Tax Impact Calculator
How Does This Work?
This calculator reveals how taxes cascade through the economy as money changes hands multiple times. Each transaction faces both income and sales taxes, creating a compounding effect that reduces purchasing power.
The Process:
- Initial Amount: We start with €100 of earned income.
- Income Tax Impact: When someone earns this money, income tax reduces the amount they can spend.
- Sales Tax/VAT Impact: When spending the remaining money, sales tax/VAT further reduces its purchasing power.
- Ripple Effect: As this money continues to circulate (e.g., business revenue → employee salary → consumer spending), the same tax effects repeat, progressively diminishing the original €100.
💰 €100 Initial Money
↓
💼 Business Revenue
↓ Income Tax
💵 Reduced Amount
↓ Sales Tax/VAT
🛍️ Consumer Spending
↓
💼 Business Revenue Again
↓ Income Tax
💵 Further Reduced
↓ Sales Tax/VAT
🛍️ More Spending...
↓
💼 Business Revenue
↓ Income Tax
💵 Reduced Amount
↓ Sales Tax/VAT
🛍️ Consumer Spending
↓
💼 Business Revenue Again
↓ Income Tax
💵 Further Reduced
↓ Sales Tax/VAT
🛍️ More Spending...
Try adjusting the tax rates and number of transactions to see how different scenarios affect the final purchasing power of the initial €100.
Choose your country for automatic tax rates
Average rate for median income
Standard rate
How many times money changes hands in the economy (1-20)
Final Impact
Starting Amount
100€
➜
Remaining Value
--
Total Tax
--
Disclaimer: This calculator provides a simplified model for educational purposes. Actual tax impacts may vary based on specific tax laws, deductions, exemptions, and other economic factors not considered in this basic demonstration.