News Socialist Health Care: Does it Work?

[Economist]

No. One of the reasons monopolies/oligopolies exist is because of high costs to entry into the market for a firm. There are natural barriers to entry in some markets (like astronomically high costs of getting started) that limit the amount of firms that can enter the market. Economists define an oligopolist market by the 4 firm ratio--the amount of the market that the largest 4 firms in the industry have a share of. If it is above 40% of the market then the market is considered oligopolist. Examine the market for health care. According to the GAO (govt accountability office)

-Blue Cross and Blue shield had over 50% of the market in 9 states (THAT IS JUST 1 FIRM!)

-In almost every state, the largest insurer in that state had an average of 43% of the market (again only 1 firm!)

It is true that some markets have high costs to entry, which produces less than perfect competition. However, there is a lot of debate in the economic community about whether government intervention can help in such markets. I bet if I researched some other industries which have high costs to entry, you may not be crying for government intervention in that particular industry. Competing with Boeing is also an industry which has high costs to entry. Maybe you think the US gov't should start making airplanes?

Economists might define an oligopoly by the 4 firm ratio, however, this tells you nothing about the welfare effects of such a firm. For example, you could have what economists call a natural monopoly, which means that you are a monopoly, but only because other firms can't compete with you. Such as, a firm who's prices are so low (because of low costs of production) that when additional firms enter the market, consumers choose to buy from the monopoly, which is actually beneficial to consumers. This is why economists use the Lerner Index (instead of the 4 firm ratio). The Lerner Index tells you how much a frim marks-up it's prices. You need to realize that being the only firm in a market does not mean you are bad for consumers. Monopolies and oligopolies can and do arise because they are really good at what they do.

You should also ask yourself how monopolies and oligopolies happen in the first place? Often times, market power is a result of government intervention. Part of the reason doctors have market power in the first place, is because the AMA severly limits the number of doctors. You might think that the AMA does this to keep you "safe" from "bad" doctors, but the truth is that the AMA does this precisely to gain market power so that current doctors will have higher salaries. There is also a large amount of market power in the pharmaceutical industry. Again, this happens because of regulation. The FDA makes it so that the average drug requires $1 billion just to get it approved. The result is that, small firms cannot compete because they can't afford this $1 billion, and now you've created oligopolies. You pointed out that high costs to entry result in monopolies/oligopolies. Often times, government regulation is the exact thing which increases costs of entry, which decreases market competition.

You preach freedom of choice and free markets for health care, but in reality WE ALREADY DON'T HAVE A FREE MARKET FOR HEALTH CARE! The insurance industry sure as hell is an oligopolist market! In almost every state 1 firm owns 40+% of the health insurance market! That completely blows out the 4-firm ratio litmus test that economists use to determine whether or not a market is run by an oligopoly.

Again, the 4 firm ration is not a litmus test when it comes to the effects oligopolies have on consumers. I agree that we already don't have a free market for health care. I think many of the current problems are probably a result of this government intervention, which is why I don't want us to make it even worse by getting government more involved.

If you really want to know why health care insurance is not a free market, then I suggest you listen to the podcast below:
http://www.econtalk.org/archives/2006/05/the_economics_o_3.html

You've answered your own question. Of course a perfectly inelastic demand doesn't exist. Even health care demand is not perfectly inelastic, however it is pretty damn inelastic. Once you go beyond a certain point for charging for a MRI, no one will demand it.

Listen, elasticity of demand is not the only thing you must consider. Yes, it is true that MRIs might be fairly inelastic. However, so are many other things that do not have extremely high prices. Food and cigarettes are not that high priced even though they are fairly inelastic. On the other hand, many things have high prices even though they are fairly elastic, such as cars. One thing I think you're forgetting to bring into your analysis, is the supply side of things. The point is, firms compete for costumers by lowering their prices. Therefore, MRI prices may not have much to do with the elasticity of demand.

So you claim the law of diminishing utility is not all to be considered here, but then go on to talk about consumer demand behaviors? That doesn't make sense, seeing as demand is defined by marginal utility! This website actually explains how demand is derived through marginal utility pretty well:

I was trying to point out that just because people have diminishing marginal utility, does not mean that they won't consume more than is available. Economists assume that people have diminishing marginal utility for all goods. However, economists also know that people will often overconsume when prices are artificially low, just as many economists have pointed out even in health care and gasoline consumption.

