According to this morning's news reports, "congressional leaders" have reached agreement on an excise tax on health insurance, the main revenue-raiser in the Senate version of the health care reform bill. The Senate wants to tax at 40% the coverage amount of so-called "cadillac" policies (defined as $8500 for individuals and $23000 for families)--i.e., good health care plans that all of us would like to have and that union workers often have as one of the benefits of the power of collective bargaining. The facts aren't really out, but the news says that there is now a deal on the excise tax to make it somewhat more palatable. See Herszenhorn, Democratic Leaders Reach Compromise on Taxing Health Plans, NY Times, Jan. 14, 2010.
I oppose this means of funding health care reform. It does not strike at the issue--which is the fact that many people have too little insurance and that even the insurance people have doesn't provide adequate health care benefits because of the privatized benefit to health insurance companies of taking a significant spread between the cost of the health care actually provided (which they seek to minimize through bureaucratic decisionmaking and jargonese that cheats the insured person) and the amount paid to providers (which they seek to minimize through clout based on scale). Instead, it strikes at unionization (a reason that Republicans and right-wing Dems pushed for this version of revenue-raising). Unions are the one way that employees have to gain some clout in bargaining with their employers. With the decline of unions, wages and benefits for employees in the US have not kept up with the substantial benefits that employers grant themselves (many of them tax-subsidized). Attacking unions and not providing better or even equal health care to union workers, by attacking the health care plans that unions have fought to provide for their employees, is a disastrous way to pay for even the little bit of health care reform that this package will provide.
The House version makes much more sense--the House bill calls for an income surtax on wealthy taxpayers--those who make $500,000 or more (individuals) or $1 million or more (couples). That's a reasonable way to pay for the bill. We have had much higher tax rates in the past, and had good, broad-based economic growth. The four decades of reaganomics have moved us to a system that is hugely beneficial for the rich and bears down too hard on the middle class (which one could generally define as the middle three quintiles of the income distribution, all of whom make substantially less than $500,000 annually). We need to raise the tax rates on the upper income distribution, to counter the trend towards harmful levels of income inequality while also countering the trend towards low effective tax rates on the upper crust. Raising the rates through a surcharge to pay for health care reform makes sense--it doesn't take health care away from the middle class as the Senate bill does, but asks more of the upper crust which has enjoyed increasingly singificant benefits from the US financial system over the last few decades.
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