We’ve heard the benefits will far outweigh the costs when it comes to Medicare for All. But who is willing to pay as much as 32% payroll tax or a 42% VAT?
November 4, 2019
By: Bobby Casey, Managing Director GWP
Both are candid about this cost because they believe the return will be worthwhile to enough people to get them elected. Yang openly admits there will be a VAT that pays for his UBI plan. Love it or hate it, he’s very clear about this and has not once backed away from it. Sanders likewise positions it as paying in for the security of getting what you need back.
Elizabeth Warren, however, has been reluctant to talk about middle class taxes. When pressed by Stephen Colbert, she tried to equivocate and steer the conversation away from middle class taxes. Colbert being friendly toward her advocacy offered up a way to sell through the taxes, but would not allow her to continue to avoid the answer.
Swedish historian, Johan Norberg, refers to the poor as “loyal taxpayers”. The short explanation is they won’t go anywhere. Whereas, the rich have the means and the inclination to leave when things get too onerous economically, so there is an implicit limit on how much they are willing to take.
He’s not wrong. The Panama Papers is clear evidence that rich people don’t want others to take their wealth. The demand for my services is evidence that people of means want to protect those means. And the exodus out of high tax and high regulation jurisdictions demonstrates that those who value wealth potential will seek out places that facilitate that.
The estimate for JUST the universal healthcare piece is $30 trillion over 10 years, which is $3 trillion per year. That’s roughly a 75% increase in overall federal revenues from what the US currently generates.
What are some tax options to achieve this goal?
The Committee for a Responsible Federal Budget itemized these options:
A 32 percent payroll tax
A 25 percent income surtax
A 42 percent value-added tax (VAT)
A mandatory public premium averaging $7,500 per capita – the equivalent of $12,000 per individual not otherwise on public insurance
More than doubling all individual and corporate income tax rates
An 80 percent reduction in non-health federal spending
A 108 percent of Gross Domestic Product (GDP) increase in the national debt
Impossibly high taxes on high earners, corporations, and the financial sector
A combination of approaches
The only option that even looks remotely acceptable is the 80% cut in federal spending, but it would essentially be replaced with federal healthcare spending so it promptly loses its appeal.
If Americans were upset with the revelations of the Panama Papers, then they are in for an even bigger story in about 5 years. They will find not just millionaires and billionaires, but thousandaires who have inverted their lives out of the US and moved their assets offshore!
Looking at just some of these, how does a struggling family survive a 42% VAT? For that matter, how does American retail survive that? It couldn’t possibly handle that kind of inflationary mark up.
How do the working poor survive a 32% payroll tax? Even if split between employer and employee the same way it is now, 16% as opposed to the 7% they pay now is a LOT to take from someone who already couldn’t afford many of their basic needs.
There’s no way this doesn’t hurt the poor first.
I’m looking at the $7,500 per capita mandatory public premium that comes out to $12,000 per individual not already on public assistance and I’m wondering how $1,000 per month per person is more affordable than buying health insurance right now?
Warren loves to put a target on the wealthy, but even then, Yahoo reports:
Warren justifies many of her programs by saying all it would take is “two cents” from the wealthy. That’s a reference to her 2% wealth tax on ultra-millionaires. But Medicare for All would be so expensive that if you taxed top earners at 100%—that’s right, if you took all the income of couples earning more than $408,000 per year—you’d still fall far short. And everybody getting taxed at 100% would obviously stop working.
A cost NOT accounted for in these assessments is the potential two million jobs that will be lost under a “medicare for all” policy. Do they all just become bureaucrats in the new system?
The healthcare problem isn’t “how do we get people the money to pay for it?”, the problem to solve is “how to we make healthcare more affordable so more people are able to pay for it?”
More taxes doesn’t make anything affordable for anyone. Reducing the costs of healthcare, however, could. High deductible low premium plans right now have co-pays ranging from $40-$60.
If people are already willing to pay that much for a non-emergency visit with an insurance premium, is there a way to get routine non-emergency consultations down to this price range, and people only carry policies for emergency and catastrophic circumstances?
Could there be room in the market for something like an “Uber Medic”? Why couldn’t a trained EMT or a former military medic fill the need for routine non-emergency attention? EMT’s make something like $10-$15 per hour. Certainly a few $40 visits per day is a better deal?
There are already online consultation services that range from $15 to $20 per call.
If you’re too poor to afford either of these options, then you’ll never afford your part in universal healthcare. There is no means testing or opting out of national healthcare if it’s rolled into your FICA taxes. Everyone in the US pays them.
Even if the resolution was some combination of the solutions listed, it would need to amount to the equivalent of any ONE of those items in order to pay for it. Again, if this is healthcare, what happens when we start adding on college? Childcare? Debt forgiveness? Some iteration of a “Green New Deal”?
Those supporting universal healthcare, are unaware of how cost prohibitive it really is. In the bluest of states, they have tried to pass something like this, and even then it couldn’t pass simply because there wasn’t a sensible way to pay for it.
Elevating it to the national level won’t make it any more economically sound.
There are free market solutions to make healthcare affordable. There are things the government can do to get out of the way of those solutions, or facilitate those solutions as well. But just saddling an already overburdened economy with more debt and/or taxes is by no means going to make life easier for the poor or the middle class.