Monday, December 28, 2009

Shorter Jonathan Gruber: (professor of economics at MIT, writing in the Washington Post)
It's far more important to get money for healthcare by reducing tax advantages some in the middle class have, than it is to tax millionaires.
Also, this laugh line: (emp add)
"... most experts and Congress's Joint Committee on Taxation assume that most companies would not end up paying this tax but would instead reduce their insurance spending to below the threshold for the tax. And when firms reduce their insurance generosity, they make it up in higher pay for their workers."
Please note that the bolded statement is not what "most experts and Congress's Joint Committee on Taxation" assume (they only assume inmsurance spending would be reduced). The bolded claim is Gruber's.

He goes on:
By my calculations the excise tax in the Senate legislation will raise U.S. worker wages by a total of $223 billion over the next decade, which would mean about $660 in extra annual earnings per employer-insured household by 2019. Moreover, the vast majority of those wage increases accrue to middle- and lower-income households; 90 percent would go to families with incomes below $200,000.
Get that? A new tax on an existing tax-advantaged benefit (health care) that overwhelmingly goes to the middle class, will ... boost wages! If course, even if Gruber's numbers are correct, he has failed to show that the $660 exceeds the value of (to-be-lost) existing health care benefits.

FOR EMPHASIS: Presenting numbers that show (potential) gains while not presenting numbers that show the value of the loss is dishonest. Gruber also asserts that by "mitigat[ing] this tax preference" by reducing it's value, is therefore not a tax increase. By his reasoning, you could eliminate every deduction in the tax schedule and it wouldn't be considered a tax increase.

This is terrible politics. Telling some members of the middle class that they will have their health care reduced in order to pay for the new system, is political poison. Gruber makes that point explicitly: (emp add)
In the Senate, the [financing for reform] is closed by relying on the "Cadillac tax," a 40 percent assessment on insurance plans with premiums of more than $8,500 for singles and $23,000 for families. In the House, the gap is closed with a surtax on those earning more than $500,000.

The Senate assessment on high-cost insurance plans has much to recommend it, which is why it is almost universally favored by health policy experts. It would reduce the incentives for employers to provide excessively generous insurance, leading to more cost-conscious use of health care and, ultimately, lower spending. In other words, it "bends the curve." It would also be progressive, in that it would take from those with the most generous insurance to finance the expansion of coverage to those without insurance.
This is progressive? Not taxing milionaires, but instead, reining in benefits some in the middle class have over others in the middle class (and over the poor). Only an academic could see it that way.

What other tax advantages are there that give some members of the middle class an advantage? How about the child deduction? Let's get rid of that, shall we? Or mortgage deduction?

But at least Gruber is saying that the House means of funding - a higher tax on (half) millionares - should be avoided. No wonder the Post ran his op-ed.

UPDATE: Lots of comments over at the Post. Mostly negative towards Gruber.


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