One common refrain on the right and the center-left alike: Since the rich can’t foot the bill alone, are middle- and working-class supporters of a more socialized health care system really ready to pay as much for it as people do in some of the high-tax nations that have one?
The problem is, we already do, and we often pay more.
It’s true that by conventional measures, taxes on workers’ wages in the United States are comparatively very low and even very progressive, affecting the lowest-earning workers the least and taxing those who can afford it more.
But these measures obscure an important fact of American life: Unlike workers in many other countries, the vast majority of American employees have private health insurance premiums deducted from their paychecks. If we reimagine these premiums as taxes, we’d realize that Americans pay some of the highest and least progressive labor taxes in the developed world.
By combining data from the O.E.C.D. Taxing Wages model with data from the Medical Expenditure Panel Survey, we can see what percentage of each worker’s compensation — a figure that includes cash wages as well as the taxes and benefits employers pay on behalf of their employees — goes toward taxes and health care, and how progressive these payments really are. What this data shows is that lower-income workers, higher-income workers, single workers, and married workers with children all contribute around 40 percent of their pay toward taxes and health premiums. And when those health care costs are taken into account, the less well off no longer pay less than high-earners, as they do in taxes alone.
For instance, according to this analysis, when an American family earns around $43,000, half of the average compensation when including cash wages plus employer payroll tax and premium contributions, 37 percent of that ends up going to taxes and health care premiums. In high-tax Finland, the same type of family pays 23 percent of their compensation in labor taxes, which includes taxes they pay to support universal health care. In France, it’s 2 percent. In the United Kingdom and Canada, it is less than 0 percent after government benefits.
Moving from our system to a European-style system would make our overall system of taxes and health insurance payments much more progressive for the majority of Americans, because the elimination of private health premiums would more than offset the rise in formal taxes for all but the wealthy.
If we don’t move toward a European-style health program, we’ll remain stuck in a system where Americans, regardless of their incomes, pay ever larger amounts out of their paychecks to fund health care. The fact that we don’t call these payments “taxes” doesn’t change that fact, so it shouldn’t blind us to the best solutions.
