Healthcare is Sick

Is there a cure?

Econ 101: Taxes reduce spending

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Almost everything in our lives is taxed- gasoline, clothes, income, etc.  Yet for some reason the government doesn’t take a cut from employer provided health care, which makes little sense considering these premiums have increased 119 percent over the last decade.  Econ 101: taxes reduce spending; if congress is so adept at taxing every other part of the economy, why do they pussyfoot around healthcare, which now accounts for 17.6 percent of the GDP?

The answer is devilishly complex.  Under the Senate Finance Committee’s proposal, insurers selling plans costing more than $8,000 for individuals and $21,000 for a family would face a 40 percent tax on the excess amount, which doesn’t seem to bad considering the average family policy is currently $13,375.

The proposal may be billed as a tax on “Cadillac” insurance plans, but would also encompass many middle class premiums, as costs can fluctuate widely based on area of the country, size of the company offering the plan and one’s occupation.

Although the tax would be levied against insurers, costs would be passed to consumers in higher premiums.  This has led unions- many of which secured insurance that currently falls into the taxable category, or soon would- to condemn the plan.  Not surprisingly a majority of Democrats, many of whom rely on the financial support of unions, have expressed their opposition to the proposal in a letter delivered today to Speaker Pelosi.

Nearly all Democrats agree that America needs health care reform, yet they oppose the Finance Committee’s proposal to tax premiums, which Chairman Max Baucus said would pay for more than a quarter of his $774 billion plan.  Why? Politics; these Democrats may want health care reform, but they want to keep their jobs more.

It’s understandable that middle class people are apprehensive about paying more for health care, but their premiums are going to increase over the coming years whether they are taxed or not.  The Congressional Budget Office estimates that job-based health insurance could increase 100 percent over the next decade.

Besides raising money, this tax would help decrease long term health care expenditures, as insurance companies would have an incentive to control costs.  The problem is this is a long term benefit, and all anyone is concerned with is how reform will affect them in the short term.  This is unfortunate, as we need reform to prevent America from bankrupting itself on health care costs, which should make sacrifices like health care taxes common sense.


[1] http://www.nchc.org/facts/cost.shtml

[2] http://www.washingtonpost.com/wp-dyn/content/article/2009/09/30/AR2009093004730.html

[3] http://online.wsj.com/article/BT-CO-20091006-714245.html

[4] http://www.nytimes.com/2009/09/21/health/policy/21insure.html?pagewanted=1&_r=1

[5] http://www.nchc.org/facts/cost.shtml

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Written by Chris Russell

October 7, 2009 at 4:52 am

Posted in Uncategorized

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