Serious people have been taking labor unions to task for opposing the insurance excise tax, explaining why it makes sense for the Baucus health reform bill to tax high-end insurance plans. Yglesias has helpfully reduced the main policy argument to this:
There’s no good reason for the tax code to privilege compensation taken in the form of health insurance over compensation taken in the form of money.
This is an interesting argument. It could be interpreted as saying that we shouldn’t use the tax code to favor some things over overs, by exempting from taxes things we want to promote and taxing things we’re trying to discourage. So even if we want to encourage everyone getting health insurance or buying homes or making charitable contributions, we shouldn’t structure taxes to favor those choices. I don’t think that’s what he means.
I think this part of the tax discussion should be about what we do/don’t want to encourage/discourage. It’s fine to use the tax code to help price environmental externalities — e.g., via a carbon tax — and rebating it back via the tax system to low-income folks or, e.g., those who weatherize their homes. At the same time, I’m not convinced that income from investment should be taxed at only 15 percent compared to income from wages and regardless of total income.
It’s one thing to criticize the tax exclusion for employer-provided insurance because it favors the wealthy over the middle class, for example, by giving a much larger tax exclusion to wealthy people with employer-paid $40,000 insurance policies than it gives to middle-class folks whose employer offers a $21,000 plan in a high-cost region, never mind someone who buys their own. Seems to me the remedy for that unfairness should be structured progressively based on the person’s total income, and the cost of an insurance plan is often a poor proxy for that.
It’s quite another thing to say that a middle class family should pay higher taxes because it chooses to take income in the form of employer-paid high value insurance and not lean on anyone else.
I understand the economic arguments against the current structure, but if folks can achieve some economic and health security — which are presumably government’s goals in any reform — through this means, it’s not clear why government should be looking here for substantial revenues, no matter how well the tax tracks rising health costs, as opposed to a zillion other tax shelters that are far more egregious in both social unfairness and public harm.
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This is a point that’s often lost. As for the big message, you got it. Why would we tax the middle class to pay for health care when the middle class are the very people we’re trying to help?
It’s not just the question of where you raise the revenues. If the government were implementing a wholesale new system of universal coverage, and had a plan for transitioning away from the employer-based system so that everyone is eventually covered by Medicare II or the exchange or whatever, then you could think about phasing out the tax exclusion and replacing it over time with whatever tax system you used to pay for universal coverage. But the Baucus plan moves in opposite directions, both restricting the movement into the exchanges and away from employer-based coverage, while punishing people for staying in a system they can’t get out of. There’s no coherent theory behind what they’re doing.
I think the coherent theory is to bail-out the insurance while not increasing taxes on the rich very much.
Unions should be proud of having wrested from their reluctant and sometimes brutal and violent employers high-quality health care and pension plans. Not coincidentally, those plans benefited all their employers’ workers and managers, not just union members, by setting the standard for the plans that applied to them. Managers, of course, still gave themselves supplemental plans on top of those benefits.
Union plans should be the standard we hold the industry and government to, not the one we run away from by denigrating their negotiators or taxing their benefits.
Union health care plans are paltry compared to the health and pension plans our Congresscritters award themselves. That’s been raised and ignored time and again. We ought to keep raising it as a fairness and an expense issue, especially as the Blue Dogs and Goopers have suddenly become hot and bothered about what their government is spending.
Congresscritters and Villagers have no shame, but the rest of the country has indignation, a voice and a vote.
Maybe I am missing something, but the discussion is not about the tax break for employee health insurance benefits itself, but about an surcharge tax for supposedly ‘too expensive’ ‘gold plated’ policies.
I think Yglesias’ summary is mistaken in two ways. The specific proposal is about about imposing a tax on beneifts above an arbitrary minimum, not about whether it is a good idea to tax or not tax the whole benefit. So, there should be a discussion about the merits of a progressive tax rate on one specific kind of benefit or amount of benefit. Two, health insurance, and health is not a typical good. There are informational and other externalities that may make a more comprehensive policy more efficient for some than for others. So, his whole discussion is a superficial muddle.
It is interesting to me that, in the name of protecting the ‘uniquely American way’ of doing things (that is, allowing legal rip-offs by rich corporations, and protecting corporate profits for no apparent reason other than they are rich corporations) the Baucus bill inteferes with free choice, and consumers’ valid preferences, and perhaps, efficiency.
I read someplace that in other countries, people can buy more coverage and the supplemental market with no tax or other penalties at all. I had never thought about that and went to check. From looking at France and Switzerland Germany and Spain, it looks like people there can buy supplemental insurance if they want more coverage than offered in public or compulsory policies, with no penalty. Australia has experimented with small taxes and subsidies for their supplementary policies, but lately mostly small subsidies to encourage more use of private insurance. In heavy handed government controlled socialist Europe and Australia, the government interferes less with consumers’ valid desires for more insurance if they want it LESS than is proposed in the land of the free, America.
