The Great American Ripoff: The High Cost of Low Taxes

Source: Joshua Holland, Moyers & Company, October 29, 2013

Editor’s note: This is the first in a series on the high cost of low taxes.

The American people pay a similar amount for social services – health care, retirement security, disability and unemployment insurance and the like – as citizens of European countries with supposedly lavish social safety nets.

But there are two significant differences. First, we pay a hugely disproportionate share of the costs out-of-pocket*, through the private sector. And when things go badly – when misfortune hits — the safety net that we fall back on is truly pathetic in comparison. Call it the great American rip-off. …

… Contrary to popular belief, American families and corporations enjoy relatively low taxes – in the OECD, we ranked third from the bottom in total tax burden in 2010 – but it’s almost a wash when you add back what we spend out-of-pocket. The eight OECD countries with the highest tax burdens in 2010 (Denmark, Sweden, Norway, Belgium, Italy, France, Austria and Finland) paid out an average of just over 32 percent of their economic output for social services, while we forked over just under 30 percent.

The difference is that we ranked near the bottom in the OECD (26th out of 34 countries) in terms of public spending on these services. Government-provided services accounted for around 19 percent of our gross domestic product (GDP), compared with 29 percent of GDP in those high-tax countries. The difference was made up from out-of-pocket spending by citizens….