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Daily Journal

Vive la Difference!

Sep. 27th, 2011
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RALEIGH – Europe is the Left’s model for how to reorganize modern society in a way that tempers human foibles, increases the power of government, and redistributes income from the undeserving rich to the pathetic poor.

Except when it isn’t.

Right now, with the grand European experiment in social democracy, welfare statism, and monetary union teetering on the brink of insolvency, American liberals are noticeably less inclined to argue that the United States would be better off adopting the European model. Never fear, however: assuming that European leaders find some way to muddle through the current mess, the Left will rediscover the Continent’s many political charms.

In the past, I’ve done my best French impression by urging a nuanced view of the differences between America and Europe. The two region’s respective histories help to explain their varying conceptions of the proper role of coercion within societies (Europeans want more), the proper use of coercion against external enemies (Europeans want less), and the proper balance between national sovereignty and international markets (Europeans don’t quite know what they want here). But these broad generalizations don't always translate into the public-policy choices you'd expect.

On domestic policy, for example, many Americans assume that because Europe is generally friendly to government planning, their education and health care systems must be inherently more centralized, bureaucratized, and monopolized by government. The reality is more complex than that.

While all developed countries feature extensive government-run education systems, America’s is in many ways the least friendly to market principles. America spends more tax dollars per pupil on education than virtually all the countries of Europe and East Asia. And America has a lower share of its students in schools of choice – both private schools and independent (chartered) public schools – than many of its competitors do.

As for health care, while the socialized medicine of Great Britain and the coercive public-private arrangements of many Continental nations would not be to the liking of any freedom-loving American, in other ways some European systems are actually better for market competition. They have more limits on third-party payments – that is, the out-of-pocket cost to patients is higher, thus promoting more efficient consumption of medical care.

Such particulars aside, however, one might say that in general Europeans are more comfortable with an expansive government role in their lives than Americans are. But you may still find some aspects of European governance surprising.

For example, while President Obama has lately been trying to shift the blame for America’s economic stagnation from his own anti-growth policies to the social irresponsibility of undertaxed “millionaires and billionaires,” it is not the case that his favored European models tax corporations or the wealthy at higher rates than America does.

According to the latest comparable data from the Organization for Economic Cooperation and Development, the wealthiest 10 percent of Americans earn about 34 percent of the country’s income and pay 45 percent of the country’s income and payroll taxes. That’s what the Left calls “progressive” and I call “punitive.”

By this measure, Europe’s tax systems are far less progressive/punitive. In Britain, for instance, the share of income claimed by the top 10 percent is about the same – 33 percent – but their share of British taxes is lower at 39 percent. In France, the wealthiest 10 percent receive 26 percent of the income and pay 28 percent of the taxes. For the 24 OECD nations as a whole – including Japan, Australia, and Canada – the relative shares are 28 percent of income and 32 percent of taxes.

Sure, the income distribution is different in America, though the difference isn’t as stark as some people think. Would you have guessed that the share of income received by wealthy Americans is only six percentage points higher than the share of income received by wealthy Europeans?

When it comes to stealing – excuse me, taxing – the earnings of the wealthy, however, America is no slouch.

Hood is president of the John Locke Foundation.