the full bill
There is a version of the American tax debate that almost everyone has heard. It goes like this: we are among the most taxed people in the developed world, and we have little to show for it. Government is bloated, inefficient, and consuming an ever-larger share of what we earn.
The data does not support this version. The United States collects taxes at all levels of government equal to about 27 percent of GDP — lower than every other OECD peer, and seven points below the 34 percent average of comparable nations. We are, by the actual numbers, one of the least-taxed developed economies on earth.
But the debate has it backwards in a more important way than that. The question is not whether Americans pay too much in taxes. The question is what Americans are paying in total — taxes plus the out-of-pocket costs they absorb privately for things that, in every peer nation, are funded collectively. When you add those up, the picture changes entirely. The American household is not undertaxed. It is paying an enormous bill through a different set of line items, with worse outcomes, and less certainty about when the bill arrives.
What the Tax Number Hides
The 27 percent figure is real. But it describes only one part of what Americans pay to sustain the systems that peer nations fund through their governments. Healthcare is the most significant example.
The United States spent 18 percent of its GDP on healthcare in 2024 — nearly twice the OECD average. That spending is split between government programs (Medicare, Medicaid, the VA), employer contributions, and what individuals pay directly. The individual share is the highest of any developed nation. Americans pay more out of pocket for prescriptions than any peer country — over $400 per person annually, compared to less than $100 in France. When you add premiums, deductibles, and co-pays to the tax dollars that fund public healthcare, the average American household is spending a substantially larger share of its income on health coverage than comparable households in Germany, Canada, or the United Kingdom — and receiving, by most measures, worse care.
Life expectancy in the United States peaked at 79 years in 2024. The OECD average is 81. Switzerland reaches 84. Japan and Spain are at 84 as well. The United States spends more per person on healthcare than any nation in history, and ranks third-lowest in life expectancy among its OECD peers. The gap between what we spend and what we get is not marginal. It is the central fact of American healthcare policy, and it has been true for decades.
The Costs That Don't Show Up in Your Tax Return
Healthcare is the largest hidden line item, but not the only one. Consider childcare.
The United States spends approximately 0.08 percent of GDP on early childhood programs — roughly one-ninth of the OECD average of 0.7 percent. Finland, at the high end, spends 1.2 percent. The result is that American families absorb the cost of childcare almost entirely as a private expense. Infant care now averages $15,926 per year nationally — more than in-state public college tuition in 34 states. Fifteen percent of American families spend more than 20 percent of their household income on childcare. In France, a tax credit covers 20 to 40 percent of costs. In Canada, the federal government has committed to $10-per-day childcare. In the United States, the subsidy is largely absent, and the cost lands on the household.
Then there is paid leave. The United States is the only OECD member country that guarantees no paid maternity leave. Zero weeks. The FMLA provides 12 weeks of unpaid leave for qualifying employees — no salary, no replacement income. The OECD average for paid maternity leave is 19 weeks. Germany provides 14 fully paid weeks. Italy provides 21.7 weeks at 80 percent pay. Denmark provides 22 weeks. In the United States, the cost of a new child — in lost wages, in childcare, in the absence of any federal income support — is borne almost entirely by the family. In peer nations, it is shared.
Add it up. A median American household paying federal and state taxes, absorbing private healthcare premiums and out-of-pocket costs, covering childcare without meaningful subsidy, and receiving no paid leave when a child is born is paying a total effective rate — taxes plus the private costs that substitute for public spending — that is substantially higher than what a comparable household pays in most of Western Europe. The European household pays more in taxes. The American household pays more in total.
The Return on Investment
None of this would matter as much if the American system produced better outcomes. If paying more privately, and less through taxes, resulted in superior services, superior health, superior quality of life — the arrangement could be defended on its merits. It does not.
The United States ranks at or near the bottom of OECD comparisons on life expectancy, infant mortality, maternal mortality, and avoidable death. Its maternal mortality rate was nearly 19 per 100,000 live births in 2023 — the highest among peer nations, and more than four times the rate in Germany or Australia. The rate for Black women was 50 per 100,000. Avoidable mortality — deaths that should not occur given timely, effective care — remains above pre-pandemic levels and is the second-highest in the OECD, after Mexico.
Child poverty in the United States is among the highest in the OECD. Social mobility — the ability to move up the income ladder from the circumstances of your birth — is lower in the United States than in Denmark, Norway, Sweden, Finland, Germany, and Canada. The American Dream, as a statistical proposition, is more achievable in most of Western Europe than in the country that coined the phrase.
The question is not whether government spending automatically produces good outcomes. It does not, and the evidence on program design and efficiency is legitimately complex. The question is whether the current American arrangement — low taxes, high private costs, outcomes near the bottom of the peer group — is working. The data says it is not.
What the Debate Gets Wrong
The persistent framing of American fiscal policy as a contest between high-tax, high-service government and low-tax, low-service freedom is misleading in a specific way: it treats the private costs as if they don't exist. The deductible is not free. The childcare bill is not free. The twelve weeks of unpaid leave is not free. These costs are real, they are large, and they fall on households in a way that is less predictable, less evenly distributed, and less visible than a tax line.
The visibility matters. A tax rate appears on a form. A $15,000 annual childcare expense, a $6,000 deductible, a gap in paid leave — these feel like personal circumstances, individual misfortunes, the market doing what markets do. They are not. They are policy choices, made by governments that have decided not to share certain costs collectively, resulting in those costs being absorbed privately. Calling that arrangement 'low-tax' is accurate in the narrowest sense and misleading in every sense that affects a household's actual financial life.
The political salience of the tax number — the rate on the form, the percentage of GDP — makes it easy to argue that Americans are paying too much. The costs that don't appear on the form are harder to organize around. They are easier to absorb individually, harder to name collectively, and more difficult to translate into legislative pressure. This is not an accident of human psychology. It is a feature of how the debate has been constructed.
The Full Bill
Very soon, Americans will vote in midterm elections in which the federal budget, social spending, and the size of government will be central issues. The debate will almost certainly be conducted in the familiar terms: taxes up or taxes down, government bigger or smaller, spending expanded or cut.
What that debate will likely not include is the full bill. The out-of-pocket prescription costs. The childcare expense that exceeds a year of college tuition. The unpaid leave. The deductible that arrives in January and has to be met before insurance covers anything. The emergency room visit that is covered, technically, but generates a bill three months later that takes eighteen months to resolve.
These are not side issues. They are, for most American households, the primary way in which the government's fiscal choices affect their lives. A family that pays a 22 percent effective federal tax rate and spends 18 percent of its income on healthcare and childcare is not living in a low-tax country. It is living in a country that has decided which costs to make visible and which to leave hidden.
The full bill, when you add it up, is not low. What we are paying for — in outcomes, in security, in the predictability of what a major illness or a new child will cost — is not what peer nations are buying with comparable or smaller total expenditures.
That is the argument worth having. Not whether the tax line on the form is too high, but whether the total arrangement — all the bills, all the costs, all the outcomes — is working. The evidence on that question is not ambiguous.
