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Steven Hill: The Myth of Europe’s High Taxes

March 3, 2010

By **Steven Hill**

Do Americans really pay fewer taxes than Europeans? Contrary to conventional wisdom, the answer surprisingly is: not really. That’s because in return for their taxes, Europeans—even those unemployed during these tough times—have access to a generous support system for families and individuals that most Americans can only imagine. That includes not only quality health care but also child care, a good retirement pension, inexpensive college education, job retraining, paid sick leave, paid parental leave (after a birth or to care for sick children), ample vacations, affordable housing, adequate senior care and more. In order to receive the same level of benefits as Europeans, most Americans have to fork out a lot of out-of-pocket payments, in addition to our taxes. These payments often are in the form of fees, surcharges, higher tuition, insurance premiums, co-payments and other hidden charges.

For example, many Americans who have health care coverage are paying escalating premiums and deductibles, while Europeans receive health care in return for a modest amount deducted from their paycheck. My siblings are saving tens of thousands of dollars for their children’s college education, yet European children attend for free or nearly so. Many Americans pay dearly for child care, or without paid sick leave or parental leave must self-finance their own time off. But Europeans receive all of these and more—in return for their taxes. Millions of Americans are scraping for retirement, stuffing as much as possible into their IRAs and 401(k)s because Social Security provides only about half the income needed for retirement. But the more generous European retirement system provides about 80-85 percent (depending on the country). According to the Organization for Economic Co-Operation and Development, in the United States public spending on old-age care is nearly 25 percent less per capita than in Europe, but Americans’ private spending on old-age care is nearly three times higher per capita than in Europe because Americans self-finance a significant share of their own senior care. Either way, you pay.

Other taxes in the United States are hidden. Every year, the federal government gives $300 billion in tax breaks to businesses that provide health benefits to their employees. That’s $1,000 for every man, woman and child in the United States—47 million of whom have no health coverage at all. That amount is easily enough to finance a real universal health care system covering every American, and it’s coming right out of every taxpaying American’s pocket.

So a thorough analysis would need to create a ledger in which all the supports and services Europeans and Americans receive are listed on one side and the amount of taxes and any additional out-of-pocket fees they pay are listed on the other. When you sum up the total balance sheet, it turns out that Americans pay out as much as Europeans—but we receive a lot less for our money.

Unfortunately these sorts of complexities are not calculated into simplistic analyses like Forbes’ 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. Increasingly these kinds of supports for families and workers are necessary for a healthy, happy and productive workforce. Europeans have them, but most Americans do not—unless you are a member of Congress, which of course generously provide European-level support for its members and their families.

Copyright 2010 Steven Hill

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This entry originally appeared at OnTheCommons.org.

Steven Hill is author of the new book, Europe’s Promise: Why the European Way Is the Best Hope in an Insecure Age (University of California Press) and political reform director for the New America Foundation.

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