RSS Feed MenuCome hell or high-water, President Obama and Congressional Democrats are determined to pass a healthcare bill no matter what the long-term costs or damage to the country. The stunning price tag of the various plans tops $1 trillion over ten years and still won’t cover the estimated 46 million uninsured Americans.
But never fear, tax man Rep. Charlie Rangel is here with a master plan from the House Ways and Means Committee. Like Robin to President Obama’s Batman, the caped crusader, Rangel’s plan would slap a huge tax increase on upper-income families which will yield $540 billion toward public health insurance. This makes no sense to have the very few 1% of the population pay for a health insurance plan for the many. If everyone can get the coverage, EVERYONE, all taxpayers, no matter what their income should pay for this healthcare overhaul.
What’s more eye-popping is the audacity of the increase the House proposes to levy on the backs of what politicians have broadly labeled as “wealthy” Americans. First, his definition can be widely disputed. A married couple with two children, earning $350,000 and living in a city like Washington, DC, New York, San Francisco, Honolulu, or Los Angeles isn’t wealthy. As a point of context, the House Ways & Means writes the country’s tax laws.
Currently, the tax rate for filers making $357,700 or more is 35% and will rise to 39.6% in 2011 when the Bush tax cuts expire. To pay for the hefty House health plan, Robin Hood Rangel proposes hitting married couples making $350,000 with a 1% surtax; couples making more than $500,000 receive a 2% surtax; and couples making $1 million or more receive a 3% surtax. By 2013, these rates would increase to 2%, 3% and 5% respectively.
I find it very amusing that Mr. Rangel wants to tax people more when he himself works to avoid paying taxes. From 1988-2007, Congressman Rangel neglected to pay $75,000 in back taxes owed on a rental property he owns in the Dominican Republic. But what’s really audacious about this tax and spend scheme is it comes at a time when everyone, across income brackets, is feeling the burden of the recession, particularly small business owners. Small business owners typically file their business with their personal taxes. A class tax like this will only force small business owners to cut more jobs, further crippling an already hobbled economy.
Relying on the tax base of the few, whose income can fluctuate just like everyone else’s, to support the many is bad math. Even the liberal state of California is realizing this the hard way and considering moving to a flat tax. California’s State Assembly Speaker Karen Bass sits on a commission created to devise ways to reduce its $41.6 billion two-year deficit. In a July 11th Wall Street Journal article, Bass called it “crazy” for California to force a puny 144,000 upper-income residents to pay half of all income taxes for a state with 38 million people. Another reason it’s crazy for states is people can always move to another state, like Maryland residents are doing right now because of higher taxes.
A flat tax is a better model to explore to fund a public health plan because all taxpayers would have to pay their “fair share,” as the president so often reminds us. When people don’t pay something, they gorge on it without regard to cost. One need look no further than Medicaid to see this in action. Medicaid is administered by states and federal funds. According to Kaiser Family Foundation, Medicaid costs are expected to reach $1.2 trillion by 2012. There is over-use of medical services and over-prescribing of drugs because recipients don’t have to pay for services or drugs. Most states have co-payment policies for services and drugs but if a patient says they cannot afford it, a provider cannot deny service or goods.
When I worked at the National Association of Chain Drug Stores, a frustration with pharmacists was that many state Medicaid programs established patient co-pays of $1.00 for a generic prescription and $2.00 for branded prescriptions but the provider couldn’t demand payment even if he knew the patient could afford it. These uncollected co-pays are lost revenue to providers for services rendered.
Fear of losing coverage also deters beneficiaries from working hard to get off Medicaid. Many states have also raised income levels, expanding state Medicaid rolls thus creating a disincentive for people to work harder to exit the program. Even before the recession, every year governors complained that burgeoning Medicaid programs strained their state budgets. (The Senate Health, Education, Labor and Pensions Committee’s health plan proposes expanding Medicaid to cover even more people.)
