Globally Speaking, American Taxpayers are Pushovers

While politicians and pundits natter on about whether or not Americans are paying our "fair share" of the national protection money forked over to that extortion racket known as government, it's worth noting that, whatever you may think of how the tax code allocates the pain, Americans are notable for paying what they're told to pay. When comparing personal income tax compliance rates gleaned from studies carefully hand-crafted by international craftsman-researchers, taxpayers in the U.S.A. are notable for their unequalled willingness to reach deep into their pockets and hand the taxman what he says they owe.

According to the IRS, compliance with the personal income tax stands at 83.1% — down a smidge from the 83.7% recorded in 2001. That makes American taxpayers international overachievers when it comes to tax-day honesty.

In What Explains Tax Evasion: An Empirical Assessment Based on European Data, a paper prepared for the Vienna Institute for International Economic Studies, authors Edward Christie and Mario Holzner calculated tax compliance rates for European Union members and several candidate countries. A separate paper by Lars P. Feld and Bruno S. Frey, Tax Evasion in Switzerland: The Roles of Deterrence and Tax Morale, puts Swiss income tax compliance at 77.7%. Taken altogether, and using numbers from more-developed countries while excluding, say, Latvia or Bulgaria, rates look like this:

Personal Income Tax Compliance Rates
United States: 83.1%
United Kingdom: 77.97%
Switzerland: 77.70%
France: 75.38%
Austria: 74.80%
Netherlands: 72.84%
Belgium: 70.15%
Portugal: 68.09%
Germany: 67.72%
Italy: 62.49%

Yes, these numbers are drawn from a few different sources, and a couple of the figures date to the late 1990s (oddly, most tax shepherds don't advertise the extent to which their flocks flip them the bird). But there is a remarkable pattern here: nobody pays like Americans pay.

So, the next time some tax-happy friends wax eloquent about the ultra-fair tax systems in Europe, where the rich and poor joyfully skip arm and arm to give the state its take, take the wind out of their sails.

Oh, and of course check out Veronique de Rugy's take on just which tax systems are more or less progressive.

Update: And don't even think of trying to flee overseas.

Comments

[Pip]

Taken altogether, and using numbers from more-developed white countries while excluding, say, Latvia or Bulgaria...

RACIST!

[Pro Libertate]

We were such a strong people, once.

[db]

Once with heads held high
They sang out to the sky
Why do their shadows bow in fear?

[BakedPenguin]

How harsh are the punishments for tax avoision in the listed countries?

[Ramjet]

This.

[Pro Libertate]

It's treason here, right?

[PapayaSF]

And yet 16.9% of our population is not in federal prison. What gives?

[Pro Libertate]

Sadly, the enforcers lack the money to convict the traitors.

Won't you give?

[db]

If paying taxes=patriotism then tax avoidance=treason.

[jdtuccille]

Christie and Holzner go into that. Obviously, it varies, but they say many European governments have given up on the idea of squeezing the last euro from their citizens as a price for minimizing political and social push-back.

[rts]

BC anti-tax crusader faces prison time.

At a sentencing hearing in Vancouver Monday, Crown attorney Bruce Harper recommended to Justice Elliott Myers that Porisky be imprisoned for 6.5 years.

"A lot of people who pay taxes are interested to know what happens when people don't, and when people tell people they don't have to," Harper told CBC News after the hearing. "You have to pay tax. It's really just that simple."

*barf*

[Bee Tagger]

I guess it turns out that this is video of Italians filling out their tax forms:

http://www.youtube.com/watch?v=wcCw9RHI5mc

[Brett L]

Geitner is the 16.9%?

[mad libertarian guy]

Soros too.

[Pip]

A Wisconsin Vindication

Property tax bills fall as Scott Walker's reforms start to kick in.

[John Thacker]

Except in Milwaukee where, err, they raced to adopt a pro-union school budget before the reforms became active.

[Dr. Frankenstein]

Dear Gov. Walker,
Please send the Green Bay Packers here to beat some sense into Gov. Pat "Jello" Quinn and the rest of the IL political establishment. Failing that just beat them like they were Jay Cutler.

[db]

Foreign Policy has an article by Joshua Keating along these lines up now. It focuses mainly on how all those dirty corporations around the world are stiffing their host ( read: parasite) governments' tax collectors. Of course, US corporations are the worst, least regulated and out of control tax evaders and Congress needs to gice it to them good and hard in the form of more regulatuon.

