SiCKO shows a better way that need not bankrupt us

The first thought that comes to mind regarding health care in France and the UK as portrayed in Sicko is "oh my God their income taxes must be outrageous!"

Michael Moore artfully dodges this in the movie, focusing instead on the standard of living, disposable income, and the like.

He might as well have laid it all out, though, because it's not nearly as bad as you might imagine. In fact, it's a pretty good deal.

First of all, some examples of income taxes paid in the respective countries (all converted to US dollars):

Income tax on $50,000
US Canada UK France
$6945 $8144 $8156 $7915

Income tax on $100,000
US Canada UK France
$19,965 $20,347 $22,773 $23,899

So there's not that much difference, in the relative scheme of things.

Ironically, corporate tax rates are actually lower in France (33%) and the UK (28%) v. up to 39% but generally around 34% in the US. The capital gains tax in France is higher at 26% v. 15% in the U.S. Capital gains in the UK are taxed the same as income for individuals, with the first £8,800 exempt.

One thing that isn't made very clear in the movie is that the French system is a single-payer "universal health insurance" plan (as opposed to "socialized medicine"), much like if we opened up Medicare to everyone. Employers pay about 12% and employees pay about 1% for mandatory enrollment in "social security", which includes a retirement benefit plus universal health insurance that covers up to 70% of most medical costs (100% for maternity related costs). Supplemental insurance is available for another 8% to get virtually 100% coverage. Most of us pay about 15% for a retirement benefit (the wealthy only pay about 3% on much of their income) and limited medical coverage for those over the age of 65 and the disabled and the poor, many of whom are still unable to qualify.

The UK has "universal health care", which means health care is provided and paid for by the government. It is funded by combination of employer/employee payroll taxes in a complicated calculation that, best I can figure, works out to about 13% of earnings over a certain amount. This provides retirement benefits and free universal health care for all.

So, our hypothetical employee who earns $50,000 per year would pay the following in income tax and "social security" payroll deductions (employee and employer combined).

$50,000 income (USD)
  US France UK
Payroll Tax $7500 $10,500 $5760
Income Tax $6945 $7915 $8156
Total Taxes $14,445 $18,415 $13,916

In this example, the French employee is paying the extra 8% in supplemental insurance so 100% of their medical care is covered. With the basic plan that covers 70% of their health care costs, the payroll tax would only be $6500, and their total taxes would be $14,415. And keep in mind that the US employee (and/or his/her employer) still has to pay for health insurance.

But then there's the Value Added Tax (VAT), similar to sales tax but not exactly. The VAT in France is 19.6% and 5.5% on groceries. In the UK it's 17.5% and zero on groceries (books, children's clothing, and several other categories are also exempt in the UK, and others are taxed at a reduced rate).

So, some example VAT/sales taxes would be:

VAT, $200 worth of groceries
Tennessee France UK
$18.50 $11 $0

VAT, $300 worth of children's clothing
Tennessee France UK
$27.75 $58.80 $0

VAT, $500 TV
Tennessee France UK
$46.25 $98 $87.50

It's more complicated than this because VAT is included in the price and it's hard to understand how it's all calculated from manufacturer to consumer. Sales taxes in Canada range from 6% (Alberta) to 16.6% (Prince Edward Island) depending on the province. It's 14% in Ontario.

Going back to the previous example of combined employer and employee income and "social security" taxes, here's the same example with only the employee's portion, i.e. take-home pay after payroll deductions:

Take-home pay, $50,000 income (USD)
  US France UK
Payroll Tax $3750 $4500 $4352
Income Tax $6945 $7915 $8156
Take-home $39,305 $37,585 $37,492

So the British and the French take home a little less and pay a little more in VAT, but their health care is fully covered (the French employee is still paying the 8% for 100% coverage). The American employee still has to pay for health insurance (anywhere from $600 to $3000 per year in payroll deductions depending on the type of policy and company size), and most also pay additional state and local income taxes (for example, approx. $2500 in Georgia, $3000 in North Carolina, or $3900 in NYC).

So, yes, providing universal insurance coverage or universal health care for everyone would cost a little more in taxes, but not that much more. And think of the savings, not to mention peace of mind and security. It seems pretty clear that it would be better than the $2 trillion we spend now that leaves nearly 50 million people behind and gives false hope to the other 250 million who think they are insured until they file a claim.

NOTE: This is a somewhat simplified version, but it seems like the "huge tax increases" issue is a "myth" that needs to be debunked. And any help with the exact calculations for employer v. employee deductions in France would be appreciated because it's a little confusing, although these numbers should be pretty close. The UK numbers are from a tax calculator and the US numbers are from the IRS tables so there is a high degree of confidence in those.

Cross-posted from by the author