Letters To My Country

January 3, 2014

"We could have eliminated the income tax in 2010 had we adopted the Canadian, German, or French health-care systems."

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I think DCJ may have jumped the shark here. I have to assume that he reached this conclusion by comparing annual revenue from the federal income tax with the cost savings differential between international healthcare systems in terms of GDP. But practically speaking, the math doesn’t get us there. According to his article, “Canada, Germany, and France each spend about 11.5 percent of their economy on health care, compared to 17.6 percent in the U.S.” 2013 U.S. GDP was $ 15.68 trillion. If we apply the GDP savings difference of 6.1% to the most recent GDP numbers, we get a savings of roughly $ 956 billion.

That’s huge. In fact, $ 956 billion is enough to wipe out the present federal budget deficit completely, and would leave us with a $ 300+ billion surplus…*if* that whole amount was going to the Government. But it’s not. Government spending on healthcare only accounts for roughly 4.6% of U.S. GDP as of 2013. So of that $ 956 billion, we can reasonably assume that the federal Government would only receive it’s proportionate 4.6% share in savings, which is about $ 43.97 billion. Not enough enough to put a dent in the 2013 deficit, much less eliminate the federal income tax.

The analysis doesn’t quite end there, however. A little over a decade ago, a study by two Harvard Medical School professors found that if you include public employee health benefits and healthcare industry tax subsidies, tax expenditures were responsible for almost 60% of all healthcare spending in the U.S. I’m not sure what the proportion would be now, but if those numbers hold true, that amount of spending alone is enough to finance a national healthcare insurance program. As the study’s authors note, “we pay for national health insurance, but don’t get it.”

Furthermore, it’s also true that the cost differentials couldn’t be more stark. Both out-of-pocket and total spending for healthcare in virtually every other country in the world is far, far lower than in America. Healthcare administrative costs in the U.S. are almost double what they are in Canada. Medical bills contribute to roughly half of all bankruptcy filings in the U.S., and three-fourths of those filers had health insurance at the time they filed.

So there is no doubt that if we switched to a Canadian, German, or French-style health-care system, that Americans would have more money in their pockets, and the U.S. Government would be spending less money. But it’s pretty far-fetched to claim that we could eliminate the federal income tax by switching to a Canadian, German, or French-style health-care system. Universal healthcare saves everybody money, but it certainly doesn’t leave us tax-free.

Update: The numbers I used for federal spending as a percentage of gdp (4.6%) don’t include Social Security. But if you include all Social Security spending (which I’m not sure is accurate for our purposes here), you would still reach a similar result: there still isn’t enough in healthcare savings as a percentage of GDP to mop up the federal deficit (much less eliminate the federal income tax), if you assume a savings of 6.1% in healthcare spending as a percentage of GDP.

2:57pm | URL: https://tmblr.co/ZMMjnx13ANliA

(Notes: 39)