President Obama keeps telling Americans we “need to get it done,” and pass a healthcare reform bill. What needs to get done is the task of fixing the health mess we’re in, not adding more government mess to it. If Democrats and the administration are serious about bringing down the costs of health in this country, why not do a phased in approach to healthcare reform instead of trying to force a triangle into a circle. Start with Medicaid and mandate that states shift more responsibility to patients and get serious about the billions of dollars lost to fraud each year.
For those uninsured Americans who can afford health insurance but choose not to pay for it, pass legislation mandating they purchase coverage. Prevention is another concept I haven’t heard used in any discussion on healthcare reform. How about mandating insurers reward good health behavior with lower premiums and other incentives. When individuals are held accountable for their actions, they act more responsibly. Safeway has kept its healthcare costs flat over the past four years with a new model that discounts premiums for healthy employees.
That’s a way to reduce runaway healthcare costs that are “crushing us,” as Vice-President Biden recently exclaimed. The majority of healthcare expenditures in this country each year are due to heart disease, cancer, diabetes and obesity, which are mostly preventable. In an op-ed published in the Wall Street Journal, Steven Burd, CEO of Safeway wrote:
If the nation had adopted our approach in 2005, the nation’s direct health-care bill would be $550 billion less than it is today. This is almost four times the $150 billion that most experts estimate to be the costs of covering today’s 47 million uninsured.
Interestingly enough, Mr. Burd’s estimated savings attributed to healthier behavior turns out to be almost the exact same amount as Mr. Rangel’s class tax. Perhaps the lesson to be learned here for the president and his friends in Congress is that the nation’s healthcare overhaul needs to be taken in a different, more realistic direction.
barker13 // Jul 20, 2009 at 12:55 pm
“…the estimated 46 million uninsured Americans.”
Just a side note: There aren’t 46 million uninsured AMERICANS.
I do believe that the 46 million figure encompasses non-citizens, including illegal aliens presently trespassing upon sovereign U.S. territory in violation of our laws.
(*SHRUG*) (Just wanna make sure we’re all on the same page with the numbers…)
“… tax man Rep. Charlie Rangel…”
aka: Tax cheat Charlie Rangel.
(Sorry… couldn’t resist!)
“…a huge tax increase on upper-income families which will yield $540 billion…”
Which may or may not; I’m betting the latter. (*SHRUG*)
“…all taxpayers, no matter what their income should pay…”
Preaching to the Choir, hon… as to the other congregants in attendance today… good luck convincing them! (*SMILE**)
* Wow… and this is just from reading the first two paragraphs! I’d better take a break – have lunch.
BILL
ottovbvs // Jul 20, 2009 at 1:28 pm
……..Apparently a $1 trillion price tag over ten years to provide universal healthcare for Americans (and contrary to Crystal’s assertion is effectively universal) IS stunning whereas an uncannily similar amount over the same period to invade and occupy Iraq IS NOT stunning. Depends on what your priorities are I suppose…….The HUGE tax being imposed on upper income families (that would be the top 1% btw). First remember this is taxable income after all deductions so a $350 k family are probably earning rather more than that, maybe around $400k. And the huge burden being imposed if you have $350k of TAXABLE INCOME $3,500 max. And if you’re struggling along on taxable income of $1million which probably means actual income of well over well do the math. Crystal trots out the standard boiler plate on top “marginal rates” ignoring as right wing shills always do what are “effective” tax rates on different income bands. When I have a moment I’ll check the actual numbers. You can judge the seriousness of Crystal’s commentary by her plan to put the whole nation on a diet……..Conservatives love all this “if only” motherhood stuff because it means they don’t have to get down to the substance and actually provide a plan.
barker13 // Jul 20, 2009 at 4:16 pm
OK… (*SIGH*)… back to the lovely Crystal…
“A married couple with two children, earning $350,000 and living in a city like Washington, DC, New York, San Francisco, Honolulu, or Los Angeles isn’t wealthy.”
You know… I understand your point… I understand you’re contrasting “well off” to “truly” wealthy… but…
http://en.wikipedia.org/wiki/Highest-income_places_in_the_United_States
Sorry, Crystal… $350,000 is a LOT of frigg’n money.
(BTW… the population of Washington DC is POOR! I believe you’re thinking the affluent suburbs AROUND Washington DC.)
