K-12 Tax & Spending Climate: US Workers Are Highly Taxed If You Count Premiums

Matt Bruenig:

But formal labor taxes are limited because they omit “non-tax compulsory payments” (NTCPs). NTCPs are payments workers and employers are legally compelled to pay to private parties. NTCPs are no different from taxes except that NTCPs are made to private corporations like health insurance companies rather than to the government.

Occasionally the OECD publishes information that combines formal taxes and NTCPs together in order to allow researchers to compare “compulsory payment rates” across countries. The last time they did this was in 2018. The 2018 OECD publication acknowledges that employer health insurance premiums in the United States are NTCPs because they are mandated under Obamacare’s employer and individual mandates. But the publication nevertheless excludes employer health premiums from its US NTCP calculations because the authors say these premiums cannot be modelled to their satisfaction.

The apparent reason these mandated premiums are incompatible with the OECD’s Taxing Wages model is that they are open-ended payments: employers and employees have to buy private insurance regardless of its cost. If the mandated premiums were set by law as a fixed sum per worker or percentage of payroll as in other countries, then they could be included in the OECD’s figures.