Public taxes less 'Sicko' than private taxes
Michael Moore's new movie, "Sicko," paints a vivid picture of the abundance of services provided to French citizens by their government. Moore's detractors point out that the French pay significantly more in taxes for this bounty.
Superficially, that's true. Taxes account for 44 percent of the French economy versus 25 percent in the United States. But that simple comparison masks two important points. First, while French taxes are higher, French corporations pay a greater share of the nation's tax burden than U.S. corporations do.
U.S. corporate tax rates have been steadily slashed over the last 60 years, especially during the last decade. In the 1950s, corporate taxes paid for 28 percent of the government's expenses. Today corporations pay about 10 percent, leaving individuals to pick up the rest of the tab. In fact, U.S. corporate taxes as a percentage of total economic output is the third-lowest among industrialized nations — only Icelandic and German corporations contribute less.
More important, stating simplistically that French people pay higher taxes ignores the myriad private taxes American citizens pay. In order to compare the two systems on an apples-to-apples basis, we have to adjust for all the services the French government pays for with tax revenue: health care, subsidized day care and long-term elder care for the poor.
French businesses and families pay no health premiums. They pay nothing for prescription drugs deemed essential. Each of these things, and many others, that American families pay represent private taxes.
Health care is our most significant private tax. In 2005, the United States spent $2 trillion on health care, our largest national investment, even ahead of war-making. Of this $2 trillion, the government pays for $800 billion through Medicare, Medicaid and the Veterans Administration. The rest — $1.2 trillion — is a private tax exacted from Americans by corporations like Aetna, Pfizer, Manor Care and Walgreens.
They provide the services that in every other industrialized nation are provided by government. If we add just the non-governmental share of health-care spending to the nation's tax bill, we see the share of the American economy devoted to taxes — both public and private — rise to nearly 36 percent. If we add the wide range of social services that Americans pay for through charitable giving, the share of the U.S. economy going to things the French pay for with taxes rises to more than 38 percent, closing the gap with France appreciably.
Yet, while the total of U.S. public and private taxes comes close to French levels, the quality of services we receive from our private tax payments is deteriorating at an alarming pace. Moore's movie recites the statistics from the United Nations annual Human Development Report: U.S. infant mortality is 41st in the world, our life expectancy ranks 30th, and the percentage of our young people enrolled in primary or secondary schools ranks 16th. If our private taxes are not providing quality services, where are these private tax dollars going?
Private taxes, unlike the public ones we pay to government, have a chunk taken out for corporate profits. Health-care companies have some of the highest profits in industry today, exceeded only by technology companies. And a big share of private taxes is skimmed off to richly reward the executives who lead health-care companies.
Leslie Norwalk, who heads the nation's Medicare system, providing health insurance to 37 million elderly or disabled Americans, earns a salary of less than $190,000 a year. His customers receive health services in virtually every community and every hospital in the nation, yet the administrative cost for this complex network is less than 2 percent of the total cost.
William McGuire heads United HealthCare, the largest private insurer in America. It provides health insurance to 26 million Americans and deals with a fraction of the physicians and hospitals that Medicare does. Despite covering 70 percent of the lives and operating a far less complex organization than Medicare, McGuire shocked the business world in 2005 when he took home $125 million in pay, more than 650 times the pay of Medicare's Norwalk.
Behind McGuire's 2005 bonanza rests an additional $1.6 billion in stock option gains waiting to be collected in future years. So obscene was McGuire's pay package (supported by the private taxes we all pay to his and other health-care providers) that the Minneapolis Star Tribune, United HealthCare's hometown paper, wrote: "McGuire's PayDay is a Shame, If Not a Crime."
Many Americans continue to feel overtaxed, but maybe the tax cut we should demand is one in our private tax burden — that share that inflates corporate profits and fattens CEOs' wallets. Shifting essential public services, like health care, from the private sector to the public sector has improved the quality of life and reduced costs in other industrialized nations. It's time to cut private taxes.
Scott Klinger is a member of United for a Fair Economy, based in Boston, Mass.
