Our Two Most Onerous Taxes: College Tuition And Healthcare Insurance

Zero Hedge ^ | 02/03/2014 | Charles Hugh-Smith

[SeekAndFind]

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.

[Little Ray]

College tuition is not a tax. And Health care shouldn’t be either.

[proxy_user]

We sent my two nieces to UConn for about $15K a year each. It was not that long ago.

[nascarnation]

Big Education channels Big Bucks to Democrats.
It’s not a tax but more like hidden subsidy.

[tsomer]

True, not a tax.

But since the Federal Government is now in charge of the student loan program, a college degree means indentured servitude 10 years beyond graduation.

[NEMDF]

It is not necessary to have loans to get a college degree. That is purely a choice that some people make. And, if they make that choice, they agreed to the terms of the loan, and presumably have greater earning power (not indentured servitude) for having elected to go that route.

[I want the USA back]

Both are redistribution of wealth, cleverly disguised as something beneficial.

[tsomer]

You’re right. It’s not impossible. It is very difficult though, especially if the kids family makes too much money, or belongs to the wrong demographic. Tuition costs are insane, even in tax-payer subsidized land-grant schools.

The student is left to choose: take 10 years working part time and low-wage jobs while attending night school, or get the loan and pay it all upfront. Most pick the latter, assuming their degree will win them a better salary.

But suppose the student lands in the middle of an economic collapse,say one that causes our currency to cave in value. Can that student declare bankruptcy if the creditor is the federal government?

[NEMDF]

The kid should not declare bankruptcy for any reason, least of all if the kid owes money to the taxpayers.

An alternative is to serve in the military and then use GI Bill benefits. Community college for the first two years can make the costs much more manageable. My son served four years in the USMC, after essentially one semester at the local university, then worked full time, completed his degree while married with an infant. In nine years after high school graduation, and without a penny of debt. It can be done.

Many students borrow the maximum they can get, using the money for a robust social life, and not concentrating on graduating and joining the workforce. Then they find that college becomes 5 or 6 years, the debt has skyrocketed, and/or the degree is not worth anything in the real world.

[CowboyJay]

"It is not necessary to have loans to get a college degree. That is purely a choice that some people make."

That might have been true back in the 1990s. It's not anymore.

There aren't too many public 4-yr schools left where the tuition and fees are less than $15,000/yr. Anyone trying to work their way through school making $10/hr won't ever start much less graduate. And good luck trying to live a "robust social life" on financial aid. Even with maxed-out pell grants and federal loans, there's not enough there for tuition/books/room/board. So even kids qualifying for full federal aid are working and having to take on additional private debt just to afford the basics.

True, kids can go on the GI Bill. But they have to weigh not being able to start their profession until their late twenties to early thirties against taking on debt. Unless, of course, you're black, native american, hispanic, or foreign, in which case you get a full ride in most states as long as you can pull a 2.5 GPA.

[tsomer]

Your son is exemplary and my hats off to you both.
No doubt he learned far more in the marines than he would have in a college.

The only thing is that right now I would not advise any one enlisting in the military while Obama is Commander in Chief.