Do you really think that just because people have diminishing marginal utility, means they won't consume a lot of something? For example, if steak dinners and BMWs were free, I wouldn't consume infinity of them, but I would consume a lot more than I currently am. I'd probably have like 5 BMWs and eat steak 2 - 3 times a week. People rarely stop consuming something because of diminishing marginal utility, rather, their budget constraint usually kicks in way before that which is why they tend to limit their consumption.

You are comparing apples to oranges. The food market is not an oligopolist market! In fact, many times in basic econ the food market is used as an example of a type of market that is almost perfect competition! So according to you " the most important things" should be handled by the free market? Okay so how about national defense? Would you want private companies in charge of all of our nuclear weapons, tanks, and stealth bombers? The problem with health care in America is the fact that it is run by an oligopoly. Oligopolies and monopolies ALWAYS lead to inefficiencies, i.e. market faliures.

You're right that the food market is fairly free market, however in economics classes it is also used as a great example of an industry that has many-free trade barriers because of subsidies. Imagine how good it could be if we made it even more free market by eliminating government intervention?

In my opinion, national defense is a trickier issue than health care when it comes to government intervention. Maybe this is something that cannot be handled by markets, and therefore maybe we need government running it. However, maybe we don't need government as much as previously thought. Even the current US military relies heavily on private industries. Many private industries are hired by the government to build tanks, weapons, and stealth bombers. There are even a large number of private military companies that provide military services (as I'm sure most people are aware given the recent media attention given to Blackwater). Furthermore, the elimination of the draft was hugely studied by economists (in fact, the elimination of the draft happened largely because of these economists). Their solution was that the US government should have to increase pay if they want more soldiers, which essentially made this industry function like a private labor market.

Again, monopolies and ologopolies do not always lead to market failures (see my first couple paragraphs). But you're right that they probably usually do lead to inefficiencies (i.e. market failures). However, once again we need to understand how monopolies and oligopolies often form, which is precisely because of regulation and government intervention. And even more importantly, what can government do about these market failures? You're forgetting that often times, government does not improve the problem, and usually just exaggerates it or has other harmful unintended consequences. You want to talk about market failures, well, what about government failures? You're also forgetting that these market failures can often be solved by markets. These inefficiencies are often tackled by other companies in their quest to make a profit.

What is there to be confused about? You are the competitive market guy for health care. A competitive market tends toward equilibrium, this is one of the fundamental laws of economics. But a competitive equilibrium leads to Pareto Optimal efficiency. This however, does not imply at all that the most efficient allocations of resources are the most equitable. You still haven't answered my question. With a free market system for health care is it socially acceptable that thousands and even millions of people may be left without proper access to health care or insurance? A free market type of system for health care inherently leads to some people who will be shut out from health care even when resources are allocated most efficiently (i.e. equilibrium). So once again is this acceptable to you? If you still find this acceptable then tell me this, would you want someone who falls between the cracks in a competitive health care market and is uninsured running around with one of these diseases (see below) and avoiding hospitals and doctors because they had no insurance or couldn't afford it?

I think you're the one who is actually forgetting the fundamental laws of economics. All societies have to allocate scarce resources. In fact, this is exactly what socialism and capitalism are, different ways for society to solve the economic problem (meaning that people have unlimited wants and needs, but limited resources). Let me throw some of the same questions back at you. Is it fair that some people need to wait for 1 year to get a very important medical procedure? Is it fair that some people die waiting for these procedures? Is it fair that some people cannot pay a doctor for his/her services because it is illegal? Is it fair that some people live in countries in which they cannot get private health insurance because it is illegal?

You mentioned that " a free market type of system for health care inherently leads to some people who will be shut out from health care even when resources are allocated most efficiently (i.e. equilibrium)." Socialism does not solve this problem. The problem which I pointed out above is that there are a limited amount of resources to go around, which is why we try to allocate them most efficiently (this is what the study of economics is all about). So which way allocates these resources best? In my opinion, that's capitalism.

Besides, many people are not dying because they can't afford health care in the US. People still go to the hospital and get treated, even in this "greedy, evil system." Hospitals have to treat them, even if they can't pay the bills. And yeah, some people do go bankrupt because of health care reasons. However, I still think it's better than a socialist approach.

