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We keep hearing "You don't want to become France!" With their free health care, generous unemployment benefits, subsidized college educations, etc. What does such a generous system really cost?

Let's see what they pay in income tax for all of that (2009 rates, exchange rate $1.23=€1):

FRANCE: Single person:  
Up to $9741: 0%
$7226-$13,862: 5.5%
$13,862-$32,016: 14%
$32,016-$85,833: 30%
Over $85,833: 41%

Let's compare that to the US to see if France has astronomical tax rates:
US: Single Person (leaves out EITC)
Up to $8,500: 10%
$8,500-$34,500: 15%
$34,500-$83,600: 25%
$83,600-$174,400: 28%
$174,400-$379,150: 33%
Over $379,150: 35%

So higher in the US on those under $34K a year, about the same for everyone under $90K a year, higher in France for single people making over $90K a year.

But for families?

FRANCE: Couple with two kids:
Up to $21,679: 0%
$21,679-$44,476: 5.5%
$44,476-$96,050: 14%
$96,050-$257,500: 30%
Over $257,500: 41%

US: Couple (children are a separate fixed deduction)
Up to $17,000:  10%
$17,000-$69,000: 15%
$69,000-$139,350: 25%
$139,350-$212,300: 28%
$212,300-$379,150: 33%
Over $379,150: 35%

So, much lower in France for a family making less than $100K a year, higher for a family making over a quarter of a million a year.

In other words, the French tax single people with high incomes in the top 20% about 10% more, and working poor people less. They tax families in the lower half of the income bracket a lot less, and generally less until a family is in the top 2% of incomes.

How do they do it? How do they afford such a generous social safety net with income tax rates not much different from the US? A couple of taxes the US doesn't have:

To pay for social security and unemployment capital gains gets an additional tax of 12.1%.  In the US, any social security taxes are only on the first $110,000 of income, and there is no contribution to unemployment from investment income.

And there is a tax on wealth - the solidarity tax:
Up to $972,000: 0%
$972,000-$1,586,000: 0.55%
$1,586,000-$3,112,000: 0.75%
$3,112,000-$4,895,000: 1%
$4,895,000-$9,348,000: 1.3%
$9,348,000-$20,344,000: 1.65%
Over $20,344,000: 1.8%

That's right, they tax huge accumulations of capital, while in the US, that money can churn around invested in property, equities, bonds, whatever, and only gains are taxed (and even then, there are myriad ways to avoid that, just as Mitt Romney and his $100,000,000 IRA).

Oh, and in case you're thinking they're just running deficits:
France's Deficit (2011): 4.5% of GDP
US Deficit (2010): 8.7% of GDP

ZOMG!  France! Socialism!!!

Fact is, you can afford a generous social safety net: but the well-off need to help pay for it. The result isn't a country where the wealthy pack up and leave, it isn't a gigantic disincentive to create wealth. The result is a country where people are healthier, where losing your job doesn't devastate your life, and where you can send your kids to college for about what it costs to rent an apartment.

Thu Aug 16, 2012 at 2:45 PM PT: ADDENDUM: Yes, I could have included VAT and the health insurance tax. And on the US side, state taxes, sales taxes, health insurance premiums, etc.

You can get fiendishly complex here, but the basic point is that the tax burdens are not that radically different for a middle class family. Take that 26% health insurance tax in France. The average employer contribution for health insurance for a family of four is $13,000.  Median income, about $52,000.  Which works out to - about 25%

We could also get in to the intricacies of needing to own a vehicle to get to work in the US, versus having robust public transit in France, etc.

I focused on income tax rates to make the basic point, and loading it up with more taxes I think doesn't change the central point:

Single people who are high earners pay more in France, the top 2% pay more, and the wealthy pay not only on income, but on wealth itself. That system allows for a much better health care system, higher education system, transit system, and other public services.  

Originally posted to Things That Fell From My Brain on Tue Aug 14, 2012 at 01:09 PM PDT.

Also republished by Global Expats and Community Spotlight.

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