RSS Feed MenuFF Symposium: Traditionally, conservatives have argued for repeal of the estate tax, characterizing it as an unfair “double tax.” FF Contributor Cetulus however argues for conservatives to back the estate tax as an alternative to high marginal income tax rates. Brian Domitrovic, author of Econoclasts, however responds that the estate tax would only discourage work and investment.
Conflict of Interest Watch: Cetulus practices gift and estate tax law.
Sen. Jon Kyl (R-AZ) is bargaining hard for an estate tax cut. If so, that’s bad news for the country. The GOP has long stood for a pro-growth tax system. Thus, Republicans have favored low income tax rates, and have even argued for replacing the income tax with a more growth-friendly tax such as a tax on consumption. The estate tax, meanwhile, is about as pro-growth a tax as one can hope for. Not only that, but it has existed for almost 100 years. To create a more pro-growth tax system, Republicans don’t have to design a whole new tax from scratch. A pro-growth tax is already there to be exploited.
Bizarrely, however, Republicans have for years been trying to repeal the estate tax. (They have been doing so, ironically enough, in the name of tax fairness — traditionally the favored philosophy of the Democrats.) Estate tax cuts will ultimately be paid for with increases in income taxes or deficit spending, which crowds out private investment. Essentially, therefore, Republicans are trying to replace a pro-growth with an anti-growth tax. It would be hard to imagine a worse outcome from the perspective of traditional Republican principles. If the GOP really believes in a pro-growth tax system, it should not only support but expand the estate tax.
Let’s start by conceding the good points made by advocates of estate tax repeal. First, the estate is indeed a “death tax.” Progressives fume that the term “death tax” is misleading or illegitimate. Yet the estate tax is a “death tax” in the straightforward sense that that it is a tax imposed at death. Says section 2001 of the Internal Revenue Code: “A tax is hereby imposed on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States.” Repeal advocates didn’t invent the term “death tax,” which appears over 35 times in the Code to refer to any tax that is imposed at death, including estate taxes. That the estate tax is in fact a death tax is not some canard invented by greedy advocates for estate tax repeal. It is true by definition.
Second, it’s not true that the estate tax only affects the very wealthiest. To be sure, fewer than 15,000 estates report more than $3.5 million of wealth at death, which was the estate tax exemption amount in 2009. Of these, even fewer actually pay taxes, as many estates qualify for unlimited deductions for bequests to surviving spouses or to charity. In the end, only 1% of decedents in recent years have died with taxable estates.
Nevertheless, the estate tax indirectly affects a much larger portion of the population. First, a considerable number of decedents, precisely to avoid estate tax, successfully plan during their lifetimes to reduce or eliminate their taxable estates at death. Second, nobody knows what the estate tax law will be when he dies. So long as the estate tax exists, people still need to plan for the possibility that they will owe estate taxes at death. Third, Americans do not expect to die poor. On the contrary, we are notorious for our love of making money and dreaming up ways to do it. To anyone who hopes to make a fortune in life, the prospect that it will be taxed at death is frustrating.
Finally, and perhaps most importantly, it takes some effort just to know that only the very wealthiest pay the estate tax. The cost of finding out whether one will owe estate taxes at death is an indirect tax on everyone — and an inefficient one, insofar as it doesn’t actually raise revenue. (Of course, the solution to that problem may be simply to lower the exemption amounts so that the estate tax applies more broadly.)
That said, proponents of repeal make one very bad argument, namely, that the estate tax is an unfair “double tax.” Taxpayers pay income taxes their whole lives on what they earn, only to get hit with another steep tax at death. That supposedly isn’t fair.
This argument is often seen as a “clincher,” but it actually backfires. First off, it’s a bit of an exaggeration to say that all taxpayers pay income tax on what they earn. Many individuals don’t earn their fortunes but instead inherit them. Gifts and inheritances, however, are expressly excluded from the definition of gross income. That is, I could be given a billion dollars tomorrow and not have to pay any tax on it. Not only that, but the “basis” in inherited property — that is, the cost of acquiring it — is automatically “stepped up” to fair market value at death. Suppose your wealthy parents in 1960 bought a Park Avenue apartment for $20,000 now worth $10 million. If your parents sell it, they will be taxed on $9,980,000 million of gain. If instead you inherit it from them and you sell it, you will not have to pay any income tax at all. Combine these benefits with lower tax rates for capital gains and dividends, and it turns out that, from an income tax perspective, the single most tax-favored way of making money is to inherit it. The estate tax is the only way in which the tax law achieves any kind of rough justice.
