SiCKO shows a better way that need not bankrupt us
The first thought that comes to mind regarding health care in France and the UK as portrayed in Sicko is "oh my God their income taxes must be outrageous!"
Michael Moore artfully dodges this in the movie, focusing instead on the standard of living, disposable income, and the like.
He might as well have laid it all out, though, because it's not nearly as bad as you might imagine. In fact, it's a pretty good deal.
First of all, some examples of income taxes paid in the respective countries (all converted to US dollars):
So there's not that much difference, in the relative scheme of things.
Ironically, corporate tax rates are actually lower in France (33%) and the UK (28%) v. up to 39% but generally around 34% in the US. The capital gains tax in France is higher at 26% v. 15% in the U.S. Capital gains in the UK are taxed the same as income for individuals, with the first £8,800 exempt.
One thing that isn't made very clear in the movie is that the French system is a single-payer "universal health insurance" plan (as opposed to "socialized medicine"), much like if we opened up Medicare to everyone. Employers pay about 12% and employees pay about 1% for mandatory enrollment in "social security", which includes a retirement benefit plus universal health insurance that covers up to 70% of most medical costs (100% for maternity related costs). Supplemental insurance is available for another 8% to get virtually 100% coverage. Most of us pay about 15% for a retirement benefit (the wealthy only pay about 3% on much of their income) and limited medical coverage for those over the age of 65 and the disabled and the poor, many of whom are still unable to qualify.
The UK has "universal health care", which means health care is provided and paid for by the government. It is funded by combination of employer/employee payroll taxes in a complicated calculation that, best I can figure, works out to about 13% of earnings over a certain amount. This provides retirement benefits and free universal health care for all.
So, our hypothetical employee who earns $50,000 per year would pay the following in income tax and "social security" payroll deductions (employee and employer combined).
In this example, the French employee is paying the extra 8% in supplemental insurance so 100% of their medical care is covered. With the basic plan that covers 70% of their health care costs, the payroll tax would only be $6500, and their total taxes would be $14,415. And keep in mind that the US employee (and/or his/her employer) still has to pay for health insurance.
But then there's the Value Added Tax (VAT), similar to sales tax but not exactly. The VAT in France is 19.6% and 5.5% on groceries. In the UK it's 17.5% and zero on groceries (books, children's clothing, and several other categories are also exempt in the UK, and others are taxed at a reduced rate).
So, some example VAT/sales taxes would be:
It's more complicated than this because VAT is included in the price and it's hard to understand how it's all calculated from manufacturer to consumer. Sales taxes in Canada range from 6% (Alberta) to 16.6% (Prince Edward Island) depending on the province. It's 14% in Ontario.
Going back to the previous example of combined employer and employee income and "social security" taxes, here's the same example with only the employee's portion, i.e. take-home pay after payroll deductions:
So the British and the French take home a little less and pay a little more in VAT, but their health care is fully covered (the French employee is still paying the 8% for 100% coverage). The American employee still has to pay for health insurance (anywhere from $600 to $3000 per year in payroll deductions depending on the type of policy and company size), and most also pay additional state and local income taxes (for example, approx. $2500 in Georgia, $3000 in North Carolina, or $3900 in NYC).
So, yes, providing universal insurance coverage or universal health care for everyone would cost a little more in taxes, but not that much more. And think of the savings, not to mention peace of mind and security. It seems pretty clear that it would be better than the $2 trillion we spend now that leaves nearly 50 million people behind and gives false hope to the other 250 million who think they are insured until they file a claim.
NOTE: This is a somewhat simplified version, but it seems like the "huge tax increases" issue is a "myth" that needs to be debunked. And any help with the exact calculations for employer v. employee deductions in France would be appreciated because it's a little confusing, although these numbers should be pretty close. The UK numbers are from a tax calculator and the US numbers are from the IRS tables so there is a high degree of confidence in those.
Cross-posted from KnoxViews.com by the author
Michael Moore artfully dodges this in the movie, focusing instead on the standard of living, disposable income, and the like.
He might as well have laid it all out, though, because it's not nearly as bad as you might imagine. In fact, it's a pretty good deal.
First of all, some examples of income taxes paid in the respective countries (all converted to US dollars):
| Income tax on $50,000 | |||
| US | Canada | UK | France |
| $6945 | $8144 | $8156 | $7915 |
| Income tax on $100,000 | |||
| US | Canada | UK | France |
| $19,965 | $20,347 | $22,773 | $23,899 |
So there's not that much difference, in the relative scheme of things.
Ironically, corporate tax rates are actually lower in France (33%) and the UK (28%) v. up to 39% but generally around 34% in the US. The capital gains tax in France is higher at 26% v. 15% in the U.S. Capital gains in the UK are taxed the same as income for individuals, with the first £8,800 exempt.