The uninsured put the general public (insured and uninsured) at huge risk. All its takes is one uninsured person going around with a multi resistant strain of TB to spread it to 100's of people because they didn't have access to a doctor or couldn't afford to seek medical care. But this is the risk you run with a free market system of health care.

Again, see my comments above.

Here's another interesting article written in New York times by a prominent Harvard economist: http://www.nytimes.com/2007/11/04/business/04view.html?ref=business

If you're interested in why capitalism works pretty well, be sure to check out these educational links below:
http://www.econlib.org/library/Essays/hykKnw1.html
http://www.econlib.org/

 

[Moridin]

I think you're the one who is actually forgetting the fundamental laws of economics. All societies have to allocate scarce resources. In fact, this is exactly what socialism and capitalism are, different ways for society to solve the economic problem

When it comes to health care, capitalism rewards the privileged and punishes the poor.

Is it fair that some people need to wait for 1 year to get a very important medical procedure? Is it fair that some people die waiting for these procedures? Is it fair that some people cannot pay a doctor for his/her services because it is illegal? Is it fair that some people live in countries in which they cannot get private health insurance because it is illegal?

Actually, the US health care system has long waiting periods as well, mostly due to being understaffed and having too few resources. Since the rich can afford expensive private health care, why shouldn't the public hospitals be restricted to underprivileged only? Then rich people can give some back to society and poor people can get help.

Besides, many people are not dying because they can't afford health care in the US. People still go to the hospital and get treated, even in this "greedy, evil system." Hospitals have to treat them, even if they can't pay the bills. And yeah, some people do go bankrupt because of health care reasons. However, I still think it's better than a socialist approach.

With the public health system being so desperately underfunded (which can be solved by allocating funds away from war and weapon industry, so all the arguments from limited funds are pure nonsense. The US has spent so much money on irrelevant things that could have been spent of health care.), underprivileged people do not know this. They have been badly treated by capitalist public health for decades. "Provided that a person with poor health, lack of education and lack of insurance understands that. Provided that the person understands that it is crucial to take the medication for years. Provided that the person is not being forced to sell the medicine for cash to buy food or rent to survive instead of taking them. I think that it takes public health imperatives both in education and a less hostile environment." (earlier post on the same subject).

 

[Economist]

Actually, the US health care system has long waiting periods as well, mostly due to being understaffed and having too few resources.

So you think the waiting times are comparable huh?

"Provided that a person with poor health, lack of education and lack of insurance understands that. Provided that the person understands that it is crucial to take the medication for years. Provided that the person is not being forced to sell the medicine for cash to buy food or rent to survive instead of taking them. I think that it takes public health imperatives both in education and a less hostile environment." (earlier post on the same subject).

How insulting that you seem to think being poor means your stupid. By the way, if poor people didn't know this, then hospitals wouldn't spend billions of dollars a year treating people who can't afford to pay them.

 

[Moridin]

So you think the waiting times are comparable huh?

Waiting times and information beats no health care at all. Also, more money and resources means less waiting time. If the US focuses more on preventative health, it wouldn't need to spend trillions of dollars on late-age cancer and heart/lung-operations.

How insulting that you seem to think being poor means your stupid. By the way, if poor people didn't know this, then hospitals wouldn't spend billions of dollars a year treating people who can't afford to pay them.

No, but underprivileged means lack of information and a lack of access to public health. It has been empirically shown that those money is clearly not enough.

 

[Economist]

http://www.econtalk.org/archives/2007/11/arnold_kling_on.html

Iteresting podcast on the topic of health care. I just started listening as I am posting this.

 

[drankin]

The poor in this country have many forms of health care available to them. I know, I've had to use it for my family when I was a young adult. It worked, and when my son needed to see a doctor in an emergency, we didn't have to wait in line.

I think health care will always be an "issue" for Americans but I really don't see it as a "problem" for Americans. Unless, of course, we get the government more and more involved.

If health care became free, who would be our doctors? Why would someone go to school for 8-12 years if he were just to get a low paying government job. Those who did, would less likely be quality physicians. The quality guys would end up going to law school instead. Like we need more lawyers in this country.

