Why is take home pay in the UK, so much less than other Western Countries?

mulronie

drc wrote: »

I just did a calculation for a PAYE salary of £50k (a just above average wage).

"Just" above average? Really?

Your assessment is lacking as it's only counting federal income taxes & FICA contributions. Most US states also demand a personal income tax (New York state is at least 6.45%, for instance, for all earnings over $40k).

On the other hand, US taxpayers get to offset all sorts of other goodies against their tax bill - mortgage payments and 401(k) contributions, for instance.

Even after you get to the respective take-home figures, you need to factor purchasing power to work out how much you can buy with what's left over.... so essentially it's near impossible to compare.

vivatifosi

I don't think anyone has posted Tax Freedom Day info, but it's an interesting comparison:
http://en.wikipedia.org/wiki/Tax_Freedom_Day#Tax_Freedom_Day_around_the_world

Pupnik

drc wrote: »

Yes of course but I was just surprised at how much tax and NI we pay in the UK. And then we pay even more tax in the form of council tax, VAT, car tax to name but a few. Where does it all go? How come the US and Germany can have a fairly well functioning society without high taxes? I know the Americans have to pay for health care separately but it can't be that much and presumably they get much better quality care as they can choose what to pay for and which insurance to go with?

It is actually the leading cause of bankruptcy in the United States by quite a large lead. I would much rather pay NI and not have to worry about whether I can afford to call an ambulance. I have many friends in the US who do not have health insurance because they can't afford it and they get extremely stressed out when they get sick and have to toss up whether it is worth the cost of visiting a GP - it is a terrible system for an advanced society.

As an example of costs, it can cost up to $100,000 for breast cancer treatment and $30,000 for a complicated childbirth so we are certainly not talking small change.

BobQ

drc wrote: »

Do you think? I don't think the NHS is that great and it is not completely free, you have to pay for a lot of things still, even after paying all that tax and NI.

Your calculations seem to be quite arbitrary and assumptions flawed.

Re the NHS, published figures show that the NHS costs about 8.5% of UK GDP. This comes largely for free as part of the tax you pay (according to ability to pay). In the US you have virtually no healthcare provided from your taxation unless you aren certain age groups. The cost of the US heathcare system is about 17% of GDP which most people have to pay out of after tax income.

You can argue that our heathcare is not as good as the US (but the counter argument is that it costs a lot less to provide). You can argue that we have to pay for a few things but this is nothing compared with the US, where heathcare insurance has loads of excesses and exclusions meaning that you pay to see the doctor and you pay the real cost of prescription medicine. You may have a problem with the NHS but you cannot ignore it in your calculation.

The problem with comparisions of this kind is that they compare apples and pears. There are many differences in all sorts of services. For example in parts of Europe and the US you pay for your rubbish to be collected like you pay for water, its not part of council tax. In the US prices seem cheap but then yoiu have all sorts of local sales taxes plus a tipping culture that expects 20%.

zagubov

BobQ wrote: »

Your calculations seem to be quite arbitrary and assumptions flawed.

Re the NHS, published figures show that the NHS costs about 8.5% of UK GDP. This comes largely for free as part of the tax you pay (according to ability to pay). In the US you have virtually no healthcare provided from your taxation unless you aren certain age groups. The cost of the US heathcare system is about 17% of GDP which most people have to pay out of after tax income.

You can argue that our heathcare is not as good as the US (but the counter argument is that it costs a lot less to provide). You can argue that we have to pay for a few things but this is nothing compared with the US, where heathcare insurance has loads of excesses and exclusions meaning that you pay to see the doctor and you pay the real cost of prescription medicine. You may have a problem with the NHS but you cannot ignore it in your calculation.

The problem with comparisions of this kind is that they compare apples and pears. There are many differences in all sorts of services. For example in parts of Europe and the US you pay for your rubbish to be collected like you pay for water, its not part of council tax. In the US prices seem cheap but then you have all sorts of local sales taxes plus a tipping culture that expects 20%.

I've also seen figures showing the US spends double on healthcare per capita what we do (I'm in the UK). The outcomes are worse ( we outlive them slightly).

Neither of us do as well as Singaporeans who outlive us both and spend about 3% of their GDP. Their system's a complex hybrid delivery model with elements of competition, compulsory savings, co-payments for treatments but free NHS-style delivery of "catastrophic illness" treatments. Not at either ideological extreme but it beats both US and UK systems on cost and outcomes. Our ideologies aren't serving us well.

grizzly1911

drc wrote: »

I know the Americans have to pay for health care separately but it can't be that much and presumably they get much better quality care as they can choose what to pay for and which insurance to go with?

I know other posters here have given pretty specific information on personal costs.

I saw a documentary that discussed US health insurance and it pointed out it is one of the big issues in looking/keeping/staying with employers if they provide some form of health insurance option. It can be a poison tie in in many cases.

One of the reasons they suggested that they spend twice as much on healthcare isn't directly in the clinical provision of care but in the administrative management of the insurance and claims systems.

BritAbroad

grizzly1911 wrote: »

I know other posters here have given pretty specific information on personal costs.

I saw a documentary that discussed US health insurance and it pointed out it is one of the big issues in looking/keeping/staying with employers if they provide some form of health insurance option. It can be a poison tie in in many cases.

One of the reasons they suggested that they spend twice as much on healthcare isn't directly in the clinical provision of care but in the administrative management of the insurance and claims systems.

So very true. US healthcare is a bureaucratic nightmare. It can take months to get a claim settled for a basic doctors' appointment, and you can have a serious bill just for collecting a prescription. Unless you've got substantial savings, any sort of medical problem can have a serious hit on the pocket.

People take jobs and stay in them for the healthcare benefits.

chewmylegoff

Leaving aside the fact that the OP compares completely different incomes (which has already been pointed out), looking at take home pay only considers direct taxation and ignores indirect taxation. Perhaps a better comparator is total tax revenue collected at all levels of government as a percentage of GDP.

Wikipedia (most reliable source ever, natch) says UK is 39%, Germany 41%, USA 27%.

The NHS budget is something like 8% of GDP and total healthcare spending in the UK is 10% of GDP (approx). The US allegedly spend 18% of GDP on healthcare but publicly funded spending on healthcare per capita is actually higher in the US than it is here, according to the guardian at least. If the US funded 80% of healthcare publicly (currently about 50%) as we do their tax rate would be much closer to ours, as a % of GDP.

chewmylegoff

zagubov wrote: »

I've also seen figures showing the US spends double on healthcare per capita what we do (I'm in the UK). The outcomes are worse ( we outlive them slightly).

Neither of us do as well as Singaporeans who outlive us both and spend about 3% of their GDP. Their system's a complex hybrid delivery model with elements of competition, compulsory savings, co-payments for treatments but free NHS-style delivery of "catastrophic illness" treatments. Not at either ideological extreme but it beats both US and UK systems on cost and outcomes. Our ideologies aren't serving us well.

Who gets included in the Singapore stats? 1/3 of their population consists of migrant workers, most unskilled, and I bet they aren't included in the healthcare outcomes stats (as they probably aren't elgible to access healthcare) which probably just considers Singaporean citizens (but obviously the productivity of migrant workers is included in the GDP stats). This may lead to spending looking lower than it really is.

Andy_L

Well the US managrs it by having less social provision and by being bankrupt. Germany manages it by having higher rates in other "non-salary based" taxes (eg corporation tax ~10% higher than the uk