One thing that isn't made very clear in the movie is that the French system is a single-payer "universal health insurance" plan (as opposed to "socialized medicine"), much like if we opened up Medicare to everyone. Employers pay about 12% and employees pay about 1% for mandatory enrollment in "social security", which includes a retirement benefit plus universal health insurance that covers up to 70% of most medical costs (100% for maternity related costs). Supplemental insurance is available for another 8% to get virtually 100% coverage. Most of us pay about 15% for a retirement benefit (the wealthy only pay about 3% on much of their income) and limited medical coverage for those over the age of 65 and the disabled and the poor, many of whom are still unable to qualify.
The UK has "universal health care", which means health care is provided and paid for by the government. It is funded by combination of employer/employee payroll taxes in a complicated calculation that, best I can figure, works out to about 13% of earnings over a certain amount. This provides retirement benefits and free universal health care for all.
So, our hypothetical employee who earns $50,000 per year would pay the following in income tax and "social security" payroll deductions (employee and employer combined).
| $50,000 income (USD) | |||
| US | France | UK | |
| Payroll Tax | $7500 | $10,500 | $5760 |
| Income Tax | $6945 | $7915 | $8156 |
| Total Taxes | $14,445 | $18,415 | $13,916 |
In this example, the French employee is paying the extra 8% in supplemental insurance so 100% of their medical care is covered. With the basic plan that covers 70% of their health care costs, the payroll tax would only be $6500, and their total taxes would be $14,415. And keep in mind that the US employee (and/or his/her employer) still has to pay for health insurance.
But then there's the Value Added Tax (VAT), similar to sales tax but not exactly. The VAT in France is 19.6% and 5.5% on groceries. In the UK it's 17.5% and zero on groceries (books, children's clothing, and several other categories are also exempt in the UK, and others are taxed at a reduced rate).
So, some example VAT/sales taxes would be:
| VAT, $200 worth of groceries | ||
| Tennessee | France | UK |
| $18.50 | $11 | $0 |
| VAT, $300 worth of children's clothing | ||
| Tennessee | France | UK |
| $27.75 | $58.80 | $0 |
| VAT, $500 TV | ||
| Tennessee | France | UK |
| $46.25 | $98 | $87.50 |
It's more complicated than this because VAT is included in the price and it's hard to understand how it's all calculated from manufacturer to consumer. Sales taxes in Canada range from 6% (Alberta) to 16.6% (Prince Edward Island) depending on the province. It's 14% in Ontario.
Going back to the previous example of combined employer and employee income and "social security" taxes, here's the same example with only the employee's portion, i.e. take-home pay after payroll deductions:
| Take-home pay, $50,000 income (USD) | |||
| US | France | UK | |
| Payroll Tax | $3750 | $4500 | $4352 |
| Income Tax | $6945 | $7915 | $8156 |
| Take-home | $39,305 | $37,585 | $37,492 |
So the British and the French take home a little less and pay a little more in VAT, but their health care is fully covered (the French employee is still paying the 8% for 100% coverage). The American employee still has to pay for health insurance (anywhere from $600 to $3000 per year in payroll deductions depending on the type of policy and company size), and most also pay additional state and local income taxes (for example, approx. $2500 in Georgia, $3000 in North Carolina, or $3900 in NYC).
So, yes, providing universal insurance coverage or universal health care for everyone would cost a little more in taxes, but not that much more. And think of the savings, not to mention peace of mind and security. It seems pretty clear that it would be better than the $2 trillion we spend now that leaves nearly 50 million people behind and gives false hope to the other 250 million who think they are insured until they file a claim.
NOTE: This is a somewhat simplified version, but it seems like the "huge tax increases" issue is a "myth" that needs to be debunked. And any help with the exact calculations for employer v. employee deductions in France would be appreciated because it's a little confusing, although these numbers should be pretty close. The UK numbers are from a tax calculator and the US numbers are from the IRS tables so there is a high degree of confidence in those.
Cross-posted from KnoxViews.com by the author
Labels: health care, public health, u.s. social forum
13 Comments:
excellent outline! As for VAT, I've lived in Germany for 20+ years, and VAT is surprisingly invisible. As this tax is built into the consumer end price items will often have prices similar to those paid in countries where the tax is not levied, or where state taxes are added at checkout.
That said, a VAT of almost 20% is a lot of money. In the US, it would be hard to use an integrated national VAT as individual states use their taxes as policy instruments, while national retailers need to use a unified pricing strategy for their sales campaigns.
This is a very well constructed post.
