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Are taxes socialist?

        Money | Money & Ethics

Taxes for Social Programs

How much higher are taxes in socialist European countries? According to 2009 numbers, the overall tax burden (an average of both personal and corporate income tax rates) in Denmark is 48.2 percent of Gross Domestic Product (GDP), the total value of all goods and services produced annually. The overall tax burden in the United States is roughly half that amount: 24 percent. Incidentally, that's the third-lowest tax burden of the 34 member nations of the Organization for Economic Cooperation and Development (OECD) [source: Calabresi]. The tax burdens of France, Germany and the United Kingdom are 41.9 percent, 37 percent and 34.3 percent respectively.

So let's get back to the question: Are taxes socialist? That depends on whether you equate taxes with government spending on social programs. Consider this: In 2010, 66 cents of every dollar of tax revenue in the U.S. was spent on the social safety net [source: Appelbaum]. In 2011, 68 percent of government spending went to Social Security, Medicare/Medicaid/Children's Health Insurance Program (CHIP), tax credits and programs for the poor and elderly, and benefits for federal retirees and veterans [source: Center on Budget and Policy Priorities].

Those costs are only going to rise over the next 25 years as more and more baby boomers start collecting Social Security and drawing heavily from Medicare. So while it's interesting to ask whether taxes are socialist, the more pressing question might be, how are we going to continue to fund these proudly "American" social programs without raising taxes and/or drastically cutting spending in other areas?

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