European trip inspires comparisons of quality of life
My wife and I took a riverboat cruise from Amsterdam to Budapest in June.
It would be hard to exaggerate the beauty of the Rhine, Main and Danube rivers. The castles along the Rhine and magnificent cathedrals in almost every town were awesome. We were in a museum in Cologne, Germany, that had a mosaic from the floor of a Roman home in the year 200.
I could go on for hours, but there were also the human issues to explore. What is it like to live in Europe?
Tauck Tours, the operator of the river cruise, provides speakers at most stops on the rivers to explain local historical and current significance of each area. One of the speakers was a German woman named Kati Gruschwitz. I believe she grew up in East Berlin, so she had a pretty good understanding of the events that have taken place over the last 40 years.
Before I get to the small business issues, I have to comment on one event. After Kati had given an excellent talk about the Berlin wall and the events leading up to its removal, a man made a statement that really surprised me. He said she told of the events from a German perspective. I wanted to scream at him, ‘She's German, you halfwit.’ He actually believed Ronald Reagan should have been given credit for the reunification of Germany in her presentation. Some people should not be allowed out of the country.
I should have known, but people in other countries seem to be dealing with all the same problems we are.
In Germany, the income tax system is very similar to ours. The top rate is 45 percent, but they also pay a solidarity surcharge of 5.5 percent. There is an employer/employee rate of 9.35 percent for retirement and 7.3 percent each for health insurance and 1.5 percent each for unemployment.
The solidarity surcharge is to finance the cost of East Germany being reunited with West Germany. There is a flat-rate on capital gains of 25 percent and the solidarity tax also is applied.
Two taxes of concern particularly to small business are the inheritance tax and the Trade Tax.
The inheritance tax rate is 7 percent to 50 percent. The exemption for inheritance is 500,000 euros for a spouse; the exemption is lower based on the relationship to the deceased. Planning can exempt small businesses from inheritance under a complicated set of circumstances.
The Germans have a Trade Tax: a value-added tax much like Michigan's old Single Business Tax. It is a local tax and applies to all products and services. The average rate is 19 percent, but that number is not a measure of how onerous the tax is. You must analyze the formula and see what is taxed and what is exempt.
So that’s the cost. The German Taxpayers Union is the primary advocacy group for reducing taxes and spending. Obviously, the taxes in Germany are more than ours. With higher taxes, they also have more comprehensive benefits.
One of the problems in dealing with liberals is they do not understand that nothing is free. German health care, university education and child care is described as “free.” It is not free. It simply is paid for by those who pay taxes. We refer to European states as “nanny” states. Remember, the nanny would not do her job if she were not paid.
What is utopia for the beneficiary is a financial burden for the taxpayer. Where is the sweet spot where the cost and benefit are maximized? They are working on it, just like we are.
I can hardly imagine six weeks of paid vacation, but that is the government-mandated amount of time off in Germany. Other than some government jobs, six weeks of vacation is unheard of in the United States.
On the other hand, German workers are more productive than American workers. When they are at work, they are focused on doing their job. With the amount of time off they have, perhaps they are more refreshed and enthusiastic about work. You can't argue with the idea that it is not how many hours you work, it is what you produce that counts. I will leave that up to the statisticians.
The German education system scares me. There is an emphasis on testing and analysis to assign children to the education path that will put them in a career at which they most likely will succeed. The testing starts at about the time American students would be in fourth or fifth grade.
If I remember my grade school years correctly, I would have been assigned to the group being trained to clean out zoo cages or some other equally distasteful career. It apparently works for them, but as a late bloomer, it makes me glad I was in an American school.
You don't become an expert by traveling through an area for two weeks. You can, however, get a feeling for the quality of life there.
Europeans pay more in taxes, but their rail system, roads, public transportation and so forth are more advanced than ours. Financial security and time to enjoy life has an appeal to most people. Not having massive education loans and not having to risk financial ruin for medical emergencies would reduce a lot of the stress in life.
It was a wonderful trip I would encourage people to take. I wasn't there long enough to form an opinion, but I was there long enough to raise a lot of questions.
A concept has value not because it is of U.S. or European origin. Its value is based on whether it works or not.
Paul Hense is the retired president of local accounting firm Hense & Associates and past chairman of the Small Business Association of Michigan.