But what about the entrepreneur who earns every penny of his fortune? It’s true that he will be pay income taxes during his life. But why call the estate tax an additional “double” tax? It makes just as much sense to say that during life his taxes are deferred. That is, he gets to pay less during life but more at death. If he leaves his money to his spouse or to charity, he doesn’t have to pay additional taxes at death at all. Seen in this way, the estate tax is not a horrible injustice but a great deal for taxpayers. Think about it: you pay less and get to enjoy more of your money during your lifetime. What’s not to like? The estate tax isn’t so much a death tax as a lifetime-deferred tax.
Not only is the estate tax a great deal for taxpayers, but it is also wonderfully pro-growth. GOP tax wonks have traditionally argued that high income tax rates penalize work, savings and investment. Well, a lifetime-deferred tax hardly penalizes productive behavior at all. Under a pure lifetime-deferred tax (i.e., if the income tax were replaced entirely with an estate tax), taxpayers would get to enjoy every penny they earn during their lifetimes.
To be sure, many individuals are strongly motivated to pass on wealth to their heirs. Contrary to what standard “life cycle” theory would predict, people often die with unspent wealth. Joseph Schumpeter — to my mind the most persuasive and subtle defender of capitalism ever — even argued that the bourgeois desire to accumulate wealth for their families drives capitalist prosperity. Admittedly, an estate tax rate of, say, 100% would discourage work and investment. On the other hand, in contrast to, say, a 100% tax on income, a 100% tax on estates would not totally discourage productive behavior, and may not even discourage it all that much. I will leave it to economists to figure out the exact shape of the “Laffer curve” for estate taxes, but I would be willing to bet my own money that even an estate tax rate as high as 50% would have virtually no effect on work, savings or investment. People may have their dynastic urges, but nothing trumps amour de soi. Everyone has to eat.
Proponents of repeal also argue that it’s wrong to make people pay taxes while they are grieving. This argument is silly. A decedent’s surviving family members have to pay funeral expenses, prove a will in court, marshall and distribute assets, pay the decedent’s bills, and carry out a host of other vulgar administrative tasks. Filing of an estate tax return is no different. Estates even have to pay income tax on income earned after death, so in reality taxes will always be a part of post-mortem planning.
In short, GOP arguments that a “death tax” is inherently unfair are unpersuasive. Furthermore, the estate tax is ideally suited to the GOP’s pro-growth agenda. It is unclear why the GOP, as the party of growth, favors estate tax repeal, while the Democratic Party, as the party of tax fairness, generally opposes it. The situation should be reversed. Let the lobbyists for estate tax repeal run to the Democrats. The GOP should instead stand for a tax system that doesn’t punish work or investment. That is, they should defend, as an alternative to high marginal income tax rates, a lifetime-deferred tax — which is to say, the estate tax.
Conflict of Interest Watch: Cetus practices gift and estate tax law.
According to E.J. Dionne, Sen. Jon Kyl (R-AZ) is bargaining hard for an estate tax cut. If so, that’s bad news for the country. The GOP has long stood for a pro-growth tax system. Thus, Republicans have favored low income tax rates, and have even argued for replacing the income tax with a more growth-friendly tax such as a tax on consumption. The estate tax, meanwhile, as I argue below, is about as pro-growth a tax as one can hope for. Not only that, but it has existed for almost 100 years. To create a more pro-growth tax system, Republicans don’t have to design a whole new tax from scratch. A pro-growth tax is already there to be exploited.
Bizarrely, however, Republicans have for years been trying to repeal the estate tax. (They have been doing so, ironically enough, in the name of tax fairness — traditionally the favored philosophy of the Democrats.) Estate tax cuts will ultimately be paid for with increases in income taxes or deficit spending, which crowds out private investment. Essentially, therefore, Republicans are trying to replace a pro-growth with an anti-growth tax. It would be hard to imagine a worse outcome from the perspective of traditional Republican principles. If the GOP really believes in a pro-growth tax system, it should not only support but expand the estate tax.
Let’s start by conceding the good points made by advocates of estate tax repeal. First, the estate is indeed a “death tax.” Progressives fume that the term “death tax” is misleading or illegitimate. Yet the estate tax is a “death tax” in the straightforward sense that that it is a tax imposed at death. Says section 2001 of the Internal Revenue Code: “A tax is hereby imposed on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States.” Repeal advocates didn’t invent the term “death tax,” which appears over 35 times in the Code to refer to any tax that is imposed at death, including estate taxes. That the estate tax is in fact a death tax is not some canard invented by greedy advocates for estate tax repeal. It is true by definition.
