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Judi's avatar

I know people track the tax rate on different countries and say that the US has a lower tax rate than European Countries but?

Asked by Judi (37655 points ) May 5th, 2009

Has anyone tracked the average tax rate in the US and added the per capita cost of health care and compared that number to countries with socialized medicine? I wonder if our actual expense when comparing apples to apples is really more?

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6 Answers

janbb's avatar

I suspect it is probably true that our costs are higher, although I don’t have the data to support or refute my position. I certainly believe that socialized medicine is a fairer, more equitable solution to he problem of providing healthcare for a society.

wundayatta's avatar

One way of looking at it is to see the percent of GNP spent on health care. In the US, the last time I looked, it was around 14%, but that was almost a decade ago. So, in 2008 it was 17%.

OK, here’s what you want: Exhibit 4—Total Health Expenditures as a Share of GDP, U.S. and Selected Countries, 2003. It’s probably a much larger disparity now. But in 2003, the US was at 15% of GDP, and the next closest nation, Switzerland, was at 11.6%. Canada is at 9.9%.

You can also compare tax rates in a number of ways. In Families With Children:
An International Tax Comparison
there are a couple of tables that might be useful. The first, Figure 1 – Total Government Revenues (as a % of GDP) and Government Net Debt-to-GDP Ratio (%), Various Countries, 2004 , shows that the tax burden of the US (31% of GDP) is smaller than that of Canada (41%).

In the second table, Figure 2 – Average Tax Rate on Employment Income, Various Countries, 2004: Married Couple With Two Children, Family Income of $80,000*, they say that Canada’s tax rate is 24% for a couple like this, compared to the US tax rate of 19%.

One way of looking at this is that if you fund health care through the government, you’ll get lower cost health care. Another way to look at it is that Canada can provide full coverage for everyone for a tax rate only 5% higher than we have in the US.

None of this says how much it will cost to provide universal coverage in the US. That depends on cost control measures, and how the payments are distributed. If we keep the cockamamie private health insurance system, we’ll end up bankrupting ourselves. Unfortunately, private insurers will be the last to go. Once they do, we’ll have a system that can actually be efficient and deliver more care for fewer bucks.

lercio's avatar

Some facts for you from the UK. We are proud of our health service but we pay for it.

The UK National Health Service costs about £92 billion, income tax only raises about £140 billion per year. But we have a lot of extra indirect taxes, check out how much tax we pay on car fuel, alcohol, cigarettes, sales tax (VAT) so the calculation is not very straight forward.

But I have never paid for regular health insurance. My kids were delivered ‘free’ in a modern well equipped hospital and if a member of my family gets sick I will not need to worry about paying for treatment.

The NHS is the largest employer in Europe and employs 1.3 million staff.

avalmez's avatar

@daloon things my have changed recently, but canadiens i worked with back in the mid-90’s were not happy with the health care provided by their government. and, at the time, costs were not evenly distributed across tax brackets. the folks i knew were single, earned more than USD 80K, and paid taxes at about 45% if i recall correctly. again, my data is dated and may not reflect the current situation in Canada.

Also, if i interpret the information about the tables correctly, wealth alone drives health costs (hence, they exclude poor nations from their analysis). any business worth its salt will charge what the market will bear.

that said, our health care system needs some fixing especially where delivery of services to the poor and unemployed are concerned. i’m not sure elimination of the health insurance companies is the answer, but change of an appropriate nature is needed and i for one am thankful i’m not charged with finding the answers.

wundayatta's avatar

@avalmez—as I recall, if you looked at studies about satisfaction with the Canadian health system back in the 90s, you’d find the vast majority of Canadians were very happy with it. You were hanging out with a very unusual demographic group, and that may be why they didn’t like it. And, of course, if you have a progressive tax system, those making a lot more money, will pay taxes at a higher marginal rate.

As to the issue of wealth driving health care costs; you could be right. In any case, that’s why I didn’t look at total spending per capita, but health spending as a portion of GDP. The US people apparently believe that health is an extremely important commodity, since they spend almost a fifth of their income on it, and that may go up to close to a third by 2030, if the projections turn out to be true.

Now, if you are wealthy, then you can spend a larger portion of you income on health, and still have plenty of money for other things you need and want. Still, studies about satisfaction with health systems show that Americans are pretty unhappy with their system, despite spending more money on it than any other country. This is probably because of the disparity in access. However, the other point is that you can spend much less than we do, and make the overall population much happier.

All the analyses I did showed that we could have more health care, and cover everyone, and actually reduce costs if we went to a single payer system. Of course, that would be tax financed, which is anathema to Americans. Such a system would significantly reduce the costs of businesses which provide insurance to their employees. Presumably they would pass at least some of those savings onto their employees in the form of raises. It would make those businesses more competitive, while not affecting the competitiveness of small businesses, at least, if you funded it through an income tax. Even if you used a payroll tax, the money still comes from individuals, ultimately.

Anyway, single payer would not stop the incentives for research and improvements in health. Far from it. There would be far more money going into actual health services (as opposed to paperwork), resulting in a larger demand for research and development. But we need only look at other nations with universal coverage systems to see that there are thriving pharmaceutical firms.

Also, they seem to get along fine without private health insurers, although they do have some coverage to cover gaps. I believe that Germany uses the private sector, but I’m not sure. In any case, even with a single payer system, you could hire the insurers to administer the system, and to do the actuarial analyses. They’d be smaller, but they wouldn’t go away.

JLeslie's avatar

@avalmez When you ask Canadians directly would they like to give up universal healthcare and go back to the old way or similar to the US, the vast majority want to keep it how it is…or rather want to keep universal care. I think their complaints are valid, but it is Canadians wanting to improve their system not get rid of it.

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