Bere in the US, we are going to tax poeple who have comprehensive policies that are deemed to expensive or generous. Why? As a kluge to make the program deficit neutral, or just to punish unions, or on the very doubtful theory that too much coverage must, in and of itself, increase costs, or expenditures?
Seems to me this is a bad idea that they are proposing because they need to raise some revenue and it cannot come out of the profits of insurance companies, because, well, just because.
People have been asking about what happens if this reform effort fails. My answer is that it makes not difference whether it fails or not. What should happen next year is that we press for more reform, because this bill is going to be so flawed, so full of useless or noxious bells and whisstles and wheels within wheels to protect corporate profits, that it will need fixing up within a few years. Doesn’t make any difference whether you want single payer, public option or Swiss style private system, we will need further reform if the likes of Baucus and Conrad and Snow have anything to say about the legislation.
But they’re already paying higher taxes because they’re choosing to take
income in the form of salary rather than capital gains. Next.
It seems to me that some of the people who rejected Medicare for All (HR 676) as not politically possible are pushing an idea that is politically radioactive. If the Dems pass a tax on health benefits under color of health care reform they will go down in flames in 2010.
Wouldn’t it just be simpler to limit the tax deduction that employers can take for health insurance for employees to some reasonable amount (e.g. average plan cost or some other upper limit) than to get into a surtax program? And extend the same benefit to individuals and self-employed, who at the moment cannot deduct premiums straight-forwardly. If the point is to limit tax subsidies for health insurance, that is.
That’s right.
Whoo HOO! Jane’s on the headline at Huffpo as one of the game changers!
Dunno, but this is one more detail that is going to confuse some people for a week or two. This is where the teabaggers try to dig in to people’s psyches and confuse them.
The unions don’t need to give the tea baggers any more claims for grievance by helping to create a system so complex and confusing that it simply feeds more public animosity and fury.
Bad place for the unions to put their energy.
Go vote for Jane, everyone.
Thx for this one, Scarecrow!
Hopefully the dems will be in charge long enough to fix some of these tax scams, and they’ll have the will to do it.
It makes about as much sense as going ballistic over the Wyden amendment because it will “destabilize” our current system but putting in incentives that will lead employers with any sense to stop offering employer based group insurance.
Yeah, there’s a missing step in the (my) explanation, which is the usual assumption that if you tax the plan, the insurer will find a way to pass the cost through to the consumer, either in the form of higher premiums or by offering a cheaper plan and passing the lost value through to the consumer. That’s why I skipped from the surtax to capping the exemption — but that needed to be explained.
I’m not denying the discriminatory impacts of the current exemption; but this doesn’t seem a coherent way to deal with that issue.
On m’way …
That was fun to get to vote for Jane. Some of those people I’ve never heard of.
A deal’s a deal. Unions sacrificed wages for those benefits. Either you exempt unions, compensate them in some other way (I don’t know how you could), or else it’s JUST PLAIN UNION BUSTING FROM A DEMOCRATIC PRESIDENT. Sorry for shouting, it makes me really mad.
Holy crap :-) I know where you got that photo. I used to ride with David Blaine from time to time. That’s a picture of the side of the Thomas Hammer Coffee Roasters HQ in downtown Spokane!
I don’t blame ‘em at all for fighting for better working conditions–it’s what a union is for.
But…all this does ask progressives–especially those stuck in right-to-work states–that the unions haven’t exactly gone to the mat for any wider leftist movement in this country. A fifty year tradition of ‘looking out for number one’ doesn’t exactly inspire alot of empathy, right off the bat.
My view is that we need to win a level playing field for unions, we need to cultivate thier rebirth as a power in this country, AND we have to fight many if not most of their leaderships tooth and nail to drop the business unionism and be the feisty, educative laboratories of democracy we need for them to be.
Unions are fighting for the Public Option. The last thing Progressives want to do is have a chip on their shoulder at this crucial juncture.
That’s not to say I agree with unions always. There is a good argument to be made that unions knew that GM and Chrysler were going to have to be bailed out, and they continued to sign contracts that they knew management couldn’t honor. But that’s something for a judge to decide. In general unions are good for working families and progressives should have their back.
O.T.
Go to Huffington Post and vote for Jane as Ultimate Game Changer
http://www.huffingtonpost.com/…..lide_image
I belong to the IBEW, (building trades electrician). I have “good” not great health insurance. I pay 5% working dues, 4% of my vacation pay goes to PAC money and my raises have all gone to health care over the last 5 years. We don’t get paid days off… it is construction. Why should I have to pay even more. I donated to Clinton, Obama, The DNC. I gave to Rob Miller the opponent of Mr. “you lie”. I gave to congressman Grayson in Florida when he called out the repugs “die quickly”. I have donated to act blue. I have not missed a vote in 20 years and NEVER voted republican even ONCE. I have been, like most of my union brothers and sisters a GOOD Democrat. It is time for the democrats in congress to do the same. If they tax my health coverage, or I receive lesser coverage, I will wash my hands of all of them. NOBODY donates or votes more regularly than union workers, especially the building trades. It is time to act like the party of the little man. Hey DEMOCRATS…. act like fucking DEMOCRATS and pass a good bill. This Baucus asshole is just looking to get re-elected. Most of that finance committee bill is crap!
