Our Two Most Onerous Taxes: College Tuition and Healthcare Insurance

by Charles Hugh Smith, Of Two Minds

It is not coincidence that these two unofficial taxes–healthcare and college tuition–are soaring in cost, outpacing all other household expenses.

I have long argued that to make an apples-to-apples comparison of real tax rates in the U.S. and other equivalently developed advanced democracies, we have to include two enormous expenses that are funded by the central state in countries such as Denmark and France: healthcare and college tuition/fees.

In The Real-World Middle Class Tax Rate: 75% (July 5, 2012), I estimated that healthcare insurance (if paid out of gross income, as we self-employed workers do) in the U.S. is roughly equivalent to a 15% tax.

Now that the Orwellian-named Affordable Care Act (ACA) is raising costs and deductibles, the true cost of healthcare (a.k.a. sickcare, because being chronically sick is so darned profitable for the cartels) is more like 20% in America.

Correspondent Tim L. (whose daughter is attending a prestigious STEM–science, technology, engineering, math–university) recently called $40-$50,000 per year college tuition what it really is: a tax:

College tuition is just another tax. If you can afford to pay it, you have to. If you cannot, you do not. Anytime you have to pay more for something because you can, you are paying a tax. Between traditional taxes, the college tuition tax, and the health insurance tax (also paid only by those who can afford to), I figure this year and the next three I’m in a 100+% tax bracket.

Middle-class Scandinavians famously pay around 65% to 75% of their gross incomes in taxes, but these taxes fund national healthcare for all and nearly free college tuition and fees. Add $200,000 (four years of tuition/fees at $50,000/year) in tax to the already-high U.S. real tax rate, and the real tax rate for middle-class households exceeds 100% of gross income.

Since only those with significant savings can possibly afford to pay a $200,000 tuition tax, the average-income household is left with one choice: the debt-serfdom of student loans. This is the acme of a morally bankrupt system of higher education: you need a college degree to have any hope of succeeding in America, but the only way to get that degree is to enter debt servitude, with no guarantees of future income needed to pay off the debt.

It is not coincidence that these two unofficial taxes–healthcare and college tuition–are soaring in cost, outpacing all other household expenses. The only other household item that is skyrocketing is debt:

The two unofficial taxes–paid by debt, either student loans, or Federal deficits– have no restraints: if you can’t pay, then the upper-middle class taxpayers who are paying most of the Federal tax will, one way or another:

Meanwhile, guess what’s been flat to down for the past 40 years–yup, the earned income of the bottom 90%:

With an unofficial tax rate for healthcare and college tuition that makes Scandinavian countries look like low-tax havens, no wonder the middle class in America is vanishing like mist in Death Valley. The political class is now bleating about the erosion of the middle class and rising wealth inequality. There are two primary sources of rising inequality in America: the Federal Reserve and the higher-education and healthcare cartels that so generously fund the campaigns of the bleating politicos.

Want to Reduce Income/Wealth Inequality? Abolish the Engine of Inequality, the Federal Reserve (January 28, 2014)

Healthcare “Reform”: the State and Plutocracy Stripmine the Middle Class (Again) (November 9, 2009)

Higher education needn’t be a bloated, ineffective, obsolete, morally bankrupt cartel: we could have a Nearly Free University system that is available to all.

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3 replies on “Our Two Most Onerous Taxes: College Tuition and Healthcare Insurance”

  1. how could ANY tax be more egregious than the FICA taxes?
    4 generations of COMPLETELY UNNECESSARY and completely regressive FICA taxes have been used as a reason to over-tax the poor & Middle Class.  
    If the MiddleClass ever catches on to this complete scam, they’ll be in the streets with pitchforks, demanding that all Corporate Welfare be paid by a prior “CIACA” Tax.

  2. Understanding the limits that current tax beliefs impose on human development can be crucial in making necessary changes in our economic system. I encourage folk to investigate Modern Monetary Theory and Monetary Sovereignty. These schools of thought, based on the concept that money can be best considered as an information system, rather than based on a scarce commodity, make a credible case that US Federal taxes do not pay for any Federal programs. US Federal taxes only remove money from the money supply. They are NOT part of the money supply, M1, M2 nor M3. The mythunderstanding that US Federal tax revenues are necessary to pay for Federal programs reinforces the obsolete theory based on the neo-Malthusian paradigm of scarcity.
    The US Federal Govt/Treasury could create sufficient money to pay for every citizens health care and education without increasing anyone’s taxes. It could even do this without increasing the US deficit or debt by issuing US Treasury money and spending that directly into the economy instead of selling T-securities. This would avoid the another mythunderstanding that the US is going “broke” because of deficit or debt. Unlike other entities, private or public, the US is monetarily sovereign and is the ONLY source of US money. People are the only source of wealth, since they are the only source of productivity.
    Anticipating the counter-argument that this would create hyper-inflation…this is another canard based on obsolete thinking that serves to maintain income and wealth inequality. As evidence of this, consider the amount of money the US created through quantitative easing over the last couple of years and the corresponding amount of inflation; almost none.
    It’s past time to rethink our obsolete, man-made concepts of money creation and control, and develop models that serve the general Welfare, as called for in the US Constitution.

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