Second, it’s not true that the estate tax only affects the very wealthiest. To be sure, fewer than 15,000 estates report more than $3.5 million of wealth at death, which was the estate tax exemption amount in 2009. Of these, even fewer actually pay taxes, as many estates qualify for unlimited deductions for bequests to surviving spouses or to charity. In the end, only 1% of decedents in recent years have died with taxable estates.
Nevertheless, the estate tax indirectly affects a much larger portion of the population. First, a considerable number of decedents, precisely to avoid estate tax, successfully plan during their lifetimes to reduce or eliminate their taxable estates at death. Second, nobody knows what the estate tax law will be when he dies. So long as the estate tax exists, people still need to plan for the possibility that they will owe estate taxes at death. Third, Americans do not expect to die poor. On the contrary, we are notorious for our love of making money and dreaming up ways to do it. To anyone who hopes to make a fortune in life, the prospect that it will be taxed at death is frustrating.
Finally, and perhaps most importantly, it takes some effort just to know that only the very wealthiest pay the estate tax. The cost of finding out whether one will owe estate taxes at death is an indirect tax on everyone — and an inefficient one, insofar as it doesn’t actually raise revenue. (Of course, the solution to that problem may be simply to lower the exemption amounts so that the estate tax applies more broadly.)
That said, proponents of repeal make one very bad argument, namely, that the estate tax is an unfair “double tax.” Taxpayers pay income taxes their whole lives on what they earn, only to get hit with another steep tax at death. That supposedly isn’t fair.
This argument is often seen as a “clincher,” but it actually backfires. First off, it’s a bit of an exaggeration to say that all taxpayers pay income tax on what they earn. Many individuals don’t earn their fortunes but instead inherit them. Gifts and inheritances, however, are expressly excluded from the definition of gross income. That is, I could be given a billion dollars tomorrow and not have to pay any tax on it. Not only that, but the “basis” in inherited property — that is, the cost of acquiring it — is automatically “stepped up” to fair market value at death. Suppose your wealthy parents in 1960 bought a Park Avenue apartment for $20,000 now worth $10 million. If your parents sell it, they will be taxed on $9,980,000 million of gain. If instead you inherit it from them and you sell it, you will not have to pay any income tax at all. Combine these benefits with lower tax rates for capital gains and dividends, and it turns out that, from an income tax perspective, the single most tax-favored way of making money is to inherit it. The estate tax is the only way in which the tax law achieves any kind of rough justice.
But what about the entrepreneur who earns every penny of his fortune? It’s true that he will be pay income taxes during his life. But why call the estate tax an additional “double” tax? It makes just as much sense to say that during life his taxes are deferred. That is, he gets to pay less during life but more at death. If he leaves his money to his spouse or to charity, he doesn’t have to pay additional taxes at death at all. Seen in this way, the estate tax is not a horrible injustice but a great deal for taxpayers. Think about it: you pay less and get to enjoy more of your money during your lifetime. What’s not to like? The estate tax isn’t so much a death tax as a lifetime-deferred tax.
Not only is the estate tax a great deal for taxpayers, but it is also wonderfully pro-growth. GOP tax wonks have traditionally argued that high income tax rates penalize work, savings and investment. Well, a lifetime-deferred tax hardly penalizes productive behavior at all. Under a pure lifetime-deferred tax (i.e., if the income tax were replaced entirely with an estate tax), taxpayers would get to enjoy every penny they earn during their lifetimes.
To be sure, many individuals are strongly motivated to pass on wealth to their heirs. Contrary to what standard “life cycle” theory would predict, people often die with unspent wealth. Joseph Schumpeter — to my mind the most persuasive and subtle defender of capitalism ever — even argued that the bourgeois desire to accumulate wealth for their families drives capitalist prosperity. Admittedly, an estate tax rate of, say, 100% would discourage work and investment. On the other hand, in contrast to, say, a 100% tax on income, a 100% tax on estates would not totally discourage productive behavior, and may not even discourage it all that much. I will leave it to economists to figure out the exact shape of the “Laffer curve” for estate taxes, but I would be willing to bet my own money that even an estate tax rate as high as 50% would have virtually no effect on work, savings or investment. People may have their dynastic urges, but nothing trumps amour de soi. Everyone has to eat.
