Tuesday, June 7, 2011

America's tax rates would be similar to Europe's if health-care costs counted as taxes.

Bruce Bartlett explains:

When Americans see these data they are usually incredulous that Europeans submit to such seemingly oppressive tax levels. Conservatives, in particular, tend to view freedom as a fixed sum: the bigger government is as a share of G.D.P., the less freedom there is for the people (if government consumes, say, 40 percent of G.D.P., then people are only 60 percent free).

The late Milton Friedman popularized this idea, but even he thought that freedom would not be seriously threatened in Western democracies until government spending reached 60 percent of G.D.P. We are far away from that “tipping point,” as he called it; in 2010, total federal, state and local government spending amounted to 36 percent of G.D.P.

American conservatives tend to ignore the composition of spending; to them, just about all spending is equally bad. . . .

Average American workers must pay for health care out of their pockets, or through their employers in the form of lower wages. Europeans prefer to pay higher taxes and get government health care for every resident in return.

Conservatives universally believe that whenever the government provides a service it will be vastly more costly than if the private sector does so. This is why they support the plan offered by Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee, to essentially privatize Medicare. Conservatives believe competition will drive down health costs for the elderly.

But O.E.C.D. data show that Americans pay vastly more for health care than the residents of any other major country. . . .

[I]f we had a health care system like those in most developed countries, we could, in effect, give every American an increase in their disposable income of 8 percent of G.D.P. – about what they pay in federal income taxes – and have health care no worse than they have in Britain or Japan. It would be like abolishing the federal income tax in terms of allowing people to spend more of their income on something other than health care.

Because most people have little more choice about medical spending than they do about the taxes they pay, one can think of the two as being similar in nature. . . .

Looking at taxes alone, the burden in the United States is 25 percent below the O.E.C.D. average, but including the additional health costs Americans pay, the United States is just 4.7 percent below average.


Joe Ynot said...

Doesn't really mean anything. You could just as easily say the US is at North Korean tax levels if you throw in the cost of food, shelter, clothing, transportation, etc.