 

[huckmank]

You want to know where I come from?? I grew up dirt poor, broken home, about as dysfunctional a life one could have, lived on the streets and homeless shelters as a young adult and one day decided to take care of myself. Noone owes me a damn thing because of my situation. It's all me, I own it. I learned how to work, something I was never actually taught never having a father around, put myself thru school when I figured out flipping burgers, moving furniture, and whatever else I subjected myself too wasn't making the best use of my time. And damn it, I'm not well off, but I'm solid middle class now and I live in a country where anyone can do what I did if they get off there butt and quit whining about how aweful their situation is.

Tell me, what do you do when some homeless guy comes up to you asks you for money on the street?

If you went to a public university, took out subsidized loans or accepted grants or scholarships then no, you absolutely did not get where you are on your own.

I have a similar story to yours. I came from a poor household, worked service industry directly after high school and into my 20s and have lived in my car. But I decided to change all that one day and enrolled in a local community college. I busted my ass to do 60 credits in a year and a half with a 3.95 gpa and transferred into a top 10 engineering school where my GPA is a 4.0. So if I wanted to think I was hot **** and owed nothing to no-one, maybe I could.

Then I remember that 80% of the cost of CC is payed for by taxpayers, not me. And that I was given $5,000 in grants, fully paying for my portion of tuition plus some. In addition, the government gave me loans which I don't have to pay interest on until I'm employed. My engineering department payed for my tuition the first semester and grants payed for half the second.

So I hope you went to a private university (hell, private education all your life) and payed cash or took out standard loans to pay for you tuition. Otherwise you're full of **** and you owe your accomplishments in part to a society that helps its underprivileged.

 

[Economist]

If you went to a public university, took out subsidized loans or accepted grants or scholarships then no, you absolutely did not get where you are on your own.

I have a similar story to yours. I came from a poor household, worked service industry directly after high school and into my 20s and have lived in my car. But I decided to change all that one day and enrolled in a local community college. I busted my ass to do 60 credits in a year and a half with a 3.95 gpa and transferred into a top 10 engineering school where my GPA is a 4.0. So if I wanted to think I was hot **** and owed nothing to no-one, maybe I could.

Then I remember that 80% of the cost of CC is payed for by taxpayers, not me. And that I was given $5,000 in grants, fully paying for my portion of tuition plus some. In addition, the government gave me loans which I don't have to pay interest on until I'm employed. My engineering department payed for my tuition the first semester and grants payed for half the second.

So I hope you went to a private university (hell, private education all your life) and payed cash or took out standard loans to pay for you tuition. Otherwise you're full of **** and you owe your accomplishments in part to a society that helps its underprivileged.

Well, you can benefit from something and still criticize and/or disagree with it.

One thing you might be interested to know, is that higher education in the US tends to redistribute wealth from poor to rich (so does social security but that's another story). If you are a little confused about how this could be, just like I was when I first heard this, then think about it this way. Many low income people pay taxes that contribute to higher education in the US, however, the people who's children are most likely to get into and go to college are not low income people, in fact wealthy people send their children to college at much higher rates.

 

[huckmank]

Well, you can benefit from something and still criticize and/or disagree with it.

Sure can, but if you take free money from the government and then ***** about others doing the same, you're what we call a hypocrite.

One thing you might be interested to know, is that higher education in the US tends to redistribute wealth from poor to rich (so does social security but that's another story). If you are a little confused about how this could be, just like I was when I first heard this, then think about it this way. Many low income people pay taxes that contribute to higher education in the US, however, the people who's children are most likely to get into and go to college are not low income people, in fact wealthy people send their children to college at much higher rates.

Back up your statement with figures, not just a priori arguments. The poor also pay a lower tax rate. I'd be interested to see if the ratio of taxes paid by the wealthy vs. the poor outstrips the ratio of state university enrollment of the wealthy vs. poor. I doubt very highly that it does.

Regardless, federal grants are need-based and many scholarships are more easily obtained by minorities or those of limited means.

 

[drankin]

If you went to a public university, took out subsidized loans or accepted grants or scholarships then no, you absolutely did not get where you are on your own.

I have a similar story to yours. I came from a poor household, worked service industry directly after high school and into my 20s and have lived in my car. But I decided to change all that one day and enrolled in a local community college. I busted my ass to do 60 credits in a year and a half with a 3.95 gpa and transferred into a top 10 engineering school where my GPA is a 4.0. So if I wanted to think I was hot **** and owed nothing to no-one, maybe I could.

