It’s the beginning of a month, which means it’s time for Rich Belzer’s guest column. While other local monthly columnists appear to be well qualified in the subject matter that they present (based on italicized credentials at the end of their articles), Belzer, on the other hand, “lives in Bend” and fails to cite any authoritative sources in his column.
In his most recent March 6 column, Belzer tells us how America needs to catch up with the rest of the world (primarily Europe, “EU”) in the areas of free health care, free college and free preschool/child care. Before jumping on the Belzer bandwagon, please understand he totally ignores (as usual) the critically important other half of the story. In this case, it is who really pays for this.
In the EU, corporations pay for many of these “free” programs, but they get much of the money from their employees. How? If you are a skilled technician or professional and your identical job was located in Europe, you would be paid about 20% to 30% less than you would earn in the U.S. International salary surveys support this.
To compete globally, EU corporations use these savings from their employees to pay its portion of these social benefit obligations (health care, long-term care, social security, unemployment, education, etc.). The cost of these programs average approximately 20% to 30% of payroll costs (according to a study by PriceWaterhouse).
In addition, corporate income tax levels are higher in the EU compared to the U.S. by an average of 5% to 6% according to the Tax Foundation.
Employees also contribute directly to these social benefit programs via payroll deductions. According to PriceWaterhouse, employees contribute about 15% to 20% of their earnings these programs. This compares to 7.65% for FICA paid by U.S. employees but this excludes the cost of health insurance which in 2020 averaged about $7,000 annually for an employee with a family (according to the Bureau of Labor Statistics).
However, U.S. health care benefits are often paid by the employer at little or no cost to the employee. About 49% of the U.S. population is covered by employer group insurance according to the Kaiser Family Foundation.
If this isn’t enough, the EU also has a Value Added Tax (“VAT”), which is basically a national sales tax. It is added to the cost of just about everything purchased. It averages approximately 21% across Europe according to the Tax Foundation.
While corporations initially pay this tax on their purchases, they receive a credit for this tax when they sell their product and add the VAT tax to its price. Thus, EU corporations don’t pay this tax, rather it ’s paid by the final consumer … you. It is highly regressive.
Everyone pays the same rate regardless of income level and thus lower-income families pay a much higher proportion of their earnings for VAT. Imagine paying 21% more for everything you buy. This taxes helps finance these governments and pay for these “free programs.”
It doesn’t take rocket science to realize that a U.S. family is much better off than its European counterpart, especially if the family does not have either young children or college age children.
The big difference is that in America, you get to keep much more of your hard-earned money and make your own decisions where it should be spent. Does America need to do a better job in providing affordable, accessible health care, day care, and educational opportunities? Definitely. But Belzer’s model is not the one to emulate and based on his extensive international travels, he should know that. After all, people still come to America to get the best health care and education the world has to offer. We must be doing something right.
— Bill Rich is a CPA and recently retired CFO
of an international food and beverage manufacturer. He lives in Bend.
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