Proponents of repeal also argue that it’s wrong to make people pay taxes while they are grieving. This argument is silly. A decedent’s surviving family members have to pay funeral expenses, prove a will in court, marshall and distribute assets, pay the decedent’s bills, and carry out a host of other vulgar administrative tasks. Filing of an estate tax return is no different. Estates even have to pay income tax on income earned after death, so in reality taxes will always be a part of post-mortem planning.
In short, GOP arguments that a “death tax” is inherently unfair are unpersuasive. Furthermore, the estate tax is ideally suited to the GOP’s pro-growth agenda. It is unclear why the GOP, as the party of growth, favors estate tax repeal, while the Democratic Party, as the party of tax fairness, generally opposes it. The situation should be reversed. Let the lobbyists for estate tax repeal run to the Democrats. The GOP should instead stand for a tax system that doesn’t punish work or investment. That is, they should defend, as an alternative to high marginal income tax rates, a lifetime-deferred tax — which is to say, the estate tax.
Danny_K // Mar 12, 2010 at 5:19 pm
You ignore the obvious: rich people hate the estate tax.
balconesfault // Mar 12, 2010 at 5:25 pm
You ignore the obvious: rich people hate the estate tax.
Or perhaps another way to look at it – rich people who don’t hate the estate tax are probably already Democrats.
Independent // Mar 12, 2010 at 9:27 pm
Well, we’ve had some at FF suggest the GOP embrace a carbon tax as a right-headed policy and example of good statecraft.
We’ve had some at FF suggest the GOP embrace other taxes and trade them for a reduction on payroll taxes.
We had some at NewMajority, FF’s predecessor, say a Fair Tax or National Sales Tax were the way to go for the GOP.
And now we have someone at FF calling for the GOP to embrace the death tax in exchange for across the boards low income tax rates.
To all of those, the correct answer is No. No waffling. No qualifications. Just No. The GOP, no matter how deep in the woods we go to find a “noted scholar” to argue why their pet tax scheme is good, should not aver from the policy of primary importance to the GOP… cutting taxes is good for the economy, cutting spending is even better; doing both at the same time is TERRIFIC. Not off-year spending cuts for this year’s tax hikes. Not future tax cuts if spending is trimmed.
No new taxes. Cut all spending possible. Balance the budget now.
What part of the lesson behind “Read My Lips” didn’t you comprehend?
agentprovocateur // Mar 12, 2010 at 11:22 pm
Since most of the federal budget goes to pay for defense, Social Security, Medicare, and Medicaid, I’m curious to know where all these cuts should come from to balance the budget. Do tell.
ferruccio // Mar 13, 2010 at 12:04 am
Cetulus, it’s wonderful to see a fellow centrist/conservative who *GETS IT* — considering the average stance is no doubt much closer to, e.g., Independent’s extremism.
BTW, Independent, as long as GOP’s stance is like yours, the GOP will never get full support from people like me, or, more importantly, like Warren Buffett (who tried helping out in California his friend A. Schwarzenegger, but soon gave up exactly due to this absurd GOP intolerance of sensible fiscal policy). Us accounting-savvy types (whether with a net worth of 11 figures like him, or just 7 like me;-) GET the numbers, you see — after all, that’s what accounting is all about.
The street are full of potholes, and street maintenance is accounted for as public spending: cut spending -> more and worse potholes -> productivity impact on everybody commuting to work -> huge impact against the economy, and against big investors like Warren and smaller ones like me. Prisons, the courts, security, national defense, the Patent Office, education… cut spending -> each of these “public spending” issues gets damaged, and damages the economy (i.e., us investors) in turn. Most of the rest of what you accounting-impaired folks consider “public spending” (social security, medicare) is actually fully or mostly funded by specific taxes which have been fully paid for decades by current and future beneficiaries of these programs, which for decades have been running surpluses — and when these programs will eventually need to start drawing down on the huge accounting surpluses they accumulated for so long, “cutting” them would be just as much an act of theft as Argentina’s seizing of all pension funds was recently. You crave a small State…? Go invest in Somalia, where the State is basically not there — you’ll just have to come to your own terms with the local warlords and pirates, of course, but then you’ll enjoy the effects on your investments of the total lack of spending on such trifles as education, roads, the courts, and so on. Good luck. I’d rather keep investing (and maybe starting new firms again) in a solid, predictable political climate where crucial infrastructure (including the rule of law and its enforcement just as much as roads and basic education) is supplied as a public good, since that’s exactly what it IS in accounting terms.
