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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, June 7, 2011

NY Times: Taxes + Health Care Puts Total U.S. Burden in Line With Europe

New York Times op-ed, What Your Taxes Do (and Don’t) Buy for You, by Bruce Bartlett:

Last week I showed that total taxes at the federal level — individual and corporate income taxes, payroll taxes and so on — are at a 60-year low as a share of the broadest measure of income, GDP. ...

American conservatives tend to ignore the composition of spending; to them, just about all spending is equally bad. Europeans don’t have this attitude because their governments provide them with benefits from which all residents gain. ...

More importantly, almost every other country has some form of national health insurance that covers, on average, 72% of all health costs. The comparable figure in the United States is 46.5%, and almost all of that is accounted for by Medicare and Medicaid, which largely benefit the elderly and the poor.

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. ...

But OECD data show that Americans pay vastly more for health care than the residents of any other major country. In 2008, we paid 16% of GDP in total health care costs, public and private combined. ... Indeed, at 7.4% of GDP, the governmental share of health spending in the United States is about the same as total health care costs in many other countries. ...

In the table below, I have added private health care spending as a share of GDP to the tax data. ...This puts the United States and other countries on the same footing, by accounting for the fact that they get health care mostly through government while Americans mostly pay for it themselves.

As one can see, the burden of taxes plus private health care spending substantially equalizes the loss of disposable income in the United States and other countries, because we pay 8.6% of GDP for health care over and above what the government pays, whereas those in other major countries pay an average of just 2.3% of GDP out of their pockets.

Looking at taxes alone, the burden in the United States is 25% below the OECD average, but including the additional health costs Americans pay, the United States is just 4.7% below average.

In short, a substantial portion of the higher tax burden that Europeans pay is really illusory. They are really just paying their health insurance premiums through their taxes rather than through lower wages, as we do.

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I don't care what Europe does. They're a bunch of socialists and kill private incentive.

Posted by: Woody | Jun 7, 2011 11:48:41 AM

This has been known for decades. The policy question is whether health care should be provided by government just as public K-12 education is or whether citizens should buy it themselves. The steady decline in quality and steady increase in cost of public education provides a powerful indication that private purchasing will work better in the long run even if the cost and quality start out the same.

Posted by: AMTbuff | Jun 7, 2011 4:08:32 PM

Am I missing something? Didn't the statistics disprove Mr. Bartlett's thesis? By paying for health care through private industry rather than taxation, the United States pays, on average, 4.7% less than other OECD countries while maintaining (demonstrably) the best health care standards in the world and acting as the greatest (if not only) medical innovator. Seems like a fair bargain to me.

Posted by: Martin | Jun 10, 2011 12:38:53 AM

@ Woody. I'm afraid your comments are irrational and not thought out at all. They are symptomatic of a conservative American knee-jerk reaction against anything that involves state intervention. Are you seriously putting all European countries in the same basket? The UK is hardly a socialist country according to your conception (although they do have the NHS, admittedly). You are assuming that the American model is superior and judging countries where states intervene more according to this (rather irrational) outlook. In countries like France and Germany, the average person has a very high standard of living, which is at least partly attributable to the role the state plays. It can't all be that bad, can it? French workers, although they work fewer hours than Americans, are actually more productive per hour than American workers (many reliable sources confirm this). Also, there are millions of Americans who don't have access to health care because they can't afford it (is that just their fault because they haven't worked hard enough and thus haven't deserved it? Is America such a meritocracy that all is required is hard work?). The question is, is that the real issue here or has the economic argument (economic growth) always got to be the number one priority? It seems to me that basic health care (provided by the state) need not prevent private sector growth overall. Also, to the very conservative Americans who insist that a public system is unaffordable, you seem to have no problem in approving of the use of state funds to pay for expensive (and unnecessary) wars, as the intervention in Iraq has demonstrated. No country is perfect and we all have different perspectives, but at least provide some arguments, don't just dismiss Europe in that irrational way without actually knowing about European countries. You might also want to rethink whether the American model/American dream is really working. The evidence suggests it's not.

Posted by: Chris | Jun 21, 2011 6:52:18 AM