Tag Archives: taxes

“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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Life before the social welfare state

In 1779, before the advent of the welfare state or even a federal government in the US, when taxes were virtually non-existent, François de Barbé-Marbois wrote: “Begging is unknown in America. There are, in almost all towns, hostels which take in old people or those who are unable to work. As for the unemployed, there are other institutions where care is taken that they lack neither work nor food.” Barbé-Marbois, Our Revolutionary Forefathers 71

Taxing offshore accounts would solve 6% of the problem. What about the 94%?

Proponents of big government and haters of the rich are making a big deal about $21 trillion that is being hidden in tax-free offshore accounts. The Observer reports:

A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore – as much as the American and Japanese GDPs put together – according to research commissioned by the campaign group Tax Justice Network.

James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, has compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited, released exclusively to the Observer.

He shows that at least £13tn – perhaps up to £20tn – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy”. According to Henry’s research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.

The information I wanted didn’t appear until paragraph eleven:

Assuming the £13tn mountain of assets earned an average 3% a year for its owners, and governments were able to tax that income at 30%, it would generate a bumper £121bn in revenues – more than rich countries spend on aid to the developing world each year.

That £121 billion is about $200 billion. The global budget deficit runs at about $3.5 trillion or 5.3% of GDP.  (The United States leads the way with a deficit of $1.3 trillion or about 9.3% of GDP.) If these hidden assets suddenly became taxable, the global budget deficit would decline by about 6%, assuming the governments don’t just spend the newfound money.

No plan to “tax the rich” or “close loopholes” can possibly reduce the budget deficit by a significant amount. As I noted previously, the U.S. government would need to double income tax rates to close the budget deficit. Obviously, this is unfeasible because tax avoidance would rise when the “wealthy” are faced with a 70% income tax rate in addition to state and other taxes. Additionally, this doubling would also apply to the poor and middle class.

The government simply cannot raise taxes enough to make any significant dent in the deficit. The idea of taxing “hidden” money would only solve 6% of the problem and that excludes the cost of enforcement. Maybe we should focus on the other 94% of the deficit rather than the 6%.

A proposal to satisfy Warren Buffett and raise his taxes

I’m tired of hearing Warren Buffett complain about not paying enough in taxes.

I propose a 10% property tax on all Americans with personal wealth in excess of $40 billion. This should bring the government about $10.5 billion in new revenue; $4.4 billion from Warren Buffett and $6.1 billion from Bill Gates.

What say you Mr. Buffett? Willing to put your money where your mouth is?

The government would have to double income tax rates and not see any tax avoidance or evasion to close the deficit.

Did you know? The government would have to double income tax rates and not see any tax avoidance or evasion to close the deficit.

Windfall profit tax on ex-government officials

For the second time in three days, Glenn Reynolds of Instapundit mentioned the idea of a “50% surtax on the earnings of former government officials.”

On April 10, 2011:

SO OBAMA’S PEOPLE ARE TALKING TAX INCREASES AGAIN. Here’s my proposal: A 50% surtax on anything earned within five years after leaving the federal government, above whatever the federal salary was. Leave a $150K job at the White House, take a $1M job with Goldman, Sachs, pay a $425K surtax. Some House Republican should add this to a bill and watch the Dems react.

Then on April 12, 2011:

FORGET JOHN GALT, WHO IS PETER ORSZAG? Peter Suderman writes: “Here’s my answer to the question: He’s a pretty-boy pencil pusher whose business, as the top budget brainiac in the administration, was to mislead the public about the budget. . . . Ultimately, it doesn’t really matter what Orzag is doing for Citibank. His primarily job duties are intangible. Mostly it seems he’s there to cast his sexy geek-boy light on the institution and serve as a conduit to Washington’s power centers.”

Seems like another good argument for my 50% surtax on the earnings of former government officials. After all, at least half of Orszag’s value to Citibank comes from his prior government service. Why shouldn’t the taxpayers claw some of that back? Shared sacrifice, dude. . . .

While I almost always oppose taxes, I might be able to get behind this one. However, I don’t like the idea of a surtax. I think it should be called a windfall profit tax.

Ballot propositions: The voice of the people or the tyranny of the majority?

When I moved to Phoenix in 1986, the sales tax was 6.7%. Today it stands at 9.3%. How have we let our state legislature, county, and city councils raise our taxes so? Well, actually, they didn’t. We did! Correct me if I’m wrong, but every sales tax increase in Arizona, Maricopa County, and Phoenix, except the recent food tax, has been approved by us at the ballot box.

That’s democracy for you. Aristotle, Polybius, and the Founding Fathers all warned about the evils of democracy. Tocqueville called it the tyranny of the majority. In our case, the majority votes to raise taxes, collected mostly from the rich, to distribute as gifts among themselves.

But hey! We are doing it for the kids. We are doing it because we need more cops and firefighters to protect us. Spending ever-increasing amounts of money on schools, most of which goes to bureaucrats, is not “spending” but an “investment.” An investment in the future.

Just about every year we have tax increases on the ballot. Some fail, but some pass. The result is steadily rising taxes. But when we voted to raise taxes for more police and fire, Phoenix announced cutbacks just a few months later. Taxes rose while the number of police and fire remained largely unchanged. It was all a big shell game. A trick to raise our taxes.

So why do we fall for it time after time? More than 2000 years ago, Polybius wrote that the people become “accustomed to feed at the expense of others and to depend for their livelihood on the property of others.” We just can’t help ourselves. If we didn’t receive our free schools for the kids, our free police and fire services, our cheap public transportation, our welfare, our unemployment, and our food stamps, we’d all suffer the consequences.

Most of you may find this a shock, but I hate democracy. I hate referendum and initiative. Politicians use it to skirt responsibility, saying that they weren’t the ones who raised taxes. Public unions use it to push for bigger government.

Our Founders knew the evils of democracy. Democracy had its place in American cities of the 1700s, at a very small local level, but the Founders knew that it could not work for large numbers of people. It only worked in small communities where just about everybody knew everybody else. The largest American city back then had just 100,000 people or so. Phoenix with well over a million people, Maricopa County with three million people or so, and Arizona with six million or more are just too large for democracy. That’s why the Founders made the US a republic. Except possibly for small communities, all our governments should be republics.

Democracy is based on majority rule. Republics are based on rule of law. I prefer the protection of stable and well-known laws than the whims of the public. The public’s job is not to vote for higher taxes or more “free gifts” either. As Jefferson said, the people are the “ultimate, guardians of their own liberty.” That is our job. To protect our liberty. Protect our liberty from foreign invasion. Protect it from our government. Protect it from each other.

So what is the true purpose of ballot propositions? Are they to defend our liberty? Sure doesn’t seem that way. Or are they designed to trick us and grow government? Based on our history, it sure seems that way.