Saturday, August 27, 2011

A thought on comparative taxation

It seems common to compare the tax rate in the United States with the tax rates in other developed countries. Of course, to make any sense, the comparison has to be between like things. Thus in some countries the federal government provides local services, while in the United States we have state and local taxes supporting state and local government functions; if one is to compare tax rates, one might compare total tax rate to total tax rate.

It occurs to me that similarly, different governments fund different things. If European governments have socialized medicine and the United States does not, then it is logically incorrect to compare their tax rates. I suggest that in terms of health services it is more reasonable to compare the health outcomes and health expenditures for the societies as a whole. Of course on that comparison the United States comes off rather badly, spending more on health care per capita than any other nation but has lower life expectancy than most European countries. Similarly, one might compare per capita educational expenditures and educational outcomes; we don't come out too well on that comparison, the difficulty being that we leave education to local control while European nations tend to have national systems.

Military expenditures? We spend more than the rest of the world's nations combined. Is our security greater than theirs?

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