are taxed again as personal income.
(6) The taxation of investment income doesn't take inflation into account.
If one makes a 10% nominal return on an investment, and inflation is 5%, then
the true tax rate (for a typical American in the 28% bracket) on this
income would be around 56%.
(7) I have been told that the U.S. tax system is one of the most complicated
in the world.  This means that if you want to find loopholes, it will cost
you a lot in time and expert advice.
(8) U.S. politicians have a penchant for changing the tax laws with
extraordinary frequency.  There are around four people running for President
right now.  One wants to cut the capital gains tax.  Another apparently
wants to create two new tax brackets above the 31% level (36% and 46%).  A
third wants to create a flat income tax and a VAT, but apparently he has
worked out so few details that no one can quite figure out what it would
amount to in practice.  And still another guy says that we have to scrap the
whole system and start over, but he won't know what needs to be done until
he gets elected!  Needless to say, this is not the optimal situation for
advance tax planning.