As to NYC, San Fran, LA… you DO realize, don’t you, that there are substantial numbers of poor and even homeless and destitute people living in these cities… I hope.
I mean I get your point – cost of living and all that – I’m concerned by your tone and the message it may send. Me? Hey… if you’re making big bucks working in NYC, San Fran, LA, wherever… bottom line…you’re still making big bucks.
I have friends who rarely use entire wings (rooms… spaces…) of their homes! Hey… cry me a river if they also want to drive his and hers Mercedes, keep a boat docked at the marina, and take awesome vacations. More power to ‘em, but I don’t wanna hear about all the stresses of keeping up with their “lifestyles.” (The “tone” of your contribution which comes across to me is that your response is partly, “there, there, you poor thing…”) (*SHRUG*)
“I find it very amusing that Mr. Rangel wants to tax people more when he himself works to avoid paying taxes.”
Yep. As previously noted… me too! (*GRIN*)
“Relying on the tax base of the few, whose income can fluctuate just like everyone else’s, to support the many is bad math.”
AND… IMHO… it’s bad social policy. “One for all and all for one” requires… er… all to show up prepared to use their swords. (*WINK*)
A flat tax is a better model to explore to fund a public health plan because all taxpayers would have to pay their “fair share…”
Agreed.
(Hell… a flat tax is the best model period – to fund government all together!)
* More later…
BILL
ottovbvs // Jul 20, 2009 at 4:58 pm
……..I make no apologies for re-posting this little primer from elsewhere on the tax system and current top effective tax rates which puts Crystal’s claims in their proper perspective:
………Some more info for those suffering from Fact Aversion Trauma (FAT) on the difference between
top “marginal” income tax rates and total “effective” tax rates.
The marginal income tax rate is what applies to your last dollar of of wage income. The total effective rate is what you pay on the average dollar of any income. Marginal rates matter, of course. But they also kick in at different levels and are offset by a variety of other policies. The total effective rate gives you a much, much better sense of how the government nibbles away at your earnings. (For a quick example of how easy it is to be mislead people by talking about marginal rates: the top rate in the 1950’s was higher than 90% and Frank Sinatra wasn’t paying 90% of his income in taxes!)
Why is there such a difference between effective and marginal rates? One reason is that we tax capital gains and dividends at a lower rate than wage income. (This is why, for example, Warren Buffett complains that his secretary taxes at a higher effective rate than he does: so much of his income is from dividends and capital gains.) It’s also why, when you look at the distribution of effective rates over the last 15 years, the tax system looks a lot less progressive (excuse me, socialist) than it otherwise would.
Top effective rates for years:
1995-36%
1997-33.5%
2000-32.9%
2003-31.5%
2006-31.25%
It gets even more interesting when you look at the distribution of effective tax rates by income percentiles. These were the “effective” tax rates in 2007 by percentile:
Bottom 20%…..18.7%
Next 20%………22.3%
Middle 20%……27.0%
Next 20%………30.5%
Next 10%………31.5%
Next 5%………..32.2%
Next 4%………..32.1%
Top 1%…………30.9%
……So the odds are David’s “effective” tax rate is actually slightly higher than that of Donald Trump and Barbra Streisand, and mine is marginally higher than David’s …….Sorry I can shed no tears for the huge increase that The Donald will be be required to pay because the odds are that even with surcharges, lapsed tax cuts in 2010 and all, his top effective rate isn’t going to be very different than it was in 1996…….BTW David it would be great to import graphs
barker13 // Jul 20, 2009 at 11:35 pm
Finishing up…
“…many state Medicaid programs established patient co-pays of $1.00 for a generic prescription and $2.00 for branded prescriptions but the provider couldn’t demand payment even if he knew the patient could afford it. These uncollected co-pays are lost revenue to providers for services rendered.”
Justice Scalia, if you’re lurking…
(*GRIN*) (Just kidding…)
Seriously, though, how is this sort of thing Constitutional? It’s a clear “taking.” I mean if the government were reimbursing the private entities at market rates that would be one thing, but to simply “take” (via ordering others to GIVE) strikes me as blatantly unconstitutional.
