Taxes: we’re not Europeans

We don’t want to pay as much tax as the Europeans do. How many times have you heard that? If less than 1,000 times, congratulations—you live without internet service. But, I still retain an old-fashioned interest in verifiable facts, not just what I’d like to be true. I hope one or two readers still feel the same way, so let’s take a look at some numbers on just who pays what taxes, and what those taxes pay for.

The moment you delve into comparing countries, you have to contend with currency conversions, buying power and the cost of necessities (what’s a middle class house in Chicago vs. Lyons vs. Haarlem?) so of course we can argue “not comparable” whenever. We work with what we have, and what I found was some very interesting data on the Forbes website. Forbes states all figures in Euros, but I’m going to use a handy dandy currency converter to put this all in U.S. dollars. (I wish these figures were newer–2009–but it isn’t easy finding facts that are up to date. I just don’t know where all those Freedom Caucus people can get their information.)

Let’s look at a couple earning $108,667 (100,000 euros) with two children. Here’s what Forbes says their after-tax income would be:

United States (overall—some states like Illinois have higher taxes) $84,760
France $78,029
United Kingdom $72,154
Germany $73,676
Netherlands $64,113

 

I could add more countries, but as you might expect, taxpayers in countries with small population bases (Netherlands, Norway, Denmark, etc.) keep less of their gross because there are fewer taxpayers to pay for services.

So, we ARE better off by at least $6,000 and maybe as much as $20,000? Wait a minute—you get what you pay for. And our mythical couple is going to have to pay for a lot more out of that after tax income—stuff that is already paid by government programs in these other countries. I’ll admit I don’t have the specifics on every policy in every other country (but would welcome input from anyone who does), but I do know a few expenses our model couple would need to cover out of pocket:

  • Yearly deductible for health care. Mine’s $3,500/family but employer plans can range anywhere from about $2,000 to $6,000. I’ll be conservative and use just $2,000. Let’s assume the parents’ employers cover all health care premiums—increasingly rare, but I’m trying to be conservative here.
  • Savings needed to cover $30,000 in college costs per year for each of two kids—I’ll again be conservative and assume the kids aren’t going to Harvard, and are 2 years old and newborn, so the amount needed will be on the low side. If the kids were older, more would need to be deducted. According to the SavingForCollege calculator, the parents would need to be saving $613/month for the 2 year old and $558/month for the newborn: a total of $14,052/year.
  • If these parents have such young children, they’re probably not very old themselves. Nevertheless, since in the US people are “free” to pay for their own long term care, and this is covered by many European health systems, let’s estimate a low $1,000/parent per year for long-term care insurance: $2,000. (forget saving for the actual cost of care—it would about double the amount needed if the parents are currently in their 30s and can save for 40 years).
  • I’m not including the value of the living allowance that is given to college students in some countries (Netherlands), the free student exchange programs that are routine, the excellent trades and vocational schools available to non-college Europeans (and which are hard to get at any price in the U.S.), the lump sum children’s benefit given to parents upon birth of a child, or the cost of co-pays and prescription drugs, since these vary and I wanted to look at just a few things we can agree on. So how does that math look now?

 

US $84,760
health care deductible (cost of insurance premiums not included) -2,000
college savings -14,052
long term care insurance -2,000
what you actually have left after being “free” to pay for those services yourself. $66,708

 

Another “but wait”—what if mom and dad are both working and need to obtain child care? In my neck of the woods that’s going to cost around $20-25,000 a year, but Europeans can pretty much depend on free or very low cost service from shortly after the child’s birth. So now, our model couple could easily be down to $46,708 after paying for the same services the European family would get for free (or greatly reduced costs). I’ll try not to go on about the paid-for health spas that are routine in Europe, the far-more-luxurious birth center experience, the well-child checkups and assistance, the earlier retirement age, the longer paid vacations, guaranteed paid maternity leave, the housing assistance for the elderly and low-income families…

Yeah, I’m glad we pay such low taxes. And that we get what we pay for.

 

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