Then I remember that 80% of the cost of CC is payed for by taxpayers, not me. And that I was given $5,000 in grants, fully paying for my portion of tuition plus some. In addition, the government gave me loans which I don't have to pay interest on until I'm employed. My engineering department payed for my tuition the first semester and grants payed for half the second.

So I hope you went to a private university (hell, private education all your life) and payed cash or took out standard loans to pay for you tuition. Otherwise you're full of **** and you owe your accomplishments in part to a society that helps its underprivileged.

Of course I relied on the "society" to go to school and to get on my feet. I don't know what you are arguing. My point is anyone "underprivilaged" can, the means to do it is available. For someone not to take advantage of what is available is a waste. The deeper reason as to why many do not is not because they don't know it's availabe, it's because they don't to put forward the effort and do it. You don't get an education for free even if you don't pay a dime for it, you work for it. IMO, most people who complain about how unfair it is that they are poor and underprivilaged are the same people that think society owes them sustenence because they are breathing.

 

[Economist]

Sure can, but if you take free money from the government and then ***** about others doing the same, you're what we call a hypocrite.

I'm just saying, if someone is offered something cheap/free, then they're probably going to take it. Besides, if someone is a taxpayer, they might disagree with the tax, but since they're paying for it anyone, they might as well use the resource. Or sometimes they don't have much of the choice, like maybe someone can't afford to send their kid to a private school after taxes, but they would prefer a system in which they were taxed less and public schools were not available.

Back up your statement with figures, not just a priori arguments. The poor also pay a lower tax rate. I'd be interested to see if the ratio of taxes paid by the wealthy vs. the poor outstrips the ratio of state university enrollment of the wealthy vs. poor. I doubt very highly that it does.

Regardless, federal grants are need-based and many scholarships are more easily obtained by minorities or those of limited means.

https://www.amazon.com/dp/B0006C0DBI/?tag=pfamazon01-20

I've heard difference people making this claim at different times, and I'm not trying to say it's absolutely true (although I currently believe it). One of the main reasons I wanted to bring it up, was not because I expected people to agree with me (as I realize it'd take more pursuasion them some guy you don't know on a forum). But rather to show people that their preconceived notions about various gov't programs may be incorrect. It's not completely clear cut that public higher education benefits the poor more than it benefits the rich (it may even work in the opposite direction). Furthermore, other programs (like Social Security) tend to redistribute wealth from poor to rich, although this is not what these programs were set up to do.

By the way, I realize that federal grants are often need based, but that doesn't completely matter in the argument I was making. The actual cost of sending a kid to a public university is still fairly high (I've heard that it maybe as high as $40K - $50K a year at some schools). The reason it only costs a student a small fraction of that is because the tax payers foot the bill on the rest. So when you go to public universities which are fairly highly ranked, you will notice that many students come from rich families and pay in state tuition (which is really a bargain). On average, who do you think has an easier time getting into a strong public school? Someone who comes from a rich family or a poor family?

Also, the poor probably pay more taxes than you think. When you take into account all taxes (not just income taxes) you'll find that taxes are fairly substantial for the poor. Things like sales taxes have been said to harm the poor much more than the rich. Furthermore, marginal tax rates can be very high for poor people in some cases.

 

[turbo]

Also, the poor probably pay more taxes than you think. When you take into account all taxes (not just income taxes) you'll find that taxes are fairly substantial for the poor. Things like sales taxes have been said to harm the poor much more than the rich. Furthermore, marginal tax rates can be very high for poor people in some cases.

This is a point that many people miss. Sales taxes, taxes on gasoline, diesel, heating oil, clothing and non-food essentials like toilet paper, cleaning supplies, etc simply cannot be escaped. People with substantial incomes often don't have to pay more taxes for these essentials than poor people. The impact of regressive taxation is felt keenly here in Maine, where our northern climate and rural-type population densities make any increase in the prices (or taxes) on fuel oil (for heat) or gasoline and diesel (for commutes, or for forestry/agriculture) very painful. These increases cannot easily be evaded and they hit the bottom line directly.

