Greg Scandlen Has a New Blog
The site is here. See, in particular, his description of my own proposal to reform the way government subsidizes health insurance:
I call it elegant because it is simple to understand, can be applied universally with a minimum of administration, and will actually get the job done. The two basic ideas are these:
- People should be insured if at all possible, but they cannot really be required (“mandated”) to do so. All that can be done is fine them if they fail to do it. Let’s assume the fine is $2,000 per person. Fining non-compliers $2,000 is precisely the same as rewarding compliers $2,000. So giving a voucher in the amount of $2,000 for every person who has health insurance is exactly the same as placing a $2,000 fine on those who fail to have it. In either case, non-compliers are $2,000 worse off than compliers.
- We already know how much our society values health coverage. We know that by how much our society spends to provide care to the uninsured. This isn’t part of John’s argument, but I would add we also know by how much we currently subsidize those with employer-based coverage. Curiously that number is about the same in both cases. In 2007, the Congress’s Joint Committee on Taxation reported that the value of the exclusion for employer-based coverage was $143.3 billion in foregone income taxes and $100.7 billion in foregone payroll taxes, or $244 billion in that year alone. Assuming 160 million people receiving employer-sponsored benefits, that is $1,525 per person in 2007. Goodman estimated that in Texas in 2001, each uninsured person received about $1,000 in free care. So, our ballpark estimate of $2,000 per person today is probably not far off the mark.
So, John’s proposal is to provide a voucher of $2,000 (or so) to every person who buys health insurance. Those who do not choose to buy it would have their voucher deposited in a safety net program. This would be financed by eliminating the employer exclusion, as well as other existing free-care programs for the uninsured.
Based on this sketch, I think this plan very well could be a tax hike and a violation of the Taxpayer Protection Pledge.
Assuming the voucher is a government expenditure (as opposed to a tax credit), you’re raising taxes by $250 billion and increasing spending by $250 billion.
Even if the voucher is a refundable credit, the outlay effects of the credit (which are spending) would be paid for by higher taxes.
Didn’t see the followup on comments check-box. Merely posting to stay tied to the conversation. Please ignore.
Love your blog, Greg. It’s great that you and John Goodman can give more exposure to each other’s ideas and research.
Did John Goodman just jump the shark? Unless I am misinterpreting this post, I am shocked, John. It sounds like you are advocating replacing the individual mandate with a tax (fine) that is tied to a specific commercial activity. That is a de facto acceptance of the premise of Obamacare (and is the argument the administration tried to spin with the both the Florida and Virginia court cases- that it’s a tax, not regulation of commerce).
By the way, I would take exception to your math. If you get a $2000 subsidy for participating, and I am fined $2000 for not participating, that is a difference of $4000. If we both start with a nominal income of $50,000, you end up with essentially $52,000 and I end up with $48,000 after the redistribution.
What’s wrong with letting adults make rational decisions in the best interest of themselves and their families, and take responsibility for their decisions?
Ryan you are wrong. At least I hope you are wrong. By that I mean I hope the tax pledge does not prohibit a redistribution of tax benefits that involves no overall increase in the level of taxation.
John, can you explain how this is tax revenue neutral in more depth?
Greg’s blog looks interesting. I will add it to the RSS feed for blogs I monitor.
A voucher system? Why not just say privatize Medicare/Medicaid? See how far that goes.
When is a tax not a tax? When a Republican endorses it?
Ain’t it grand, slamming head first into Americans for Tax Reform? True, when they score the refundable tax credit, they end up with more spending and more taxes.
Unfortunately, excluding employer-monopoly health benefits from taxable income is a horribly inefficient way to offer health insurance, So, there is no way to “reform” without eliminating that and “increasing taxes” in a very narrow sense.
I’m sure we could make everybody happy by scoring the above, plus a refundable tax credit, plus eliminating Medicaid, SCHIP, federal funding of community health centers, etc., in such a way that we get no net tax increase.
Why haven’t we done it yet? ATR opposition to the refundable tax credit is, IMHO, the single biggest obstacle to the conservative movement’s embracing this idea.
Dr. Muldoon is quite right: litigation against the “individual mandate” is based on the Constitution, not economics. There is no economic difference between a fine for not buying health insurance and a refundable tax credit for buying qualifying health insurance. The refundable tax credit is, ceteris paribus, paid by higher taxes on those who do not claim the credit.
But please don’t tell this to the Administration. If Obamacare had avoided the “penalty” and levied another tax instead, there would not be the slightest constitutional challenge to it.
Of course, it’s too late now, isn’t it?
Erik–one wouldn’t have to privatize Medicaid and Medicare. One could, for example, take the same money and give specific subsidies to individuals. They would replace the current mixed bag of producer subsidies, uncertain payments for various conditions, and price suppression rules. The system would not be privatized and no tax increase would be needed. Just copy the SNAP (food stamp) program structure.
Okay, Ryan, here goes. We take all existing tax and spending subsidies and divide them equally among the population. Everybody gets a refundable tax credit. There are no new taxes and no new spending. We are just dividing up what government does in a rational way.
Seamus, we have been subsidizing insurance through the tax system since World War II. Some would say that is the cause of most of our problems. Any way, there is nothing new here as to principle. The new twist is treating everyone the same.
@John Graham, ATR is not opposed to a refundable credit approach. However, you have to make sure you don’t “pay for” the outlay effects of the refundable credit with gross tax hikes elsewhere. I don’t know how many times we have to repeat that over and over, but that’s where we stand.
The Taxpayer Protection Pledge is not an obstacle to good healthcare reform. But it would be ridiculous to do healthcare reform with horse blinders on, pretending that the net tax impact doesn’t matter.
It’s entirely possible and in fact it’s easy to do good reform without raising net taxes.
@John Goodman, that may or may not work. Let’s say there’s $300 billion per year in tax benefits, and $500 billion in spending benefits.
Let’s say we turn that into a $5000 per person refundable tax credit (the math may not add up, but let’s just say for the sake of argument that this is budget neutral).
There are three possible net tax revenue outcomes of this:
1. It’s a tax cut;
2. It’s a tax hike;
3. It’s tax revenue-neutral
ATR would obviously be fine with (1) or (3). However, (2) is the most likely outcome. Why?
According to CBO, 45 percent of households have no income tax liability. You literally have to spend money on them if you want to deliver a benefit–there is no other choice. It would be difficult to envision crafting a scheme like this that doesn’t score out as a spending hike/tax hike.
Linda,
I understand. You would privatize Medicare but call it a subsidy/voucher/tax rebate. You know “A rose by any other name?”
Elimination of the employer healthcare exemption will lead to even more uninsured, bad idea.
I’m confused, first you say a “voucher”, then later “refundable tax credit”, which is it? Big difference to us guys who’s businesses are losing money right now and don’t have any use for a “tax credit”.
Let see if I get this, an unemployed (or under employed part timer) who can’t afford insurance will get fined $2,000.00 for not buying insurance because he couldn’t use his $2,000 “tax credit voucher” and now is in debt with the IRS, cool idea!
Leon, the employer would not be directly affected by this proposal. If you buy health insurance you could deduct the full premium, just as under the current system. But insurance would no longer be tax free to the employees. It would be taxed, just like wages.
The employees would get a tax credit against the premiums, however — regardless of how they obtained the coverage (direct purchase, employer provision, etc.).
Got it, thanks for helping with my confusion, I’m with you now.