Where does America get it's money?

I was in holiday in Boston Massachusetts and the tour guide at the state house said that Sales Tax (VAT) was going to be raised to 6.25%. Ours is going up to 20% and when we told her this she was truly shocked :eek:

I think that in general, there is lower taxes compared to here, is this correct? If so, how does America make it's money? It has a huge armed forces and was in Vietnam, the Gulf War, Iraq and Afghanistan (the ones which spring to mind) which must have cos billions and billions of dollars. In Britain, our armed forces isn't so nearly as big, and I've heard that American troops are generally higher paid than their British counterparts. So the question is, where does America get it's money?

I suppose not having an NHS will help a lot, but I was thinking that that wouldn't be enough. I don't know if this makes much sense, but where does America make it's money to me a massive global player with such low taxes?

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Reply 1

Psyk

Good question. Some states don't have any sales tax at all.

Reply 2

initiation

Original post by Psyk

Good question. Some states don't have any sales tax at all.

The ability for individual states to decide sales tax levels is a good idea because it introduces downward pressure on tax levels stopping endless rises in taxation levels.

Reply 3

M1F2R3

Original post by initiation

Federal revenues by source in the chart above.

There are also state tax revenues.

From wikipedia you can see that the US has tax revenues as percentage of GDP as ~28% where as the UK is +10% higher.

The ability for individual states to decide sales tax levels is a good idea because it introduces downward pressure on tax levels stopping endless rises in taxation levels.

This.

Reply 4

Kolya

davidmarsh01

I think that in general, there is lower taxes compared to here, is this correct? If so, how does America make it's money?

Yes. According to the Tax Policy Center, the US raises 27% of its GDP in taxes, compared to 37% in the UK. To make up for the low sales taxes, it has high personal income tax - higher than the UK. Read this for my info: http://www.taxpolicycenter.org/briefing-book/background/numbers/international.cfm

Regarding its army: it spends a far greater proportion of GDP on the armed forces than the UK. It spends ~4.5% of GDP on defence, compared to ~2% in the UK. (See here for a list of countries in the world.) (And that figure is even lower in most other developed European countries.) So its armed forces come at a huge cost. If you rank the wikipedia list, you'll see that the only countries who spend more on defence are countries in the middle east and Georgia, which has the threat of Russia to deal with.

(edited 13 years ago)

Reply 5

thisisnew

<Tin foil hat> It regularly pillages vulnerable Middle Eastern countries while using myths like terrorists to cover their actions.</Tin foil hat>

Reply 6

domino0806

It's a pernicious whore of a country.

Reply 7

Made in the USA

Original post by davidmarsh01

Higher taxes don't always mean more revenue. Have you studied the Laffer Curve in economics? I believe that much of Europe is on the wrong side of the curve and could have more wealth and prosperity with lower taxation levels.

Reply 8

manchild007

Um hello? What about the $3 trillion is had borrowed!?

But then again, its the reserve currency (and lead superpower) of the world, so can get away with it frankly...

Reply 9

Craiky1506

Original post by Made in the USA

Maybe, but without being able to support the poorer people in the country with NHS, state schools etc.

Reply 10

Chelle-belle

Original post by davidmarsh01

I suppose not having an NHS will help a lot, but I was thinking that that wouldn't be enough. I don't know if this makes much sense, but where does America make it's money to me a massive global player with such low taxes?

Compared to Europe the UK actually had a relatively low rate of VAT. We have a rate of 17.5% (which will be 20%) whilst Europe's rates range from 15%-25%.

"A lot" is probably an understatement. On top of that, the USA does have more people than the UK... I don't know much about taxes but I feel like this should be noted, since the majority of the USA's GDP comes from income tax.

Reply 11

Made in the USA

Original post by Craiky1506

Maybe, but without being able to support the poorer people in the country with NHS, state schools etc.

I seriously doubt that, doesn't the US spend far more on healthcare than any other country? Higher taxes don't necessarily mean higher revenue, often it means lower revenue.

Reply 12

Craiky1506

Original post by Made in the USA

I seriously doubt that, doesn't the US spend far more on healthcare than any other country? Higher taxes don't necessarily mean higher revenue, often it means lower revenue.

Not just the NHS, everything that goes out there to support the poorest and weakest in society.

Maybe - I don't know, I'm not an economist but you do say not necessarily, so it's still possible.

But I'll agree to disagree - cos we won't change each other's minds. :smile:

Reply 13

Captain92

Original post by Made in the USA

I seriously doubt that, doesn't the US spend far more on healthcare than any other country? Higher taxes don't necessarily mean higher revenue, often it means lower revenue.

They spend more on healthcare because they pay individually through insurance companies rather than having the centralised system. Or that's my understanding anyway.
Our system is better value for money per person because we are taxed more.

But feel free to tear that argument to shreds, I've never studied economics in depth lol.

Reply 14

Howard

It also sells Government Securities - Bonds and such like (IOU's basically) to countries all over the world. China alone holds close to a trillion dollars worth at the moment.

Reply 15

Howard

Original post by Made in the USA

I seriously doubt that, doesn't the US spend far more on healthcare than any other country?

Yes it does. If ever a lesson was needed in the non linear relationship between spending and efficiency, the US approach to healthcare tells us all we need to know.

It delivers far less bang for the buck than any other developed nation. It spends twice as much as the UK and still manages to leave 50 million people without affordable medicine. That's quite some achievement.

Reply 16

Made in the USA

Original post by Howard

It is, but if you have the money, you can't get any better care anywhere in the world. I was just at the NewYork-Presbyterian Hospital and I was astounded by what a huge industry medical tourism is in manhattan. A saudi king was there for surgery and he had paid for an entire floor to have for himself. They have the place set up to help people in every single language, even their phone system is set up to accommodate people in every possible language, including not so common ones.

When is the last time you heard a story about king Abdullah commandeering an entire wing of an NHS hospital, chartering three flights to Heathrow, arriving with a massive security team and a film crew, and leaving the airport in a convoy of 40 vehicles, including 20 for luggage alone? With all his super wealth, he could have gotten his back surgery anywhere, but he choose the US.

It's a flawed system, but if you've got a good health plan of plenty of money, you've got access to state of the art, cutting edge medical technology that my relatives in europe can only dream of.

Reply 17

Howard

Original post by Made in the USA

I agree. If you have money then you can get great healthcare. But there again, if you have money you could probably get fabulous healthcare in Guatemala.

It's all very well that a Saudi King is renting out an entire hospital so he can have an operation to remove an ingrowing toenail but how does that help the rest of us - ordinary Americans who continue to struggle with ever increasing deductables for ever crappier services - or for those of us who, God forbid, are left out of the "commonhealth" altogether?

Reply 18

amsie/

They're evil.
:devil3:

Reply 19

Organ

Sigh, the usual 'the NHS is expensive' rubbish.

The Americans spend 16% of GDP on their crazy heathcare system - we spend 8% of GDP on the NHS, the French spend 11%. The NHS is much cheaper than pretty much all healthcare systems in the industrialised world.

It's also seriously underfunded, and has only recently been brought up to a comparable level of funding (but still less than the rest of Europe and North America) to the rest of the developed world.