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Paying for Health Care is Easy: Tax the Rich

October 14, 2009

The Center on Budget and Policy Priorities has released an excellent report explaining the Senate Finance Committee Health Reform Bill. The purpose of the CBPP is to encourage policymakers to consider the needs of low and moderate-income people, so naturally the report casts a favorable light on the bill, which is said to expand health care coverage by “redirecting spending and tax subsidies from less productive uses elsewhere in the health sector.” In reality, the bill redistributes wealth downward from wealthier Americans to the uninsured. So those spending and tax subsidies are “less productive” not in reference to achieving goals shared by all Americans, but in achieving greater economic equality – a goal many Republicans hold in contempt. Embedded in the very language of the report is a concept of fairness hotly contested by the Right.

If it “fair” for all income brackets to share the tax burden at equal rates, the bill is patently unfair. While hiking taxes on the rich is only one strategy by which the Senate Finance Committee has sought to produce deficit neutral health care reform, it is an important strategy. Currently, the federal government subsidizes health care costs for all Americans by excluding employer-sponsored health care from an individual’s taxable income. The Senate Finance Committee bill would tax health plans exceeding $8,000 for singles and $21,000 for families, starting in 2013. The report approvingly cites CBO Director Douglas Elmendorf as saying that

limiting the favorable tax treatment of health insurance could also help slow the increase in health care costs. The proposed excise tax would discourage insurers from offering, and firms from purchasing, extremely generous health insurance coverage that encourages excess health care utilization. That, in turn would reduce incentives for excessive health care spending.

But, of course, favoritism is precisely what the bill imposes. In the interest of greater equality – spreading the health care wealth around – the wealthy will either pay more for their health plans or, what is more likely, switch to less “generous” and “excessive” plans. Again, such plans are only “excessive” to proponents of economic equality — many conservatives would describe a generous health care plan as the just compensation for talent and hard work. Another measure in the bill would limit the annual contribution on Flexible Savings Accounts to $2,500. Since only the wealthiest Americans set aside $2,500 or more pre-tax dollars for FSA health spending, the measure limits the added benefits they receive from FSAs by contributing more. Which is arguably unfair.

In short, the health care debate is, as much as anything, a debate about fairness. The CBPP, along with congressional Democrats, thinks it fair for wealthy Americans to shoulder a greater percentage of the tax burden than their middle and low-income counterparts so as to ensure that no one goes without necessary treatments. So do I.

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