My core motivation for reading and interacting on this forum is: I’m a conservative at heart, in that I want to defend fundamental freedoms — first and foremost, since I’m first and foremost an accountant, investor, and occasional entrepreneur, the freedom to trade, including freedom from confiscatory taxation and oppressive regulation. Most Democrats (though not Clinton or Obama, much as the GOP delights in falsely painting each of them as socialists of some sorts — the Clinton years were the best ever for the economy!-) would curtail my freedom through protectionism, *confiscatory* taxation (extremely high marginal rates), and/or extremely oppressive regulation (not the SENSIBLE sort, which I support whole-heartedly — but the kind that forces me, if I make and sell hammers, to lather each of them with warnings to the user about not smashing them onto their toes!-). But Independent is an example of the kind of Republican that makes me about as wary to support the GOP as I am to support the Dems: crazy, extremist, accounting-inimical hostility to *SENSIBLE* taxes to support the public infrastructure I NEED as an investor. (Other Republican factions, such as Bush’s crazy budget-busting 8 years, or Ron Paul’s crazy craving for the gold standard, just add to the wariness!-).
What we most need in taxation is (besides a huge SIMPLIFICATION of the current, absurdly abstruse and complex, system) _low MARGINAL rates_. If you don’t understand why MARGINAL rates are key, you don’t understand enough economics to get out of a paper bag: go get an Econ 101 course at your local community college and come back when you have minimal economic literacy. We need low (ideally zero, but that will never happen) rates on capital gains and dividends; an end to all fiscal support for debt (mortgage interest deduction, corporations able to offset interests against revenue); low marginal rates on income; taxes as much as feasible against consumption, NOT against investment and saving (so a VAT, flat-as-feasible income tax, and, sure, an estate tax can really help too!).
To help the poor I have no problem with generous exemptions at the low ends — e.g. X millions exemption on estate tax, several tens of thousands’ exemption on income tax, EITC — an excellent provision that should only be strengthened — as long as the highest marginal rate can be kept moderate, well below “confiscatory” levels, to avoid discouraging enterprise, saving, investment.
But (to keep fighting potholes, arresting criminals, etc, etc) the public sector needs substantial revenue, so to keep the marginal rates low requires broad-based taxation. Estate taxes (with strong exemptions and well below confiscatory levels: the current US terms are *JUST FINE*!) do NOT discourage investment and enterprise. Cetulus has it just right (wonderful to see a lawyer GET IT: wish more of the lawyers I worked with, or more often against, in a career mostly spent in accounting, comptrolling, and auditing, with a CPA/economist bias, *DID* “get it”!-); Independent shows sharply what we, the accounting-smart moderate-conservatives, are up against in our quest to make common sense prevail:-(.
Estate Tax News – March 13, 2010 by Kevin Staker « Estate Tax News Blog by Kevin Staker // Mar 13, 2010 at 8:39 am
[...] @ 1:22 pm Tags: estate tax, Kevin Staker The Frum Forum has interesting dueling articles on Why the GOP Should Support the Death Tax and Why the GOP Should Oppose the Death Tax. The Republican Party has long opposed the [...]
sinz54 // Mar 13, 2010 at 10:38 am
Cetulus: It is unclear why the GOP, as the party of growth, favors estate tax repeal
Because the GOP favors cutting ALL taxes, everywhere. And calling the estate tax a “death tax” gives the GOP a sound-bite that plays well in the media. (Words like “death” instantly get the public’s attention: “Death tax,” “Death panels,” etc.)
You argue that it’s better to have an estate tax at death than to raise the income tax during one’s life. But the GOP wants to cut both types of taxes.
And that’s just not feasible now.
The truth is that with the exploding cost of Medicare due to the huge baby-boom cohort now retiring, there is simply no way to balance the Federal budget by cutting spending alone–unless you majorly restructure these entitlement programs and force many people to spend more out of pocket. GOP Rep. Paul Ryan is the only one brave enough to say this publicly (and notice how the rest of the GOP scuttles away from his statements). No other prominent figures, from either party, will.
sinz54 // Mar 13, 2010 at 10:43 am
ferruccio:
I agree with most of what you said, though I maintain that it’s most important to maintain low marginal income tax rates only for those making less than $250,000 a year. Above that point, the wealthy are more interested in capital gains than straight income. So I don’t have a problem with progressive taxation.
I also disagree with you about Medicare. Bush added on Medicare Part D, which like all other entitlements is costing far more than originally anticipated. And now that the baby-boomers are retiring, the cost of Medicare will explode. It sure won’t be running a surplus anymore.
