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Are taxes socialist?

        Money | Money & Ethics

President Barack Obama speaks at a campaign event in San Francisco in February 2012. See more pictures of Barack Obama.
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Critics of U.S. President Barack Obama and his economic policies often accuse him of being a "socialist." During the 2012 Republican presidential primaries, Newt Gingrich called the Obama presidency the first step toward "European socialism and secularism," while Mitt Romney said Obama takes his political inspiration from "the socialist democrats in Europe" [sources: Chafkin and Abcarian].

Taxes remain a central point of contention between Obama and his critics. The Obama administration fought unsuccessfully to let the Bush-era tax cuts expire at the end of 2010 for the highest income earners. The Republican-led opposition argued that higher taxes would further fuel runaway government spending on "entitlement" programs, namely Social Security, Medicare, Medicaid, unemployment benefits and welfare programs like food stamps and subsidized housing.

This relationship between taxes and social welfare programs drives the argument that taxes are essentially socialist. Let's make one thing clear, however: When Gingrich and Romney call Obama's policies "socialist," they're not equating them with the socialism of Soviet Russia or China under Chairman Mao. That brand of socialism is an economic system in which the state owns and controls "the means of production" (i.e. all industry) and there's no such thing as private property [source: Heilbroner]. Instead, Obama's critics equate his policies with the democratic socialism practiced in many Western European countries after World War II, including most Scandinavian countries, Germany, France, Italy, Spain, and to an extent, the United Kingdom [source: Nord].

The European brand of socialism works hand-in-hand with capitalism, free markets and private property. The major difference between Europe and America is that Europeans pay far higher taxes to help pay for a wide array of state-funded social services, including free universal health care, free education through college, state pensions, extensive unemployment benefits, more vacation days, and generous benefits for mothers and children [source: Beardsley].

How much do Europeans pay for such an extensive safety net? And how much does the federal government spend on its social programs? Find out on the next page.


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