 

[Economist]

This is a point that many people miss. Sales taxes, taxes on gasoline, diesel, heating oil, clothing and non-food essentials like toilet paper, cleaning supplies, etc simply cannot be escaped. People with substantial incomes often don't have to pay more taxes for these essentials than poor people. The impact of regressive taxation is felt keenly here in Maine, where our northern climate and rural-type population densities make any increase in the prices (or taxes) on fuel oil (for heat) or gasoline and diesel (for commutes, or for forestry/agriculture) very painful. These increases cannot easily be evaded and they hit the bottom line directly.

Exactly! That's what I was trying to say, that many taxes hit the poor a lot harder than the rich. This is why I've heard economists say, "People think we have a progressive tax system, but when you look at ALL taxes, you'll find that we actually have a regressive tax system."

 

[mheslep]

You have posted links to right-wing sites that support your skewed view with no reliable statistics.

Right-wing sites? The NY Times? The Economist?

 

[mheslep]

Things like sales taxes have been said to harm the poor much more than the rich. Furthermore, marginal tax rates can be very high for poor people in some cases...

This is a point that many people miss. Sales taxes, taxes on gasoline, diesel, heating oil, clothing and non-food essentials like toilet paper, cleaning supplies, etc simply cannot be escaped...

Guys - don't forget: Its the lotteries, the lotteries, the lotteries which are overwhelmingly paid by the poor.

 

[Economist]

Right-wing sites? The NY Times? The Economist?

For real, how can someone say these are right-wing? Especially the NY Times.

Guys - don't forget: Its the lotteries, the lotteries, the lotteries which are overwhelmingly paid by the poor.

LOL. Yeah, that's true too

 

[wildman]

Also, the poor probably pay more taxes than you think. When you take into account all taxes (not just income taxes) you'll find that taxes are fairly substantial for the poor. Things like sales taxes have been said to harm the poor much more than the rich. Furthermore, marginal tax rates can be very high for poor people in some cases.

In the US, the poor have to pay a 15% payroll tax off the top even if a person only makes a few dollars. This is an atrocious tax on the poor especially since it is only on the first $100,000 a person makes.

 

[drankin]

In the US, the poor have to pay a 15% payroll tax off the top even if a person only makes a few dollars. This is an atrocious tax on the poor especially since it is only on the first $100,000 a person makes.

I don't like paying taxes anymore than the next guy but to what country might you comparing our 15% tax to?

 

[ShawnD]

I don't like paying taxes anymore than the next guy but to what country might you comparing our 15% tax to?

Canada might be a good comparison.

USA tax from $0 - $7,825 is 10%
Canada tax from $0 - $9,600 is 0%

USA tax from $7,551 – $30,650 is 15%
Canada from $9,600 - $37,178 is 15%

USA from $30,651 – $74,200 is 25%
Canada from $37,178 - $74,357 is 22%

USA from $74,201 – $154,800 is 28%
Canada from $74,357 - $120,887 is 26%

USA from $154,801 – $336,550 is 33%
Canada at "over $120,887" is 29%

USA highest bracket (over 336k) is 35%
Canada highest bracket (over 120k) is 29%
USA tax
Canada Tax

edit: don't worry about adjusting for currency either. For the past month or so, Canadian dollars are worth more than American dollars.

edit again: I also found this article comparing the two countries. I haven't read it yet, but it looks interesting Canadian and American economies compared

edit: another link from that comparison article: Canadian and American health care compared

 

[D H]

In the US, the poor have to pay a 15% payroll tax off the top even if a person only makes a few dollars. This is an atrocious tax on the poor especially since it is only on the first $100,000 a person makes.

Fine. Let's eliminate Social Security.

This post is incorrect for many reasons. First, the employees only pay half of the tax. The employer pays the other half. Suppose the tax were eliminated. Most employers would not give their employees a 7.65% pay raise as a result. Calling the tax a 15% tax on the employees is a misdirection at best. Another misdirection: The Medicare part of the tax (1.45%) has no upper limit.

Social security is supposedly similar to a retirement account. At least that is what the silly annual letter than I get from the SSA implies. In actuality it is a pay-as-you-go Ponzi scheme. Let's call it what it is: a wasteful, regressive welfare program that transfers wealth from the working middle class to the elderly who didn't have the wherewithall to save while they were working.

 

[mheslep]

Canada might be a good comparison.

Doesn't Canada have a big VAT on top of that income tax?

