While writing my last post, I stumbled on a Krugman piece that reminded me about the time Trump’s ambassador to the EU claimed (quoting Krugman) “that Europe is as poor as Mississippi and Germany as poor as West Virginia.” (“To which the immediate answer should be that if that’s what your numbers say, your numbers are wrong,” quoth Krugman.)
As someone who lives in Sweden but regularly visits New Mexico to visit my wife's family I have long suspected that GDP was not that informative given the fact that they have similar per capita gdp. I really appreciate seeing this layed out in such clear terms.
Why is the pre-tax income an interesting figure? Europe has very high taxes compared to the US. Isn't disposable income against cost of living a more telling statistic?
Pre-tax income deducts contributions for public and private pensions and mandatory social insurance and includes public and private pension and social insurance benefits; it ignores all other taxes but also other benefits.
Looking at the numbers for post-tax-and-transfer income, the “Bismarckian” welfare state countries (Germany, Austria, Netherlands) look a lot worse.
But then if we’re looking at post-redistribution income, a lot depends on which percentiles you include. Looking at the bottom 80% instead of 95%, the Bismarckians make up most of the lost ground and France moves way up to around New York state’s level.
Another factor worth mentioning -- the other side of the ledger-- is looking at how much taxes various European nations pay compared to what they receive for their taxes, compared to how much Americans pay in taxes and what they receive. When you do that analysis, you discover that, contrary to yet another stereotype, Europeans really don't pay that much more in taxes AND they get a lot more for their money. I wrote an article about this (indeed an entire book, "Europe's Promise") for The Fulcrum that you might find of interest. Here is a link:
Pre-tax income deducts contributions for public and private pensions and mandatory social insurance and includes public and private pension and social insurance benefits; it ignores all other taxes and benefits. The post-tax-and-transfer series looks much worse for the US.
This is so interesting! Not to give you more work but ... I'd love to see the 99%. And as a Canadian (where we often hear we are poorer than Mississippi) I'd be very curious how we stack up. ... ah just noticed you shared the Canadian numbers
As someone who lives in Sweden but regularly visits New Mexico to visit my wife's family I have long suspected that GDP was not that informative given the fact that they have similar per capita gdp. I really appreciate seeing this layed out in such clear terms.
This is great Seth, keep the analyses coming. All the best, Steven Hill
thanks!
Why is the pre-tax income an interesting figure? Europe has very high taxes compared to the US. Isn't disposable income against cost of living a more telling statistic?
Pre-tax income deducts contributions for public and private pensions and mandatory social insurance and includes public and private pension and social insurance benefits; it ignores all other taxes but also other benefits.
Looking at the numbers for post-tax-and-transfer income, the “Bismarckian” welfare state countries (Germany, Austria, Netherlands) look a lot worse.
But then if we’re looking at post-redistribution income, a lot depends on which percentiles you include. Looking at the bottom 80% instead of 95%, the Bismarckians make up most of the lost ground and France moves way up to around New York state’s level.
Excellent. Could you have all EU-27 in there? Would be great for completeness, and out of personal interest, to see where Greece falls.
Another factor worth mentioning -- the other side of the ledger-- is looking at how much taxes various European nations pay compared to what they receive for their taxes, compared to how much Americans pay in taxes and what they receive. When you do that analysis, you discover that, contrary to yet another stereotype, Europeans really don't pay that much more in taxes AND they get a lot more for their money. I wrote an article about this (indeed an entire book, "Europe's Promise") for The Fulcrum that you might find of interest. Here is a link:
https://thefulcrum.us/governance-legislation/tax-day-2024
Thanks Seth for your work,
Steven Hill
www.Steven-Hill.com
“Massachusettsians” are called Bay Staters, FWIW.
https://en.wiktionary.org/wiki/Massachusettsian
That's great work. Is pre-tax inclusive of mandatory contributions to state pensions as well?
Pre-tax income deducts contributions for public and private pensions and mandatory social insurance and includes public and private pension and social insurance benefits; it ignores all other taxes and benefits. The post-tax-and-transfer series looks much worse for the US.
This is so interesting! Not to give you more work but ... I'd love to see the 99%. And as a Canadian (where we often hear we are poorer than Mississippi) I'd be very curious how we stack up. ... ah just noticed you shared the Canadian numbers
Since Canada is frequently included in this discourse. Do you mind telling me where they’d rank?
$43,187 / 102% of US hours