[Ex Nihilo]

That makes American taxpayers international overachievers when it comes to tax-day honesty.

Just because we pay at higher rates does not make us more honest. What is the rate of creativeness on our returns.

[plu1959]

While politicians and pundits natter on about whether or not Americans are paying our "fair share" of the national protection money forked over to that extortion racket known as government, ....

That's beautiful.

[plu1959]

I dint RTFA, but isn't the standard explanation for this that taxes in the USA are mainly collected by means of withholding? IOW, there's less evasion because there's less opportunity for evasion.

Which is also the standard explanation for why small-business owners are supposedly the worst offenders when it comes to tax evasion.

[John Thacker]

Other countries do withholding as well.

[protefeed]

It's not the withholding -- it's what gets reported to the IRS, versus what transactions take place in cash.

Tip a waiter or waitress in cash -- prolly not reported as taxable income. Tip them on your credit card, where there's a paper trail that the IRS can audit -- gets reported.

Now, move the marginal tax rates up to 90% levels again, and watch businesses scramble to move into cash sales.

[sarcasmic]

Tip a waiter or waitress in cash -- prolly not reported as taxable income. Tip them on your credit card, where there's a paper trail that the IRS can audit -- gets reported.

In my experience regarding waiting tables, the red flag to the IRS is percentage of sales.
So the average server reports a percentage of their sales, like ten to twelve percent, though they may actually make closer to twenty, regardless of if it's cash or plastic.
At least that's what I did and why.

[Mr. FIFY]

I delivered pizza, many years ago, and made quite a pile in tips.

What I put on my tax form, however, was the unwritten sentence "not one out of ten of those cheap fucks ever tipped me, yo".

Probably a different story now, though, as credit-card payments for delivered pies was virtually nonexistent in my area in those days.

Fuckin' IRS. How do it work?

[mad libertarian guy]

Any good American should ALWAYS pay waiters in cash.

[mad libertarian guy]

Tip, I mean.

[albo]

Germany at only 67 percent? That's startling. Germany's a country where there's even a law against making noise on Sunday.

And what's Greece's compliance? Negative 5?

[Rrabbit]

Smells like flawed methodology.

They seem to essentially be trying to do the following:
o compute a distribution of gross income
o subtract tax exemptions
o thus get the amount of taxes due
o add this up and compare to actually paid income taxes.

Presumably they made serious errors computing the exemptions. German tax code has many exemptions which can only be computed at the individual level, and might even depend on other parameters such as age of the taxpayer. Tax exemptions for having children up to age 25, for the cost of driving to work, for a home office, for certain types of personal income (such as pensions, unemployment benefits, capital gains from long term investments), for expenses related to a home office, for health insurance premiums, for donations, etc.

[Rrabbit]

The bulk of the unpaid personal income taxes is due to underreporting, such as taxpayers not reporting the capital gains on those millions in that Swiss bank account.

I don't see any way to reliable estimate that, much less reliably estimate that such that comparisons can be made between different countries.

[Fist of Etiquette]

Hitler didn't pay United States income tax. Do you want to be like Hitler?

[protefeed]

Everyone lies about sex -- and how much they paid in taxes.

You're really gonna trust these numbers?

[Ska]

I'm getting a blowjob and efiling my returns right now.

[CE]

...taxpayers in the U.S.A. are notable for their unequaled willingness to reach deep into their pockets and hand the taxman what he says they owe...

But the Taxman never tells you what you owe -- you have to calculate it yourself, based on dozens of incomprehensible forms and hundreds of pages of instructions.

[sarcasmic]

taxpayers in the U.S.A. are notable for their unequalled willingness to reach deep into their pockets and hand the taxman what he says they ow.e

Wesley Snipes disagrees.

[Joshua]

But they get a lot of their revenue from the VAT. individuals may have greater compliance in the US, but I'd guess that those other countries have better compliance regarding the amount of money collected vs. expected.

[Proprietist]

Not only are differences in enforcement a factor, but also income tax structure in general. In America, 50% of those filing taxes are getting money back. Thus they'd be stupid not to file taxes. And those with lots of assets are rightly frightened of the IRS's ability to destroy their lives and seize their property, so they pay too. In European countries, if more people have to pay taxes and the enforcement bureaucracies aren't as severe and ruthless as the IRS, I could understand the lack of motivation.

[CatoTheElder]

"wind out of their sales"

What are they selling?

[jdtuccille]

Yikes! Fixed.