Do workers in the Nordic countries of Denmark, Finland, Norway, and Sweden pay higher taxes on their wages than workers in the United States? The conventional answer to this question is yes. If you look at the labor tax schedules of the various countries, you see that the Nordic labor tax rates are considerably higher than the American labor tax rates. But this conventional answer uses figures that do not account for the different way that these countries handle cash benefits for children and health care financing. Once we normalize away those differences, US labor taxes don't look very different from the Nordic countries, at least for the broadly defined middle class of the countries.

The OECD maintains a database that decomposes the marginal and average "tax wedges" for different earnings levels across many OECD countries. A "tax wedge" is defined as the amount of tax paid for any given dollar of labor cost. This means that it includes both employee-side and employer-side taxes into the equation.

For each country, the OECD calculates these tax wedge figures for all wage levels between 50 percent of the country's average wage and 250 percent of the average wage. This same database also includes how much money a particular wage-earner would receive in cash benefits for their children at these earnings levels. In the two graphs below, we can see what these figures look like for a single, childless adult and for a single adult with two children.

If you were to rely only on these graphs, you would conclude that Nordic labor taxes are higher than US labor taxes across the board. These graphs normalize the child benefit regimes between the two countries: the US's EITC, ACTC, and CTC are baked into the tax wedges while the cash child benefits of the Nordic countries are separately deducted from the tax wedges. But they do not normalize the healthcare regimes of the two countries: the sums paid by Nordic workers into public health insurance are counted as taxes while the sums paid by American workers into employer-sponsored health insurance are not.

In the next set of graphs, I attempt to normalize this by adding the average ESI premiums for a single plan and family plan to these figures. The employer portion of the premiums is counted towards labor costs while both the employer and employee portion of the premiums is counted towards tax.

Once we incorporate employer-sponsored health insurance in this way, we see that American workers earning the average wage pay just as much, if not more, in labor taxes as Nordic workers who earn their country's average wage. Of course, not all workers receive health insurance through their employer and not all workers have average health plans. But these sorts of figures illustrate the basic point that financing a very expensive healthcare system with per-capita premiums does not actually generate a low-tax environment for regular people even if the national accounts say otherwise.

In fact, there was a time when it was not clear whether the national accounts would count US health premiums as taxes or not. During the Obamacare debates in 2009, the CBO put out a report indicating that it may end up scoring all of the post-Obamacare private premiums as federal revenue, with the reasoning being that employer and individual mandates make such payments compulsory just like taxes. Ultimately, the CBO balked and private health premiums did not get converted into taxes for national accounting purposes.

The OECD, which has its own System of Health Accounts, reached a different conclusion, however. After the Obamacare provisions came into effect in 2014, virtually all private health premiums got converted from "voluntary private" premiums to "compulsory private" premiums, which means that they became accounted for as a kind of quasi-tax.

But whether you want to call them private spending, compulsory spending, or taxes, the fact is that, to a household budget, it's all the same thing. Public squalor does not always mean private opulence. For ordinary people, it often means private squalor as well.