Independent // Mar 13, 2010 at 11:39 am
ferruccio opines: “Us accounting-savvy types GET the numbers, you see — after all, that’s what accounting is all about”.
Gee… and after Enron and Lehman and Laventhol & Horwath and McGladrey & Pullen/Madoff and Sentinel and Arthur Andersen and… well, the list goes on forever… I thought accounting firms were about getting the numbers WRONG and cooking the books? At least that’s what it looks like when you view the federal court docket for the last 15 years.
You may want to put your trust in accountants, but it’s like asking the CIA for an intel report on Yemeni terrorists… the “there” just ain’t there.
But this isn’t about accounting errors and cooking the books; it was about why the GOP shouldn’t embrace new tax schemes that are contrary and fundamentally undercut the Party’s only unsoiled brand item… cut taxes, don’t raise ‘em to feed the govt trough-hungry pigs.
By the way, the fasted growing employment sector in the economy isn’t the Obami’s “green jobs”… it’s forensic accounting –teaching people how to catch the crooked accountants. Neat, eh?
balconesfault // Mar 13, 2010 at 12:26 pm
By the way, the fasted growing employment sector in the economy isn’t the Obami’s “green jobs”… it’s forensic accounting –teaching people how to catch the crooked accountants. Neat, eh?
Neat, indeed. By the way, the main stimulant for the growth in the forensic accounting field was Sarbanes-Oxley.
A government mandate.
JonF // Mar 13, 2010 at 1:57 pm
The tax is not due until the estate has gone through probate– many months later. If the theirs are still weeping and wailing and gnashing their teeth they have a lot more problems than just a tax. Moreover, the courts and lawyers generally take care of paying the tax before turning the inheritance over the heirs, so the ehirs really don’t have to hassle with it at all.
sinz54 // Mar 13, 2010 at 1:58 pm
agentprovocateur: Since most of the federal budget goes to pay for defense, Social Security, Medicare, and Medicaid, I’m curious to know where all these cuts should come from to balance the budget.
Rep. Paul Ryan wants to means-test Social Security and Medicare, by preserving the current level of benefits for lower-income workers, while providing less benefits to the wealthy, requiring the wealthy to partly pay for their own retirement through savings accounts and investment accounts. Under his proposal, a wealthy retiree may get less than 50% of the current level of Medicare payments.
Democrats have attacked Rep. Ryan’s proposal as heartless. But they haven’t come up with a better alternative. Nor have they explained why some billionaire, after he retires, should still be entitled to full Medicare payments as if he was a blue-collar worker barely getting by.
balconesfault // Mar 13, 2010 at 7:06 pm
Democrats have attacked Rep. Ryan’s proposal as heartless. But they haven’t come up with a better alternative. Nor have they explained why some billionaire, after he retires, should still be entitled to full Medicare payments as if he was a blue-collar worker barely getting by.
Here’s Ezra Kline’s summary of Ryan’s proposal:
The proposal would shift risk from the federal government to seniors themselves. The money seniors would get to buy their own policies would grow more slowly than their health-care costs, and more slowly than their expected Medicare benefits, which means that they’d need to either cut back on how comprehensive their insurance is or how much health-care they purchase. Exacerbating the situation — and this is important — Medicare currently pays providers less and works more efficiently than private insurers, so seniors trying to purchase a plan equivalent to Medicare would pay more for it on the private market.
It’s hard, given the constraints of our current debate, to call something “rationing” without being accused of slurring it. But this is rationing, and that’s not a slur. This is the government capping its payments and moderating their growth in such a way that many seniors will not get the care they need.
As for why Medicare is applied without means testing, Democrats realize that when you means test a program then upper class people immediately start working politically to gut funding for it.
agentprovocateur // Mar 13, 2010 at 7:56 pm
re: sinz54 // Mar 13, 2010 at 1:58 pm
Ryan’s plan, which would actually raise taxes as well as try to at least partially privatize Medicare, Medicaid, and Social Security, seems to represent the worst of both worlds. You needn’t worry about Democrats attacking it, as it appears Republicans won’t even support it.
The Death Tax, Revenue, and the Laffer Curve « noot's observatory // Mar 13, 2010 at 8:51 pm
[...] both the principle of it and its budgetary implications. Somebody whose nom de cyber is Cetulus writes: Bizarrely, however, Republicans have for years been trying to repeal the estate tax. (They have [...]