Tax: who pays what?

How much you pay in tax depends on personal allowances, tax rates and brackets, social security contributions and benefits; the numbers can start to get confusing.

One way to cut through the muddle is to think in terms of the tax wedge. In basic terms, this is the difference between the net earnings that a worker takes home at the end of the year and what it costs to employ that worker. On the employer’s side, this cost includes the worker’s salary as well as employer contributions for social security (e.g. healthcare, pensions); on the worker’s side, the negatives are income tax and employee social security payments, while the positives include the salary and, possibly, cash benefits, for instance.

The tax wedge ranges from just over 15% in Mexico for a single worker on an average wage, to just over 55% in Belgium.

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Does Wonderwoman earn as much as Superman?

Last night’s news carried a story on the status of women in the workplace today. The teaser promised to inform us on France’s relative progress on pay differentials, discrimination and harassment.

My 13 year old son piped up in disbelief, “That’s not true anymore…Maybe it used to be, but women are treated just the same as men now.”

I pause to think of an age-appropriate explanation of  “the treatment of women” – on the history of women’s rights, the progress made and the confounding barriers that remain.

Trying to explore the meaning of equity and equality is actually a great way to put the issue in perspective.  In the developed world, women are present in most fields (and have begun to outnumber men in higher education).  Still, they lag behind in average pay – and what more concrete measure is there than compensation?

The latest data show that across the OECD, men’s median earnings are on average about 18% higher than women’s.   In some countries the difference is as much as 30%.  We may appear to be on equal footing – projecting an image of strength and success to our children – but the figures tell a different story…

Useful links:

Overview of Gender Differences in OECD Countries