At Least Four New Taxes in Baucus Bill

The Baucus Health Care bill follows in the tradition of many other pieces of recent legislation in raising taxes in ways such that Congress can claim that it didn't actually raise taxes.  Here are four such taxes in the Baucus Bill  (note that no one that I know of has read any actual legislative language, so this is based on the press releases by the bill's authors.  Actual bill language can only be worse).

Employer Penalty is a Tax: In a step right out of Goldilocks, the Baucus bill will impose "penalties" on employers with no employee health care plan as well as on employers who have plans that are "too rich."  Never mind the insanity of the government micromanaging how an employer chooses to structure his compensation package to employees.  These "penalties" are structured as percentages of wages -- the one for having no health care plan was 8% of wages in the last bill.  This is a direct tax on employment, making hiring people more expensive (effectively the same magnitude as doubling the Social Security tax).  So how does this effect the average person?  Think of it this way, for the same wage, you job will be more expensive to a company that it was before the bill, making it less likely you will get hired at that wage.

Insurance Mandate as a Tax: The mandate that everyone must have insurance is a tax on the young and the healthy, as I explained previously:

People focus too much on the penalty itself being a new tax.  But the new tax is actually the requirement that individuals buy a product (in this case a health insurance policy) that they feel has no value (or else they would purchase it of their own free will today).  The government stopped pretending long ago that these younger middle class families will get much value from such a policy.  In fact, if they did get value commensurate with the premiums they will be paying, the mandate would not be achieving its purpose.  The whole point is that healthy people pay more into the insurnace system than they get back to support sick people.  If that payment is mandatory, then it is a tax, even if it is called an "insurance mandate" instead.

In fact, this is made all the more clear when politicians also suggest that cheaper high deductible health insurance plans be banned, as they were in Massachusetts.  Again, the whole point is to get young healthy people to overpay for insurance, and allowing them to buy sensible, cheaper, high deductible insurance defeats the whole purpose.

In fact, the bill's supporters have explicitly discussed requirements that insurance companies raise the price of insurance to the young and healthy to help reduce premiums for the old and, er, politically more active.  This is a redistributive tax, hidden within an insurance rate structure that will be heavily regulated by Congress.  Though don't expect Congress to admit this when young folks start to complain, they will say "blame the insurance companies."  Which is the whole beauty of such a hidden tax.

Corporate Taxes as Consumer Taxes: The plan would place new excise taxes on insurance companies, drug companies, and medical device providers.  But these taxes, particularly in the low margin insurance businesses (Yeah, I know if you only listened to Obama, you would never realize they were low margin but they are) just get passed onto consumers in the form of higher prices.  Congress knows this, but pretends it doesn't happen, so it can tell the economically ignorant that it hasn't raised taxes on consumers, and that rising prices are all the fault of the evil insurance companies blah blah, you know the drill.

Price Controls as a Tax: A large part of the Baucus Medicare savings is instituting price controls on doctors and other medical suppliers --  basically cutting their reimbursement rates.  This, by the way, just confirms what we all have known, that Obama and the Democrats don't have some mysterious win-win way to cut medical costs.  The only levers they have are 1. Price Controls and 2. Denying care.

There is absolutely no difference to a doctor between price controls and a tax.  A cut in the reimbursement rate from $50 to $40 is the same as having a 20% tax put on his $50 reimbursement.  Again, price controls in this context are just a way of hiding a tax.

And this might be the most dangerous tax of all, as such price controls always, by the immutable laws of economics accepted by monetarists and Keynsians alike, reduce available supply.  Doctors, for example, are going to be less willing to stay in the medical profession.  The result is inevitably shortages and long waits, something that should surprise absolutely no one as shortages and queuing are endemic in every government health care system in the world, starting with liberal darling Canada, whose citizens get medical treatment quickly only by crossing the border into the US.

  • DrTorch

    Probably will bode well for a new style clinic opening in Douglas, Nogales, Tiajauna, etc.

  • spiro

    As a (fairly) young business owner who voluntarily goes WITHOUT health insurance, this legislation drives me nuts. Especially the partially hidden mandate that all medical services will be forcibly billed through some form of insurance.
    No more paying for services rendered, no more opportunity of shopping around for medical exams or medications.
    I can only hope that I can stay in the loop of the medical underground and that I will be able to find a doctor/clinic that will buck the system and take cash -- because I can guarantee he/she will be the BEST doctor in town.
    As with any system with multiple moving parts, capitalism has its flaws, but nobody has yet found a better system for matching cost with value.

  • ElamBend

    DrTorch,
    Some friends and I have been talking about that idea for a while. Cruiseships, too.

  • Dr. T

    "Canada, whose citizens get medical treatment quickly only by crossing the border into the US."

    Part of the reason that Canadian citizens must come to the US for timely medical care is that thousands of Canadian physicians moved to the US because of the low pay, horrid bureaucracy, and low job satisfaction after the provincial governments took over medical care.

    I spent over four years as a federally employed physician (at a VA Medical Center). I won't work for the federal government again. Lots of colleagues feel the same.

  • Bob Smith

    Does anybody know if the employer penalty applies to all employers, no matter how small? Most current Federal mandates don't apply to employers with fewer than 10 or 20 employees.

  • Ted Rado

    The idea that government "does something for you", and business taxes are huge frauds. We pay for everything, either as taxpayers or consumers. If a tax is put on a product, the producer must add it to the selling price. Hence it is only a pass-through to the individual. Companies are not money tree that produce profits in some magic way. Similarly, government taxes you, then fritters away part of the money, and gives the rest to someone else to buy votes. On average, the public suffers a net loss.

    As a retired engineer, I have seen bad decisions made due to tax policy. If the most economical location for a new factory is at location "A", but the local government at location "B" gives a tax break that causes the factory to be built there, then we have, in total, suffered an
    economic loss. This happens all the time. The bailout of GM is an example of the government and not economics making business decisions, to the detriment of the whole.