There's only one big remaining issue on health care reform: how to pay for it. The House wants a 5.4 percent surtax on couples earning at least $1 million in annual income. The Senate wants a 40 percent excise tax on employer-provided "Cadillac plans." The Senate will win on this unless the public discovers that a large portion of the so-called Cadillacs are really middle-class Chevys, expensive not because they deliver more benefits but because they have higher costs.
The dirty little secret under the hood is that less than 4 percent of the variation in the cost of current health-care plans has to do with how many benefits they provide. Most plans that cost more do so because (1) a particular set of employees is older and tends to get sicker than the average set of employees (that's true for a lot of old rust-belt firms), (2) the plan is offered by a small business that lacks bargaining clout with insurers (small businesses pay, on average, 16 percent more for the health insurance they provide, per capita), (3) the work that employees do subjects them to greater risk of medical problems (health-care workers, for example), or (4) most employees are women (who tend to have higher health-care costs than men because women are the ones who bear children). Plans could also cost more but deliver average benefits because (5) insurers in the area don't face much competition (one main reason for the public option).
So by taxing so-called Cadillac plans, the Senate bill would actually end up taxing the Chevy plans of a large portion of the middle class. And as time goes by, a still larger portion, since the Senate plan is geared to the overall rate of inflation rather than to the (much higher) rate of increases in health-care costs.
Defenders of the Senate plan say not to worry. Employers who bear the tax and therefore have an incentive to cut back on health care for their employees will make it up to employees in higher wages. But anyone taking even a passing glance at today's labor market knows this is wishful thinking. Employers have no incentive to raise wages when almost everyone is worried about keeping their jobs. (Besides, a dollar's worth of tax-free health benefit is worth more than a taxable dollar of wages.)
In any event, I thought a major purpose of health-care reform was to get more care to more people, not to cut it back. Even employees who get extra dollars of wages to make up for the cutbacks won't necessarily plow those wages back into health care.
Some say the Senate's excise tax is the only way to control long-term health care costs. Baloney. If a portion of the middle class loses their health care, they won't get the preventive care that's so crucial to containing long-term costs. If Congress wanted to do more cost containment it would allow Medicare and Medicaid to use their huge bargaining power to get lower costs from pharmaceutical makers and medical suppliers. And it would have a public option to compete with private insurers.
Of course, we're playing with probabilities here. No one knows exactly what will happen when the Senate excise tax hits -- how many employers will cut back coverage without raising wages to compensate, how many middle class people will be hit hard by this, how many who do get higher wages will use them to buy health care, including preventive care.
But why even take these chances when the House bill simply and cleanly goes after the top 1 percent? It's not as if couples earning over a million can't afford to pay the tax. When I last looked, the top 1 percent was taking home a record 23 percent of total income. If anything, the Great Recession is widening the gap. It's bonus time on Wall Street again. But the middle class is taking a beating.
This is the last big fight on health care reform. It's being fought right now. Make your voice heard.
Cross-posted from RobertReich.org.
Bank fee on Bounce president shouldn't have gave tax payers money to banks in the first place
Unfortunately the reform bill(s) are trying to do too much in one bill. It seems like they have dropped most of the approaches to reducing costs and are focused on higher taxes to cover the uninsured. So the fight is over who pays.
Generally taxes on high incomes gradually start to impact more and more people as inflation pushes people up the chart. Witness the Alternative Minimum Tax. If inflation increases to 10% from today's 3% (not unlikely), people with an AGI of $100,000 will find themselves subject to the increases in their lifetime, which the government will correct with the same speed they have applied to the AMT.
If we all want to cover health care for everyone (I agree) then we should all have a part in covering it so that we pay attention to how the money is spent.
You say, "The Senate will win on this unless the public discovers that a large portion of the so-called Cadillacs are really middle-class Chevys..." I agree. But why is it that the public hasn't discovered it yet? I don't understand.
Actually though I would love to see these rich liberals have to give all their money to the government and have 20 people move into their mansions with them. Think Queen Pelosi would do that?
The blog says the top 1% was taking home 23% of total income (correct me if I'm reading that incorrectly).
40% of the Government's income tax receipts come from the top 1% (again, if you've seen different numbers, just let me know, but this figure doesn't appear to be controversial as far as I can determine).
So we're talking income taxes, and we seem to be talking about the same 1%.
We have a progressive tax system, designed so those with more income not only pay more dollars, but also a higher percentage of their income.
So, by definition, as you earn more, you pay more - I've never seen anything to contradict this.
Sales and excise taxes are not progressive, so a cigarette tax would take a higher percentage of a poor person's income than of a rich person's, assuming they bought the same amount of cigarettes.
But even in these areas, the wealthy minority still pays the majority of taxes, because they buy more.
So all you're left with is that rich people avoid most taxes through tricky accounting schemes. But that directly contradicts the data above.
If you have any data, I'd love to see it.
I'm not saying that rich folks should be paying more or less - but you should be able to admit that we do have a progressive taxation scheme already, and that you'd just like it to be more progressive, which is a valid opinion that can be discussed rationally.
It is also a myth about higher education being free for everyone in other countires. It is only the students at the top of their classes that go on to higher education.
Unfortunately, it now also looks as though the Democrats are as in to ensuring that the wealth of the nation mostly flows up to the casino economy gambling class as the Republicans.
The reason for this is that VAT is rebated to the manufacturer for goods exported. This doesn't begin to take into account additional balance of trade skewing from currency manipulation and direct strategic industry subsidies.
If you want to get more details, read Pat Choate's "Saving Capitalism".
We're screwed and nobody is doing anything meaningful to address this, at least that I'm aware of. If there were, I'd do everything I could to support them.
Are you ready to pay up to a 25% tax on everything you buy? NO, because you will claim its unfair to the poor. Well if you want socialized medicine the way they do it in Europe and specifically the Nordic countries, then you have to pay for it.
For example....
-In Denmark, VAT is generally applied at one rate, and with few exceptions is not split into two or more rates as in other countries (e.g. Germany), where reduced rates apply to essential goods such as e.g., foodstuffs. The current standard rate of VAT in Denmark is 25%. That makes Denmark one of the countries with the highest value added tax, alongside Norway and Sweden.
-The current maximum rate in operation in the EU is 25%, though member states are free to set higher rates.
Denmark has the highest average monthly salary (now this includes benefits for FT employees) at 1,850 Euros a month (thats around 22K Euros a year or roughly 30K a year USD). But you have to remember you are also paying close 25% VAT tax on most everything you buy.
The rest of the European countries go downhill from there....
Oh yeah and Germany has the 7th highest wages at 1277 Euros a month.
Someone must have told you that lowering taxes for the rich and paying lower wages will expand the economy when, in fact, it does the reverse. It simply frees up more cash to play fast and loose in this so-called financial innovation we are only too familiar with. Remember Michael Milken's Junk Bonds years ago. If our taxes go just a bit lower and those financial innovators can work their magic just one more time, then things will be alright. If you believe that, you are playing to lose as well.
Dwight Eisenhower
bill instead the one we were promised. See how they like it now LOL.
they are making more money, ergo pay more taxes. The US has 269 billionaires and the next country to us has 26, you see the fallacy here? Why should the little person pay 28% and the rich 15% as Warren Buffett had pointed out. I am for everyone paying their fair share, currently it is not happening.
I think this issue is the one that I hope House Democrats will rally around to force better provisions through reconciliation - including a PUBLIC HEALTH OPTION!
Anyone who says that you need 60 votes in the Senate to pass that is lying. Period. We need our House Democrats to show they have the spines of a Lieberman and stare down the President.