Happy Tax Day: Are Americans Getting Their Money’s Worth?
Are Americans getting enough benefits for the taxes they pay?
April 16, 2010
Most Americans seem to regard April 15 — the day income tax returns are due to the Internal Revenue Service — as a recurring tragedy akin to a Biblical plague.
A few years ago, an American acquaintance of mine who lives in Sweden told me that, quite by chance, he and his Swedish wife were in New York City and ended up sharing a limousine to the theater district with a U.S. Senator and his wife, who were from the South.
This senator, a conservative, anti-tax Democrat, asked my acquaintance about Sweden and swaggeringly commented about “all those taxes the Swedes pay.”
To which this American replied, “The problem with us Americans and our taxes is that we get nothing for them.” He then went on to tell the senator about the comprehensive level of services and benefits that Swedes receive.
“If Americans knew what Swedes receive for their taxes, we would probably riot,” he told the senator. The rest of the ride to the theater district was unsurprisingly quiet.
Whatever Europe's shortcomings, the fact is that, in return for their taxes, Europeans do receive a generous support system for families and individuals — services for which Americans must often pay exorbitant, out-of-pocket fees.
That includes quality health care for every single person, the average cost of which is about half of what Americans pay, even as various studies show that Europeans achieve better health results.
But that’s not all. In return for their taxes, Europeans also are receiving affordable childcare, a decent retirement pension, free or inexpensive university education, job retraining, paid sick leave, paid parental leave, ample vacations, affordable housing, senior care, efficient mass transportation and more.
In order to receive the same level of benefits as Europeans, most Americans must fork out a ton of money in out-of-pocket payments, in addition to the taxes we pay.
For example, most of those Americans who do have health insurance are paying escalating premiums and deductibles, which reduces their effective net pay considerably — which from the financial perspective of individual households is a steep tax in itself.
Moreover, 47 million Americans have no health care, yet many of them are working and paying taxes. Since the federal government provides $300 billion annually in tax subsidies for companies that provide health care for their employees, that amounts to a hidden tax on those working Americans with no health care who ironically are subsidizing those who do have health care.
Meanwhile, all Europeans receive health care in return for a modest amount deducted from their paychecks.
Many parents in the United States are saving nearly $100,000 for their children’s college education, and most young Americans graduate with tens of thousands of dollars in debt. But European children attend for free — or nearly so (depending on the country).
Childcare in the United States costs over $12,000 annually for a family with two children, but in Europe it costs about one-sixth that amount, and the quality is usually far superior.
Millions of Americans are stuffing as much as possible into their IRAs and 401(k)s because Social Security provides only about half the retirement income needed.
European retirement systems are more generous and provide about 75-85% (depending on the country) of retirement income. Either way, you pay.
Americans’ private spending on old-age care is nearly three times higher per capita than in Europe because Americans must self-finance a significant share of their own senior care.
Americans also tend to pay more in local and state taxes, as well as in property taxes. Americans also pay hidden taxes, such as $300 billion annually in federal tax breaks to businesses that provide health benefits to their employees.
When you sum up the total balance sheet, it turns out that Americans pay out just as much as Europeans — but we may well end up receiving less for our money.
Now, no doubt, Europe has a vigorous debate underway about the current levels of taxation — and receiving proper value for the money. Income taxes in Europe are certainly high for some people, but the highest rates are paid only by those in the highest income brackets. Many middle class and low income Europeans don’t necessarily pay an income tax rate any higher than what many Americans pay.
We Americans, meanwhile, should not get too cocky about analyses like Forbes Magazine’s Annual Tax Misery Index, which shows European nations as the most miserable and the low-tax United States as happy as a clam — right next to Indonesia, Malaysia and the Philippines.
In this economically competitive age, delivering services in a cost-effective manner is necessary to ensure healthy, productive and, yes, happy families and workers.
Europeans can count on these forms of support, while most Americans cannot — unless they pay a ton out-of-pocket. Or, of course, unless you are a member of the U.S. Congress, which provides a European level of support for yourself as a member and your family.
That’s something to keep in mind on April 15. Happy Tax Day.
It turns out that Americans pay out just as much as Europeans — but we may well end up receiving less for our money.
In this economically competitive age, delivering services in a cost-effective manner is necessary to ensure healthy, productive and happy families and workers.
In return for their taxes, Europeans do receive a generous support system for families and individuals — services for which Americans must often pay exorbitant, out-of-pocket fees.
Can the "China Miracle" Last? (Part I)
April 13, 2010