Now of course when we’re talking state laws then it’s no longer a black and white Constitutional (federal that is) issue, but since we’re talking about joint federal/state regulation and funding…
(*SHRUG*)
Anyway, I’d love to be able to get a clear, concise answer concerning this question from a constitutional scholar – any hanging around…???
“President Obama keeps telling Americans we “need to get it done,” and pass a healthcare reform bill. What needs to get done is the task of fixing the health mess we’re in, not adding more government mess to it. ”
Hallelujah, Sister Crystal…! (Eureka, I think she’s got it!)
“How about mandating insurers reward good health behavior with lower premiums and other incentives.”
I’d be weary of more government mandates; that’s what’s arguably gotten us into this mess in the first place – at least in large part.
Crystal. Here’s the problem. Insurance AS “insurance” is just one side of the coin; the other side is care regardless of any other variable besides need. It’s when these two realities clash that you get rationing.
What I’m trying to articulate is the reality that we’re not talking about setting up a brand new “system” from scratch with a “start-up” demographic of young and healthy able and willing to afford insurance priced in accord with actuarial data and reality. Nope. The problem is that we’re already stuck with caring for those who will be net losses for whatever system is devised which brings us back full circle to the 20-something adult paying insurance rates not simply sufficient to pay for her own care (according to the best actuarial forecasting), but, rather, she’s paying premiums far beyond any reasonable premium based on self-care so that “the system” can use all those “excess” dollars paid to fund the sicker (particularly older and sicker) demographic.
“For those uninsured Americans who can afford health insurance but choose not to pay for it, pass legislation mandating they purchase coverage.”
For good or ill, I’m a lot more open to that idea now than I’ve been in the past. Still… easier proposed than put into practice. (*SHRUG*)
As to Mr. Burd’s recent op-ed…
Perhaps I’ll address it separately.
BILL
sinz54 // Jul 21, 2009 at 9:13 am
ottovbvs sez: “First remember this is taxable income after all deductions so a $350 k family are probably earning rather more than that”
Many single-proprietorship type small businesses make more than that. This proposal socks the “mom and pop” stores.
ottovbvs // Jul 21, 2009 at 9:26 am
sinz54 // Jul 21, 2009 at 9:13 am
“Many single-proprietorship type small businesses make more than that. This proposal socks the “mom and pop” stores”
…………What precisely is the difference between earning say $400,000 as the owner of a mom and pop store or gas station and being paid $400,000 in salary and bonuses as an executive at an insurance or manufacturing company……..the “socking” involved is exactly the same……..except it probably isn’t because the executive hasn’t a fraction of the opportunity for tax avoidance that is available to the mom and pop store owner!!…….the desperate quest by doctrinaire conservatives to justify their arguments reveals so much about them
sinz54 // Jul 21, 2009 at 10:15 am
ottovbvs: I was self-employed, and the opportunities for tax avoidance available to me were few–unless I incorporated myself.
Even the Democrats in Congress don’t agree with you. The Blue Dog Democrats are frantically trying to find a way to add a loophole to prevent mom-and-pop businesses, or the self-employed like me, from being socked with a huge tax increase. Because there are millions of such Americans. If they get socked with a big tax increase, they’re going to vote GOP in 2010. The fact that their CPAs may be able to find some way to shelter the income is not going to impress them.
ottovbvs // Jul 21, 2009 at 10:37 am
sinz54 // Jul 21, 2009 at 10:15 am
“ottovbvs: I was self-employed, and the opportunities for tax avoidance available to me were few–unless I incorporated myself.”
……….So you don’t disagree with my basic point…….While undoubtedly fewer than if you incorporate they are considerably greater than exist if you are an employee(clue I’m in this category also) ……..and of course most owners of mom and pop businesses DO incorporate……the 25 year old kid who takes care of the fences, decks, etc at my property is incorporated for godsake…..why do you keep arguing against yourself?
” Even the Democrats in Congress don’t agree with you.”
