Europe Tax Model Delivers Much More

April 15, 2010 |
The fact is, in return for their taxes, Europeans are receiving a generous support system for families and individuals for which Americans must pay exorbitantly, out-of-pocket, if we are to receive it at all.
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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. Particularly this year, with U.S. government deficits soaring, everyone from the tea baggers to Fox News and Senate Republicans are sounding the alarm about a return to "big government."

Ex-New York mayor Rudy Giuliani even stated recently that President Barack Obama was moving us toward – gasp – European socialism.

Europe frequently plays the punching bag role during these moments because there is a perception that the poor Europeans are overtaxed serfs. But a closer look reveals that this is a myth that prevents Americans from understanding the vast shortcomings of our own system.

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 southern senator and his wife. 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 Americans and their taxes is that we get nothing for them." He then told the senator about the comprehensive 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.

The fact is, in return for their taxes, Europeans are receiving a generous support system for families and individuals for which Americans must pay exorbitantly, out-of-pocket, if we are to receive it at all. 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 healthier results.

That's not all. In return for their taxes, Europeans also receive affordable child care, 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.

To get the same level of benefits as Europeans, most Americans fork out a ton of money in out-of-pocket payments, in addition to taxes.

While 47 million Americans don't have any health insurance, many who do are paying escalating premiums and deductibles. Indeed, Anthem Blue Cross announced that its premiums will increase by up to 40 percent.

But all Europeans receive health care in return for a modest amount deducted from their paychecks.

Friends have told me they 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).

Child care in the United States costs more than $12,000 annually for a family with two children. In Europe it costs about one-sixth that amount – and the quality is 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. The more generous European retirement system provides 75 percent to 85 percent of retirement income, depending on the country. 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 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 we Americans pay out just as much as Europeans – but receive a lot less for our money.

Unfortunately, these sorts of complexities are not calculated into simplistic analyses like Forbes' annual Tax Misery Index, a "study" that 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, these kinds of services increasingly are necessary to ensure healthy, happy and productive families and workers. Europeans have these supports, but most Americans do not – unless you pay a ton out-of-pocket.

Or unless you are a member of Congress, which of course provides European-level support for members and their families.

That's something to keep in mind on April 15. Happy Tax Day.

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