Word.
It’s amazing that we complain amongst ourselves about what the Congress is doing, and trying to shove on us, but we aren’t camping on their door steps. We don’t have the balls the Iranians did to actually go to the streets and face the bullets. Oh! That’s because we have the greatest form of Government in the world, even though it doesn’t work. The greatest Healthcare in the world, if we are lucky enough to get the care we need. The greatest Military in the world, even though it can’t win wars, protect us, or handle little countries. We have the greatest economic system, that is full of booms and busts, and we always are on the short end. We are the greatest, even with the fact that everything we have is unsustainable, and we are doing nothing to solve any of our problems.
The worst part of all of this is we are looking to the same people in our Congress that caused every problem this Country has, to fix healthcare. It was Congress some different poeple at a differnt time that set up the very insurance based healthcare system we enjoy. They promoted it, defended it, and protected it. Now we are expecting them to acually do something about it. HA HA, is the best coment for that.
How about some general observations-Unions bargain for their health care in lieu of wages; it is part of their wage package and if the costs of the health plan go up in between contracts it comes out of the member’s wages, not from the employer. At least in my union. But-the income is pre-tax. That means that there is no income tax on the insurance. For people who buy their own insurance it is with after tax dollars; even though they get to deduct it they are only saving what their tax bracket saves. Not a totally fair deal. In essence a union member is getting tax free income, albeit in the form of health insurance.
Other stuff-notice that if everyone made enough money to buy their own insurance we wouldn’t be having this conversation? And that the same people who oppose raising minimum wage, and oppose unions and the money and benefits the members get are the same ones opposing health insurance reform? There is a pattern here.
If the insurance companies were willing to change; were capable of changing; and cared about the American people they would be making changes in the face of the potential legislation in an effort to soften the new laws. But they are not are they? Instead they are spending money hand over fist lobbying Congress to keep things the same. This entire debate about the public option, and all the convoluted mechanisms that legislators are trying to write into the law are all attempts to deal with the health insurance companies, and keep them in the loop. Keeping companies in the loop that serve only as middlemen and skim precious health dollars into their own coffers, without providing one iota of benefit for patients is folly. I think we should lobby Congress to write laws that directly and deliberately create a situation where the insurance companies will shortly wither and die. Drown them in the bathtub as Grover Norquist is fond of saying. Then let’s see if they come around or go down fighting. Last thought-How about we ask Congress to outlaw earmarks and use the money for health care? Won’t that get Congress’s panties in a bunch!
There’s no good reason for the tax code to privilege compensation taken in the form of health insurance over compensation taken in the form of money.
That’s right, and there’s a whole ton of money in the form of foregone taxes- $2 trillion over ten years.
I’m with you 100%. I have always chosen union jobs quite deliberately, because I believe in having some say in the conditions of my working life, and benefits (especially healthcare) have always been just as important to me as salary. I have been a union rep and contract negotiator, and it is a grueling process that usually involves an agreement over the total pot of money for the whole crew, and it’s then divied up among wages and benefits. I object to the proposal to tax my (so-called) “Cadillac” healthcare plan, because it changes my compensation without any negotiation. (Why do all such changes of the rules in the middle of the game always result in take-aways, never increases?)
I am barely middle class, if that. I have saved for my retirement and paid the max into pension account, and chose a job with retiree healthcare benefits, and live very frugally. Because of this, I might actually be able to retire pre-decrepitude, at age 60, with a (rented) roof over my head and very modest lifestyle, after earning a living for 44 years straight.
The only way I would be willing to pay anything more for healthcare would be if ALL the money went to actual healthcare, not to insurance profits (and make no mistake: I am already paying for all of MY healthcare, and some of other people’s healthcare too, through taxes).
It is hard to imagine that anyone seriously believes that it’s people making less than $75k who should suddenly be taxed to pay for any new healthcare plan–has the world gone mad?
And why would the public option be limited to self-insured? I am SICK of paying into health insurance corporations, and would like the choice to pay into public plan instead, just as I chose to go with US Dept of Ed for my student loans, rather than the jerk banks–I even would have been willing to pay a higher interest rate for this privilege!
In short: why should I be penalized via taxes for making good decisions, in choosing to take responsibility for my healthcare costs to the best of my ability? The tax-free status of health insurance was always to avoid passing my healthcare costs onto taxpayers; why penalize that choice that now?
Like Mrwirez, I am a lifelong and repeat contributor to Dem and progressive causes, but it really frosts me that any serious consideration at all is being given to prying yet more tax dollars out of me and those who are in similar circumstances. Combined with other things (Afghanistan; refusal to prosecute torture; continued attack on civil liberties, etc.) my patience is wearing quite thin.