On Taxes

Now, here's an article in Inc about Norway, socialism, and entrepreneurship which is generally positive about Norway's socialism and its friendliness to business.
And, of course, it irks me. I'm irked in the same way as I was irked by the whole "Joe the Plumber" ingralabooroo during the Presidential election.
And it's all because of a misunderstanding about taxing businesses.

As a Norwegian, he pays nearly 50 percent of his income to the federal government, along with a substantial additional tax that works out to roughly 1 percent of his total net worth. And that's just what he pays directly. Payroll taxes in Norway are double those in the U.S. Sales taxes, at 25 percent, are roughly triple.

OK, that's all cool and everything but you really can't consider payroll taxes as taxes on your business. They're an indirect tax on the employee certainly. And they're a pain-in-the-ass for the employer to collect. But if Norway's taxation system works in any way like America's, you're really looking at an increase in the cost of employment, which isn't the same thing as an added tax on business.

In the US you can effectively calculate the "cost" of employing someone as an additional 22% of their salary/pay. So although it might discourage you from employing more people (because they cost 1.22 times their salary), and it keeps salaries lower (because the employer's cost is more than what they pay the employee) the employer's part of payroll taxes is not exactly a tax on the business, even though the business collects it (and pays the business share of it.)

And truthfully I'd love to see the "cost of employment" to go down. I'd love to see the burden of collecting taxes (in the way of payroll taxes) taken off of businesses. But the Government won't do that because having businesses collect the taxes and pay them quarterly is a cheap and easy way to fill the coffers.

Shifting the tax burden entirely to the employee (and given a 21 or so percent raise) would certainly make payroll taxes more transparent. And it would be cheaper for businesses (I generally count the cost to business as one or two percent, which is what I pay a payroll service when I use one, plus the time and aggravation of dealing with all the paperwork.)

So am I saying that the Inc article isn't dead-on in its reporting? No. I think they're right that the anti-tax religion is not beneficial for business. I'm just saying we should be clear about payroll taxes and the role of business in collecting those taxes. And, I'm saying I got up too early on a Saturday morning.