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9 Countries That Do It Better: Why Does Europe Take Better Care of Its People Than America?

The world's wealthy democracies have somewhat different priorities, leading to some very different outcomes for their citizens.

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Among the wealthy countries, only Norway and Iceland have a higher retirement age (67) than we do in the U.S. (66). People in Luxembourg can retire with full benefits at 57, and the Italians join them just three months later.

Taxing Corporations Versus Individuals: Luxembourg

The U.S. government collects less in taxes than the other rich countries, on average, but that doesn't tell us who pays what.

It's worth noting that the U.S. is tied for the OECD country that collects the lowest share of the economy in corporate taxes, at 1.8 percent of GDP (in 2008), or about half the group's average.

That means that more of the burden falls on individuals and households. Americans fork over more in personal income taxes than the OECD average as a result – we pay 9.9 percent while the OECD as a whole pays 9 percent.

Denmark leads the world in corporate taxes, and the Slovak Republic has the lowest personal income taxes, but the most “balanced” system (an admittedly arbitrary standard) is arguably Luxembourg's, where corporations were taxed at 5.1 percent and individuals and families at 7.7 percent in 2008.

Aren't They Taxed to Death in General?

What about the “economy-killing” taxes under which those crazy European socialists suffer? Well, in 2007 we paid 7.5 percent of our economic output less in taxes than the average of OECD countries, but citizens of the other wealthy countries got a lot more for their tax dollars than we did – free or very low-cost health care, college educations, better unemployment benefits, job training and the list goes on.

In the United States, we paid the equivalent of 8.2 percent of our economy more in social spending out of our own pockets than the people in other rich countries did that year. So the savings we enjoyed on our tax bills were more than offset by what we paid for those things our counterparts bought with their taxes. When private and public spending on our social welfare are added together, Americans pay just a little bit more than the other citizens of the world's leading economic powers.

But What About the Debt?

Perhaps these countries just ran up piles of debt in the course of taking better care of their people?

That's not the case; among the world's wealthy democracies only six – Japan, Greece, Ireland, Iceland, Belgium and Italy – had a higher ratio of debt to GDP than the United States last year.

Denmark's debt level was less than half of our own.

Much has also been made of the Europeans' supposedly slower growth and lower average incomes. It is true that over the last decade, gross domestic product grew by about 1 percentage point more annually in the United States than in the core countries of the EU-15. But when we talk about “growth,” we mean a growing population as well as increasing productivity: more people making stuff means more total stuff.

The differences in population growth between the United States and the EU are stark. Since 1980, the population of the United States has increased by more than a third, compared with 7 percent in the EU (as a whole). Adding people, however, doesn’t necessarily make countries more affluent. A better standard is the growth of GDP per person . As Paul Krugman pointed out, “Since 1980, per capita real G.D.P.—which is what matters for living standards—has risen at about the same rate in America and in the E.U. 15: 1.95 percent a year here; 1.83 percent there.” That’s essentially a rounding error.

 
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