In “Make no mistake: Medicare for All would cut taxes for most Americans,” Berkley economists Emmanuel Saez and Gabriel Zucman make a bizarre and disingenuous argument to make an otherwise perfectly valid point.
The starting point of any intelligent conversation about health in America must be that it’s a cost for all of us – and a massive one. The United States spends close to 20% of its national income on health. Elderly Americans and low-income families are covered by public insurance programs (Medicare and Medicaid, respectively), funded by tax dollars (payroll taxes and general government revenue). The rest of the population must obtain coverage by a private company, which they typically get via their employers. Insurance, in that case, is funded by non-tax payments: health insurance premiums.
Although they are not officially called taxes, insurance premiums paid by employers are just like taxes – but taxes paid to private insurers instead of paid to the government. Like payroll taxes, they reduce your wage. Like taxes, they are mandatory, or quasi-mandatory. Since the passage of the Affordable Care Act in 2010, it has become compulsory to be insured, and employers with more than 50 full-time workers are required to enroll their workers in a health insurance plan.
This is just sheer and utter nonsense. Words have meanings. A tax, by definition, is paid to the government, with noncompliance punishable by said government.
Insurance premiums paid to private businesses are . . . insurance premiums. Yes, it was for a short time required under the Affordable Care Act to prove coverage or else pay a fine that was much, much smaller than the premium. The Supreme Court ruled, 5-4, that Congress had the power under the Constitution to do this because it was effectively a tax; they were wrong. Regardless, this provision has since been eliminated.
I find this frustrating not because I oppose Medicare-for-All but because, in adopting the absurd “tax” dodge, Saez and Zucman diminish what is actually a very powerful argument with which I very much agree:
A frequent objection to calling health insurance premiums a tax is that people have some choice. Can’t the poor, the argument goes, enroll in cheap health plans? If you start calling health insurance premiums a tax, then shouldn’t we also call spending on food and clothes a tax?
This argument, however, is wrong, because cheap healthcare does not exist. There are cheap meals, there are cheap clothes, but there is no cheap way to treat your heart attack, to cure your cancer, or to give birth. Cheap health insurance means no healthcare when you need it. All wealthy nations, even those that try hard to control costs, spend 10% of their national income on health – the equivalent of $7,500 a year per adult in the United States. The view that healthcare services are like haircuts or restaurant meals – services for which there is a product tailored to any budget – is a myth. Healthcare is like education: everybody needs it, regardless of their budget, but it’s expensive. That’s why all advanced economies, except the United States, fund it through taxation.
Perhaps because my dad was in the Army and I grew up taking it for granted that the kids of privates and colonels alike could go to the doctor (and even the dentist and optometrist!) whenever they needed, it has never made sense to me that access to healthcare should be based on the ability to pay. Even in my staunchest, most capitalist College Republican days, I thought the “America has the world’s greatest healthcare because of the free market” argument was absurd.
While I bristle at the Bernie Sanders stance that health care is a “right”—no one has a right to another citizen’s labor—I’m perfectly comfortable with the idea that all Americans deserve access. And that, because health crises are unpredictable and beyond the ability of even upper-middle-class people to absorb out of pocket, it requires a system of universal coverage to make that a reality.
Let’s just admit that we’re going to have to raise taxes, rather substantially, to do this. Like every other developed country on the planet.
Let’s not, by contrast, resort to absurd, inflammatory rhetoric like this:
The main difference between the insurance premiums currently paid by American workers and the taxes paid by workers in other countries is that taxes are based on ability to pay. The income tax has a rate that rises with income. Payroll taxes are proportional to income, at least up to a limit. Insurance premiums, by contrast, are not based on ability to pay. They are a fixed amount per covered worker and only depend on age and the number of family members covered. Insurance premiums are the most regressive possible type of tax: a poll tax. The secretary pays the same amount as the executive.
Paying for things based on what they cost isn’t a tax. And it sure as hell isn’t a poll tax. It’s a free market that we accept for virtually everything in society. But that, for reasons Saez and Zucman explain perfectly well without resorting to nonsense, doesn’t work for health care.
And the economic cost-benefit analysis stands perfectly well on its own without the outrageous “poll tax” nonsense:
Proposals such as Medicare for All would replace the current privatized poll tax by taxes based on ability to pay. Some believe that it would result in a big tax increase for America’s middle class. But the data show that it would, in fact, lead to large income gains for the vast majority of workers.
Take again the case of a secretary earning $50,000 in wage and currently contributing $15,000 through her employer to an insurance company. With universal health insurance, her wage would rise to $65,000 – her full labor compensation. With an income tax of 6% – which, if applied to a base large enough, would be enough to fund universal health insurance – she would have to pay about $4,000 more in tax. But the net gain would be enormous: $11,000. Instead of taking home $50,000, the secretary would take home $61,000.
In fairness, Sanders is already making this argument. Elizabeth Warren, to the exasperation of her competition, is refusing to acknowledge that people like secretaries would have to pay more tax—but save even more in premiums!—if her plan were passed into law. But it’s a perfectly sellable calculation.
I lack the accounting skills to assess this but it seems reasonable—if, again, we tune out the “premiums are a poll tax” nonsense:
On TaxJusticeNow.org, any interested reader can simulate the effect of replacing private health insurance premiums by taxes – progressive income taxes, wealth taxes, consumption taxes, or broad taxes on consumption or all of national income. This simulator that we developed is open-source, user-friendly, and based on a systematic exploitation of all available statistics about who earns what and pays what in taxes and health insurance in America.
As one illustration, it’s possible to see how the tax plans of the leading Democratic primary candidates would affect tax rates for each group of the population. For instance, Bernie Sanders’s tax proposals would be enough to replace all existing private insurance premiums, while leaving 2.6% of national income to cover the uninsured and spend on other programs. Under such a plan, the 9 bottom deciles of the income distribution would gain income on average, as would the bottom of the top 10%. With smart new taxes—such as broad income taxes exempting low wages and retirees—it is possible to make the vast majority of the population win from a transition to universal health insurance.
Granting that American political culture is built on an allergy to taxation, most Americans surely care more about how much they have left to spend with every paycheck than how much goes to the government vice an insurance company.