As an American living in the UK, I can say that it confirms my personal experience. In the UK my tax has been lower and my health care is covered. In my experience, the quality of care is also very good.
Thanks for providing an excellent summary.
Thanks for this.
I've spent several weeks trying to decipher the various tax systems in the countries whose health care systems I envy, and had basically given up on that angle. I appreciate your taking on the task so that I don't have to.
OECD maintains some statistics on various things such as: % of national income collected as taxes, % of national income collected for "social security", % of national income spent on health care. I added it up and in general, for the average American, they would be better off paying an additional 7.5% Medicare tax as vs. 15% Medical Care "tax" to the insurance companies. It really doesn't matter to me whether it is the government or the health insurance companies that take the money out of my pocket, it still ain't in my pocket either way. Given that, why should I spend 15% of my income on medical care when I could spend 7.5% instead? (Or 10% if we want a Cadillac system like the French one).
- Badtux the Healthcare Penguin
I am not seeing how the numbers add up in the last table "Take-home pay, $50,000 income (USD)." Shouldn't it be about 39,000 takehome for the US and Britain?
Yeah, what finfangfoom said. If that last table is supposed to be 50K - (payroll tax + income tax), the numbers are way off for US and UK.
FinFangFoom: Thanks for spotting that.
There were two errors.
On the US takehome, my spreadsheet deducted from "taxable" instead of "gross" income.
For the UK example, the NHS payroll tax for insurance was entered on the chart in Pounds instead of Dollars, but the calculation was correct (in dollars).
It changes the outcome somewhat, but not the overall conclusion. Corrections made and notes updated, thanks again.
Came over from Majikthise.
Good work, but I have a question.
How does France and the UK manage to provide retirement and health benefits, from a lower tax rate than provides retirement benefits only here?
this is very interesting indeed. I have a couple of questions. (1) Have you looked at the metrics on access and outcomes relative to price for each country?(2) Does your pricing take into account the working population paying for the non-working population in all countries?
thx.
SamC, as I said this is a "simplified" example that attempts to compare "apples-to-apples" social security/insurance and income tax related deductions. But it's a lot more complicated than that, I'm sure, what with other taxes, cost of living, etc. factored in. And as I noted, they in fact pay a little more in taxes, but get a lot more in benefits. How they do that is something we ought to be studying, I suppose.
Anon: no, I didn't take into account any access or outcome data, or working v. non-working support for beneficiaries. But most studies rank the French system pretty high in outcomes and quality of care. A true cost/benefit analysis would be a massive undertaking beyond my capability. :)
Excuse me but your calculations are false ; I'm a French small company CEO and I love our system, as a conviced social-democrat, but the real figures are much less rosy, esp. in the social security section :
Basically, social security in France covers three items : -Retirement, health and joblessness
All the contributions amount generally to 45% of the PAID amount for the employee ; this amount is divided in gross salary, appx 60% of the amount, and the "cotisations patronales", company contribution to social security ; then the gross salary is divided in net salary (the amount the employee gets), roughly 80% and "cotisations salariales",20% contribution of the salaryman to social security
All in all, you get only 55% of what the company pays for yor work, the rest is for retirement, health care and joblessness insurance
now on those 55%, you'll pay roughly, but depending very much on your family situation, between 0% and 60% income tax, let's say 10% for an average family of 4 in which the combined net salary of the two parents is 50000$, an average french situation ; that makes it 5,5% less, so we're at roughy 50% of the amount paid for the employee
Then there's the VAT ; let's suppose a mix of 60/35/5% between 19.6%,5.5%, and 100%(oil) VAT : that's 18.6% now 50% of that is 9.3%, hence from what was paid to the employee there is 40% left for actual goods and service value.
Those figures may appear staggering but don't forget that with the 60% given away we get premium health care, retirement, a good joblessness insurance, free studies for all, and of course all the kind of other public services : army, roads, justice, etc...
In fact I'm very proud to be living here and I just long to be able to contribute more, which would mean that I'd be earning more after all
Actually, the UK figures are also a little less rosy. In the UK, every person pays thousands of pounds per year in "council tax" to local governments-- this is basically similar to a property tax in the US, but everyone pays it whether they rent or own. It's a very regressive tax since it hits poor people who rent just as much as rich people who own. So, for that take-home pay, you must subtract at least $4,000 in council tax per year to be accurate.
In the movie, Sicko the phrases including 'free', 'nothing' and 'zero' occurred 32 times, while the phrases 'tax' and 'taxation' occurred just 5 times.
Where are the statistic that show how Medicare and Medicaid are more efficient and effective than the insurance companies? Should we first have this discussion, before we move to 100% gov't- financed healthcare?
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