Monthly Archives: September 2017

“Medicare For All” is more appealing when you hide the enormous tax increase

According to the Washington Post, the “dam is breaking on Democrats’ embrace of single-payer” for healthcare as a fourth member of Congress co-sponsored Bernie Sanders’s “Medicare for all” bill. But the Post makes no mention of the cost for this bill.

Why, you ask, would they only discuss the benefits to be received without mentioning the cost? Hmm…

Heading over to Bernie Sanders’s Medicare for All website, one finds that the cost is estimated to be $1,380,000,000,000. That’s $1.38 trillion.

Bernie Sanders then lists seven ways to raise the required revenue–new taxes, tax increases, and closing loopholes. The largest source of revenue would be a “6.2 percent income-based health care premium paid by employers,” in other words a 6.2% tax on income to be paid by employers, as if employers will just eat the tax increase without passing it on to employees or customers. On top of this is a “2.2 percent income-based premium paid by households,” i.e., a 2.2% tax increase.

Given that all but one of these additional sources of revenue involves directly or indirectly a tax on income, lets just look at the tax increase in aggregate. This year, the federal government is expected to generate revenue of $3.46 trillion. A $1.38 trillion tax increase is the equivalent of all tax rates rising by 40% (40 percent, not 40 percentage points). In other words, social security taxes would have to rise from 6.2% to 8.7%. The lowest tax bracket would have to jump from 10% to 14%. The 25% tax bracket, in which most American probably reside, would need to leap to 35%. And the top tax bracket would have to go from 39.6% to 55.4%.

Bernie Sanders wants to pay for his Medicare For All by taxing the rich. He raises the top tax bracket from 39.6% to 52%, but only on those earning over $10 million. Other high-income people see smaller increases in their income taxes.

How do lower-income earners fare in his proposal? Probably even worse than their high-income counterparts. Although Bernie Sanders tries to hide it by calling one new tax a “6.2 percent income-based health care premium paid by employers” and another a “2.2 percent income-based premium paid by households,” these are, in effect, tax increases of 6.2% and 2.2%, the first to be paid by the employer, who will surely pass all or most of the cost along, and the second to be paid by the earner. If one looks at one’s income tax rate as the total of his income taxes plus social security taxes plus medicare taxes, the lowest tax bracket will go from a current 25.3% to 33.7%, a 33% increase. That may not be the portion paid by the individual, but it’s the amount the government takes and it is the amount paid by earner either directly through his taxes or indirectly through lower wages or highest consumer prices.

The Medicare For All website also claims that a typical family earning $50,000 would save $5,800 in healthcare spending. He does not mention that the new taxes of 2.2% and 6.2% total $4,200. So the saving as much smaller. But the website also points out people currently receive “tax breaks that subsidize health care” to the tune of $310 billion. These would be eliminated under the plan. The website does not say much does a typical family earning $50,000 receive in these “tax breaks.” I wonder why. Needless to say, that $5,800 in savings all but disappears when one accounts for the tax increases and the removal of tax breaks.

Now it’s clear why the Washington Post does not mention the cost of this “Medicare For All” bill. It’s also clear why the Medicare For All website gives a clear picture of how much a typical family saves but not how much it will cost them.

It’s much easier to give away goodies when people think they are free or someone else is paying for them rather than tell them how much it will cost them. If politicians were required to disclose the costs in addition to the benefits (much like a drug advertisement is required to reveal the side-effects), socialist proposals like Medicare For All would surely gather less support than when everything appears to be free.

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