‘Socialism’ and High Taxes (Or, you get what you pay for)

Let me preface this by saying that this is not really a religious post. I don’t want anyone to think I’m trying to say that being heathen means you have to be a socialist, or any other ideology. I just get annoyed when people ignore evidence and use faulty logic. So this meant as food for thought, and hopefully a counter to the incomplete logic so popular among politicians.

You know the old saying “You get what you pay for”? Well, it applies to governments as well as commodities. Every time I or someone else suggests that America catch up to the rest of the first world and start offering universal health care or free tuition to our citizens, someone comes along and complains about how much our taxes would go up. What I want to consider is if it would be a bad thing if our taxes went up to pay for investing in our human capital in this country. After all, educating people, keeping them healthy, and providing food for the children of the poor are all investments in the future and economy of this country- not charity.

Does the average American is actually saving money by having lower tax rates than a ‘socialist’ country like Germany or Norway? When we count in the cost of healthcare in this country, it turns out the average American isn’t really saving any money at all. Those ‘socialists’ are simply paying their government for a service we buy privately. No money saved, really. When we consider that 60% of bankruptcies in this country are caused by illness, and 75% of those people who went bankrupt had insurance,[1] it becomes obvious that our healthcare payer system is not only just as pricey as other countries, but it also completely worthless.

So, down to the numbers:

Consider that the average American spends $9,596 on healthcare in a year.[2] Out of an average annual salary of $45,230 per year[3], that works out to a whopping 21% of their salary. Due to the crazy state-by-state system of taxation America uses, it is a bit difficult to get good data on what the average American pays in taxes total. I usually figure in about 20-30% for my annual budgeting, so I’m going to run with that.* It seems reasonable or on the low end for a middle-class American. (I just had a conservative quote me 33%, but I can’t find a source for that, so I’m still a bit clueless.)

Let’s compare our tax rate to a country like Germany or Norway, both of which pay college tuition for students (in the case of Germany, for international students as well) and have universal health care. A quick Google search reveals Germany’s tax rate: it tops out at 45%,[4] with lower brackets for those who make less total income. Norway’s is slightly more complicated, requiring me to add municipal, national, top, and social security taxes. It works out to a top bracket tax (the most you have to pay assuming you’re very wealthy) of 47.8%.[5]

So let’s assume that I’m a middle-class American, smug about my 20-35% lower tax rate. Add in the 21% of my income I spend on healthcare, and suddenly my minimum tax rate is more like 41%. Compare that to the 42% tax bracket that most middle-class Germans fall into. So basically, I’m paying the same amount of taxes as any citizen in a “socialist” country, and I don’t get free education or the guarantee that a medical problem won’t bankrupt me despite all the money I’ve spent on insurance. If I assume my taxes are closer to 30% (which is more likely), after adding in the cost of healthcare, I am paying 51% of my income in taxes and for social services provided by taxes in ‘socialist’ countries. That is a higher income percentage than most ‘socialist’ countries.

That’s the numbers. I like numbers. I’m a mathematics major, and I would feel bad if I didn’t present the hard evidence people should (but hardly ever do) base their opinions on. (And please, go check out this stuff for yourself. I’m an honest person, but I can make mistake just like the next person.) I think there is another aspect to this as well. That is the philosophical, values-based angle.

We live in one of the richest countries in the world. We spend billions of dollars every year on the military, on subsidies and tax breaks to oil companies and agribusiness. No one makes a budget issue over drone strikes or bombings in other countries (like Syria). But let one politician suggest that we offer single-payer healthcare or free education to our citizens, and a hundred politicians and pundits bemoan the expense.

This tells me that in our current culture, it is acceptable to waste money on war, but unacceptable to spend tax money on ensuring that in one of the richest countries in the world, every person has access to basic healthcare. This seems like a horrible inversion of values to me.

*I find it interesting that a Google search quickly reveals Germany’s tax rates by income, while our system is so convoluted that I keep getting contradictory answers to the point where I just don’t trust anyone’s guess on what the average American pays in taxes. But that is beside the point I can’t help but wonder what they are trying to hide….


[1] “Medical bills prompt more than 60 percent of US bankruptcies” CNN.com http://www.cnn.com/2009/HEALTH/06/05/bankruptcy.medical.bills/

[2] “The Average American Spends This Much On Healthcare Every Year — Do You?” Fool.com http://www.fool.com/investing/general/2015/03/15/the-average-american-spends-this-much-on-healthcar.aspx

[3] “The Average American Monthly Salary” Houston Chronicle. http://work.chron.com/average-american-monthly-salary-8614.html

[4] “Personal Income Tax in Germany” Confederation Fiscale Europeenne. http://www.cfe-eutax.org/taxation/personal-income-tax/germany

[5] “Your Europe” http://europa.eu/youreurope/citizens/work/taxes/income-taxes-abroad/norway/index_en.htm


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