……….You mean a fraction of the Democratic caucus doesn’t agree with me (20-50 depending on whose numbers you believe)…….I’m delighted to hear you have a before tax family income of over $400,000 because you’re only going to get socked if it’s north of this figure…….and basically you can afford it because as I demonstrated above your effective tax rate is at historic lows!
ottovbvs // Jul 21, 2009 at 10:47 am
sinz54 // Jul 21, 2009 at 10:15 am
” If they get socked with a big tax increase, they’re going to vote GOP in 2010. ”
……….As I said above your comments are rather self revealing……why do you assume all those with incomes above $400k (a small proportion of the electorate anyway) a) all voted democrat b) if they did vote Democrat didn’t realize their taxes were likely to rise as a consequence of doing so……..I’ve got news for you……most of the people I hang out with are in the top 10% of income earners…..all of them who went democrat knew it was likely to increase their taxes but basically could live with it…..do you think all these people dim or something.
sinz54 // Jul 21, 2009 at 1:07 pm
ottovbs sez: “Apparently a $1 trillion price tag over ten years to provide universal healthcare for Americans (and contrary to Crystal’s assertion is effectively universal) IS stunning whereas an uncannily similar amount over the same period to invade and occupy Iraq IS NOT stunning.”
Speak for yourself.
I was stunned by the cost of the Iraq War too.
Remember back in 2002, the Bush Administration had estimated that the total net cost of the entire war would be under $100 billion–because Iraq’s oil wealth would reimburse us for part of the cost?
That would have been an accurate forecast–if the U.S. armed forces had been able to leave Iraq immediately after finding and removing the WMD. It was the growing insurgency that negated all of Bush’s original plans.
sinz54 // Jul 21, 2009 at 1:09 pm
ottovbvs sez: “I’m delighted to hear you have a before tax family income of over $400,000 because you’re only going to get socked if it’s north of this figure”
No I don’t. I wasn’t able to grow my business that far before I became ill.
But what liberals don’t seem to get is that even working-class Americans don’t hate wealthy entrepreneurs like Ford, Steve Jobs, Bill Gates, etc. They admire them, and wish they could be like them.
ottovbvs // Jul 21, 2009 at 1:48 pm
sinz54 // Jul 21, 2009 at 1:07 pm
‘Speak for yourself.
I was stunned by the cost of the Iraq War too.”
……….I was only responding to Crystal’s “stunning”……….I’m not sure why everyone is getting so excited about $1 trillion over 10 years, that’s an additional $100 billion a year to a federal budget of well over $3 trillion( it’s 3%)……..I’m under no illusions that one way and another they will have to raise additional revenue to in the medium term to pay for a universal system…….equally I think govt involvement is in the long term the only hope we have of bringing total costs under control……how you raise the additional revenue in the short term is a matter of debate……the surtax on the very rich is the most politically possible, and if you have a family income of over $400k a year you’re fairly rich
ottovbvs // Jul 21, 2009 at 2:00 pm
sinz54 // Jul 21, 2009 at 1:09 pm
“But what liberals don’t seem to get is that even working-class Americans don’t hate wealthy entrepreneurs like Ford, Steve Jobs, Bill Gates, etc. They admire them, and wish they could be like them”
…………Who are these liberals who hate wealthy entrepreneurs……the richest man in the country is a democrat……..in fact I’ve met conservative working class guys who don’t like the rich and some who do, and likewise liberal working class guys……..Bill Gates started his business in the 1980’s when the top marginal rate was probably in the low forties and the top effective rate was probably in the high thirties…….Ray Kroc got into the burger business in the late forties early fifties when the top marginal rate was around 90% …….I’ve known dozens of entrepreneurs and tax rates had absolutely zero to do with their decision to start businesses
barker13 // Jul 22, 2009 at 10:30 am
I just want to take this opportunity to recognize Crystal, David Frum, David’s various “contributors,” and David’s employees who so diligently take the time and make the effort to address our various points, comments, and questions in a timely, polite and meaningful way…
(Oh… sorry… wrong website… wrong dimension of space/time.) (*CHUCKLE*)
BILL