French Versus American Income Taxes: Who Pays More? (Part Three of Getting Sick)
Last weekend, inspired by some very good points and questions from readers, I went down the tax rabbit hole and into the very confusing world of French impôts, where everything is topsy-turvy — about as upside down, or right-side up, as things are in the American tax world. In some aspects, the two systems are quite similar; in other aspects, they are completely different. But it all boils down to this: one system is more expensive for taxpayers yet offers generous health, education, retirement, and welfare benefits. The other system is less expensive but offers its taxpayers little sécurité.
The question today, though, is: how much more expensive?
I attempted to find the answer in Part Two of Getting Sick, but I lacked some very important information: one, that both American and French income taxes are calculated on graduated scales so that portions of income fall into different tax brackets. Two, that the French are also subject to a host of social taxes that are taken directly from their gross (brut) earnings; they pay their income taxes on their net earnings. Three, that Americans also pay social taxes — the U.S. government takes a portion of gross earnings for Social Security and Medicare.
Both systems allow for myriad deductions — everything from credit back for taxes paid to credits for purchasing clean-energy cars and employing domestic workers. Taxpayers in both countries try to claim as many deductions as they can (and even some that they can't) in order to reduce their taxation.
So, without further ado, let's look at what the French pay, and what Americans pay. (Okay, a few more "ados" — my calculations are based on the most recent tax tables from both countries, plus the most recent tax tables for California. I have applied the graduated scales, and also Social Security and Medicare for Americans and all of "les charges sociales" for the French. No extra deductions, such as dependents or union fees, were applied. For those who would like to double-check my numbers, my sources are listed at the bottom of this post.)
And now, finally, voilà: A single American earning $25,000 a year and living in California pays:$3,332.50 in Federal taxes+ $588 in State taxes+ $1912.50 to Social Security and Medicarefor a total of $5,833 or just over 23% of his income in taxes.
A single French citizen earning €25,000 pays:€5,250 in "charges sociales" (social charges)+ €1,174 in income taxesfor a total of €6,424 or nearly 26% of his income in taxes. (Note: French social charges are about 21% of the gross income. A 10% credit is then deducted from the net earnings to arrive at the amount owed in income taxes.)
A single American earning $90,000 a year and living in California pays:$18,920 in Federal taxes+ $6,066 in State taxes+ $6,885 to Social Security and Medicarefor a total of $31,871 or just over 35% of her income in taxes.
A single Française earning €90,000 pays:€18,900 in "charges sociales" (social charges)+ €13,168 in income taxesfor a total of €32,068 or nearly 36% of her income in taxes.
An American couple earning $50,000 each, filing jointly, and living in California will pay:$17,375 in Federal taxes+ $4,689 in State taxes+ $7,650 to Social Security and Medicarefor a total of $29,714 or nearly 30% of their combined annual incomes in taxes.
A French couple earning €50,000 each and filing together will pay:€21,000 in "charges sociales" (€10,500 each in social charges)+ €10,406 in income taxesfor a total of €31,406 or over 31% of their combined annual income in taxes.
So,the French system is only slightly more expensive for its taxpayers, and they get more out of it. What exactly do they get out of it, compared to what Americans get? Stay tuned for Part Four . . .
SOURCESThe Internal Revenue ServiceThe French Government Fiscal Administration site (in French, but with a detailed tax calculator).State of California Franchise Tax Board (also with a tax calculator).Le Money Mag (in French)Dixon Wilson Chartered Accounting