Ovid (publius_ovidius) wrote,

  • Mood:

Why It's (Sometimes) OK to Pay More Taxes

Imagine, if you will, that there are only two countries. The first country, UCS (United Corporate States), values the market. The second country, EW (ElseWhere), tends to value people as much as the market. Neither value system is wrong, but let's imagine how they might view the price of a ham and cheese sandwich.

People in these countries live on three ham and cheese sandwiches a day, with equal proportions of bread, ham and cheese. The UCS sandwich costs:


And the EW sandwich costs:


So the EW sandwich unquestionably costs 25% more than the UCS sandwich. However, the EW cheese costs 100% more! At this point, the news networks in the UCS, all run by profit-making corporations, point out that YOU PAY TWICE AS MUCH FOR CHEESE! Of course, they go on to lament how difficult it is for people in EW to make ends meet and they find it very easy to find people in EW who lament that the price of cheese is so expensive because, since it's not a discretionary cost, they've no choice but to pay it.

But what's it really like in EW? Forget about the price of cheese for a moment and ask yourselves "what are people's lives like?" Well, as is pointed out in this simplistic example, the overall cost is only 25% higher, not 100% higher. And what do you get for that 25%? How about better protection when you're out of work? How about far, far less expensive healthcare? How about an inexpensive, and often free, university education (meaning that your long-term earnings are going to be higher)? In terms of overall quality of life, what do you get for the higher price of cheese?

The The 2010 Mercer Quality of Life Index lists the top 50 cities in the world. The majority of the top 25 are in Europe. You have to go all the way to number 31 (Honolulu) to hit a US city. Every year, International Living Magazine ranks 194 countries by their quality of life. Their 2010 index has 6 out of the top 10 countries in Europe (six countries do better than the USA, with France and their expensive cheese taxes topping the list for the fifth year in a row).

If you start doing quality of life research, you find out that, by most objective standards, the US does ok in terms of quality of life, but consistently loses out to other countries both in terms of average standard of living and is absolutely abysmal in terms of standard of living of the poor.

Why? Because the US is so focused on the price of cheese that it's not paying attention to how many people that sandwich can feed.

In other words, I don't want to hear "you pay higher taxes" spilling out of your mouth until you can tell me what life over here is really like. My wife, Leïla, went to university in France for seven years to earn a Master's Degree in French Law. She spent about €2,000 a year for that. Because she wanted better health care coverage, she spent €30 a month on that. If her parents were poor, she would have gone to university for free. Now tell me the average price of a Master's Degree in Law in the US. My ad-hoc research indicates that it's about ten times more expensive. And yes, my wife also earned a fat salary at the end of that. And her medical costs were covered. And if she wound up with no job, the safety net would take care of her.

Now are you worried about the price of cheese, or your quality of life? If you know nothing about economics (and if you think you do, let's talk about the cross-price elasticity of demand between health care and dead babies), know this: economics is about deciding the most efficient allocation of scarce resources. "Efficient" is often a value judgment, but to understand "allocation", you have to look at more than just taxes.

Update: Fixed some acronym typos that a few have pointed out.

Tags: economics, politics
  • Post a new comment


    Anonymous comments are disabled in this journal

    default userpic

    Your reply will be screened

    Your IP address will be recorded