 

[ShawnD]

I'm not familiar with that term. Can you define it?

 

[mheslep]

i.e. a sales tax
http://en.wikipedia.org/wiki/Value_Added_Tax

 

[ShawnD]

6%
It will be 5% on January 1.

 

[mheslep]

Ok, since the US has no federal VAT, then for your comparisons posted above you should add 6% (5%) to all the Canadian figures?
...
USA tax from $7,551 – $30,650 is 15%
Canada from $9,600 - $37,178 is 21%(20%)
and so on

 

[Evo]

In the US, the poor have to pay a 15% payroll tax off the top even if a person only makes a few dollars. This is an atrocious tax on the poor especially since it is only on the first $100,000 a person makes.

I have never seen this and I am looking at a paystub. What exactly are you referring to?

Ah, I see from DH's post it's Social Security. Social Security is 6.2%

 

[BobG]

In the US, the poor have to pay a 15% payroll tax off the top even if a person only makes a few dollars. This is an atrocious tax on the poor especially since it is only on the first $100,000 a person makes.

I have never seen this and I am looking at a paystub. What exactly are you referring to?

Ah, I see from DH's post it's Social Security. Social Security is 6.2%

I think he's referring to the combination of SS tax, Medicare, and income tax or the entire SS tax including the part employers pay (a self-employed person has to pay the entire SS tax, although half is deducted from your income as an employment expense). A single non-self employed person might come close to 15%, but I think the end tax after deductions would be quite a bit less.

Fine. Let's eliminate Social Security.

This post is incorrect for many reasons. First, the employees only pay half of the tax. The employer pays the other half. Suppose the tax were eliminated. Most employers would not give their employees a 7.65% pay raise as a result. Calling the tax a 15% tax on the employees is a misdirection at best. Another misdirection: The Medicare part of the tax (1.45%) has no upper limit.

Social security is supposedly similar to a retirement account. At least that is what the silly annual letter than I get from the SSA implies. In actuality it is a pay-as-you-go Ponzi scheme. Let's call it what it is: a wasteful, regressive welfare program that transfers wealth from the working middle class to the elderly who didn't have the wherewithall to save while they were working.

I can't say that's a totally inaccurate statement, but part of the issue is that the 'victims' forced by law to pay into the scheme aren't willing to write off everything they've paid into Social Security as an expensive lesson learned. If the government isn't going to fulfill its promises to its citizens, then every Congressman from the 30's to the present should lose their Congressional pension plus spend at least a few months in prison. There's probably not much hope that Congress would vote for that solution.

Ok, since the US has no federal VAT, then for your comparisons posted above you should add 6% (5%) to all the Canadian figures?
...
USA tax from $7,551 – $30,650 is 15%
Canada from $9,600 - $37,178 is 21%(20%)
and so on

I don't think you could directly apply a sales tax to income unless all workers are spending 100% of their income. Unless buying on credit is as common in Canada as it is in the US, in which case maybe you're not adding enough to the tax.

 

[ShawnD]

Ok, since the US has no federal VAT, then for your comparisons posted above you should add 6% (5%) to all the Canadian figures?
...
USA tax from $7,551 – $30,650 is 15%
Canada from $9,600 - $37,178 is 21%(20%)
and so on

Sort of yes and sort of no. Sales tax does not apply to rent, medical, dental, food, lawyer fees, or financial services. These are what make up the bulk of peoples' expenses.
Example:
I start with 100% income
20% taken in taxes
35% goes to rent
5% for food (I don't eat much)
7% for insurance (financial service, no tax)
33% left over for spending (or saving, which will be spent eventually)

0.33 * 6% tax = ~2% tax (on total income)

Due to the exemptions, GST is a progressive tax. Yes poor people spend a greater percentage of their pay checks, but they spend a much greater percentage of it on things that are tax-exempt (rent, food, dental, etc).

 

[mheslep]

0.33 * 6% tax = ~2% tax (on total income)

Fair enough for the daily expenses. However, Id say that changes if you include the major purchases of a car (lots of poor as we're defining them here still can buy a cheap car) and possibly even a low cost home / condo / duplex.

 

[Economist]

Check this short blog article out. Seriously, it probably takes like 1 minute to read.

http://gregmankiw.blogspot.com/2007/11/where-would-you-rather-be-sick.html