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05 Nov 09

Matthew Yglesias » The New American Economy

  • Here he is explaining why Europe isn’t a zero growth dystopia:


    In America, people tend to think of their federal taxes as money down a rat hole and react accordingly. But in Europe, the people are more apt to feel they are simply paying for services with their taxes that Americans have to pay out of pocket.


    This fact is best illustrated by health care. Most Americans get health insurance through their employers. The cost reduced their cash wages by 7.9 percent on average in 2008 according to the Bureau of Labor Statistics. If we had national health insurance and insurers were entirely relieved of this expense, they could afford to pay their workers 7.9 percent more and be no worse off. If the payroll tax went up by 7.9 percent to pay for health insurance, it would all be a wash, but both taxes and government spending would be higher. [...] The second reason why taxes have less of an impact on incentives in Europe than one might expect is because European countries raise much more of their revenue from consumption taxes than the United States does.

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