Foreign Social Insurance Taxes

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Most European countries have a much better funded social safety net that provides more services than the United States. Many of these social safety net services are paid for with payroll type taxes similar to the U.S. Social Security and Medicare taxes. The largest part of the difference in tax burden between Western European nations and the U.S. is this social insurance tax gap.

Conservatives are critical of the high tax burdens in these nations, either as a percentage of GDP or income or similar measures. But, these are not apples to apples comparisons. Both Western European nations and the United States has to provide health care and retirement support and similar services to its citizens. It just so happens that in Western Europe this happens on the government side of the ledge, while in the United States this happens largely through private companies.

While there are some areas where there is compelling evidence that, at least in the United States, government is a less efficient, more costly and less innovative way to provide services, this case has not been made very clearly in areas like health insurance and pension management, where administrative costs in the private sector tend to be very high (by one measure the excess of adminsitrative costs in the U.S. health care system over governmental systems alone is so great that it could pay for actual care for all the uninsured in the United States without putting any more money into the system).

Also, because many matters handled by employers through private companies in the U.S. are handled by the government in Western Europe, things Americans think of as "employee benefits" often transfer more seamlessly from job to job in Western Europe, and the downside of starting a new business from a benefits perspective is often much smaller in Western Europe, where small business employees receive those benefits, than in the United States, where small business employees must generally do without those benefits, making working with a small business riskier for both the employer and the employees.

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