Thursday, May 7, 2009

The Nexus of the Community v. Self Debate

Germany, Like most of Western Europe and England, provides several valuable services. The Faustenburgs, residents of the German Lander (a German Lander is the same as an American state) Baden-Wurttemberg, benefit from these policies in several ways.

For example, Germany provides generous unemployment benefits and health care benefits which shelters the family from the economic crisis. Additionally, the government provides a monthly stipend to families with children. Like many other European countries, citizens can receive an education from prestigious universities at a fraction of the cost their American counter-parts endure in pursuit of higher education.

Additionally, the German government intervened as the economic crisis worsened by asking ailing companies to reduce the number of hours employees worked (which reduced their compensation) with the proviso that the government would match any lost compensation.

Of course, none of these goodies are free. Average Germans pay taxes through the nose. The article cites the number as 52% of all wages. In other words, Germans give 52 euro cents back to the government out of every earned euro. The article contrasts that number with 30 cents out of every dollar for American citizens. However, I think that number is low as I will discuss in a moment.

So, which system do you prefer, The U.S. model or the European model? While I still hold that our system is on a more solid basis fundamentally, the German model has managed to cap costs on education and health care. This would not be a major issue for me if the cost of these two institutions had not exploded recently in a manner that is beyond market fundamentals or demand in my opinion.

Additionally, the 30% number is low. How do you feel about a comparison of the two systems if our tax burden is closer to 40-45% of earnings? We are simply not getting a good bang for the buck at that point!

I think that is where I am at right now. Taxes are a necessary evil for civil society. However, the U.S. government (and many state and local governments) simply dilute the power of our tax dollars with projects and programs that serve little to no benefit for average Americans.

Sorry, I left the philosophical aspect of this post behind in my rant!!

6 comments:

  1. Robert,
    It is probably no secret which system I prefer. I certainly prefer the lower tax environment to higher tax environment.

    One of the highest values that I hold is the value of individual liberty and human rights (right of each person to his own life). On these values, it is hard to build a political system in which the state provides health care, higher education, and unemployment benefits to the individual.

    You brought up education. I always ask my classes why, in their opinion, the US k-12 system seems to lag many of the world's k-12 systems, while the US higher education system is the envy of the world with most of the top 20 universities located in the US. Is the different outcome due to the different level of competition in US k-12 v US higher ed? If so - then what would happen if we eliminate competition in health care?

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  2. I have a confession: I don't know exactly how much I make. (Luckily, my wife does.) I do have a ballpark figure of how much I bring home each month which is what our budget is based on, so I generally have a decent idea of what goes in savings, to pay off debt, bills, and so on. Somewhere in the back of my mind I am aware that we're in a pretty high tax bracket after the FSA, insurance, retirement, and so on. So, honestly, what matters to me most of the time is my net pay, not my gross. I wonder if this attitude is common to many others and if it impacts the way we accustom ourselves to taxes.

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  3. It is not due to competition. Actually, higher scores in math and science (if lower test scores are the "lagging" indicators in the American k-12 sytem you are referring to) could just as easily be explained by social engineering. The United States educational system seeks to teach every student the same topics without concern for academic aptitude while other countries separate the wheat from the chaff at an early age. I am not advocating one system over the other as much as explaining the results.

    The methodology for measuring and ranking universities is a completely different animal. For example, here is an article challenging the methodology employed by U.S. News and World Report when ranking law schools:

    http://leiterlawschool.typepad.com/leiter/2008/11/an-open-lette-1.html

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  4. I think that is an excellent point Philip. That is how I look at it. However, I do know my real tax bracket and track my probable tax burden thoughout the year. This after taking zero accounting courses!!

    The American tax code is chock full of incentives and triggers. Many of these might fall under Gushee's policy models. It is also chock full of special interest giveaways.

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  5. I just looked at my paystub online; my tax rate is 25%, although counting in tax refund I get, it probably ends up being a bit lower. On the other hand, this is only the federal income tax, medicare tax, and social security tax. Realistically I would need to add in the sales tax I pay, plus the property tax. Then the rate would probably be well into the 30s.

    Robert, I agree that the university ranking methodology can be challenged, but I doubt that many people would argue against this: US K-12 is substandard, and US higher ed is above average. I certainly agree that not all of it is due to different levels of competition, but I think that competition as one of the factors cannot be discounted very easily.

    The reason to bring it up is this: if we do go to more of a government provided healthcare, education and other services then I think the quality would suffer, and I know there would be excess demand for these services.

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  6. Again, I would posit that labeling k-12 as substandard simplifies the argument. Also, we must remember that our k-12 system is the source for the vast majority of the students in the American higher education system.

    Trust me, I am a big believer in programs such as vouchers and charter schools that introduce competition to the education model. Likewise, socialized medicine looks good on paper to many but is rife with concerns.

    My basic point is that something is wrong if the tax burden for the average taxpayer approaches 35-40% and the government is still underfunded.

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