This Might Be My First Tax Post
I have to admit that I’ve been a bit checked out on the health care reform process recently. On purpose. I watched 
Congressional Democrats and the Obama administration completely mismanage their flagship domestic legislative initiative by screwing over their base and I approached a place of political dissolution akin to right after the 2000 election. Except worse because these are my people.
It was a good thing-taking some time off the health care reform push. It gave me the chance get past my anger at being screwed over by my own party and focus my thoughts on what to do next. I’ve come to except that if reform legislation passes I’m not going to be thrilled with what’s peddled as reform, but I’m enough of a pragmatist to believe that doing something is better than doing nothing. So, this is me engaged in the debate again and mustering up some enthusiasm for getting a health care bill passed. Woot.
I do have a couple questions. And they are serious, so feel free to leave an answer. Please.
Question One: I understand that it’s easier to amend existing law than it is to pass new law which is the only reason why I’m even still talking to you, Congressional Democratic leadership. But is it too much to ask for Democratic reform to not legislate my health care rights back fifty years? Hyde wasn’t an acceptable floor? Okay, so Question Two is in there also.
Question Three: Explain to me why I should get behind an excise tax on Cadillac plans? This is truly a serious question as I admit One and Two were a little pissy. How are citizens supposed to be effecient consumers of health care in a market they have absoultely no ability to influence? I’m inherently suspicious of the argument that making people better consumers of health care is an effective way to control costs because that’s how Health Savings Accounts are peddled and HSA’s, you might remember, are kind of an issue with me.
So back to the tax. Why do we want to tax generous health insurance plans out of the marketplace? I understand they are expensive to maintain, but um, last I checked UnitedHealth was doing just fine. Hard working Americans fought for those benefits in exchange for accepting salary freezes. Union workers, government employees, your base, Democrats. What am I missing here?
Here’s where this argument for pushing it back on to the consumer loses me, and I really want to be wrong here. Accidents happen, and by their very nature are not the kinds of creatures that play by rules of economic reasoning, which is largely why we purchase insurance in the first place. Under high deductible/hsa plans accidents can be financially devastating, that is unless you’ve got a spare $30,000 or so for say, the birth of a second child or, back on point, an accident. The difference between a Cadillac plan and a high deductible/hsa plan is covered expenses in exchange for years of collecting premiums. I’d kind of like to see more Cadillac plans myself.
I can stop there for now. It’s best to ease back into these things. But I was serious about fielding some answers. Convince me.
February 24th, 2010 | 
Tags: health care reform, hsa, insurance, politics | Category: Mommy, The Family, The Patriarchy |
2 comments | 
Comments 
Historians will look back at the Healthcare Reform Adventure of 2009 and highlight a major tactical mistake by the Obama Administration — they let Congress get involved.
Simple put, too many cooks spoil the broth. Obama wanted bipartisan support and thought that by getting Republicans to join, it would produce bill that would be accepted across the political spectrum. Instead, we have the GOP throwing gasoline on the fire while the in-fighting between the Dems has produced a very poor bill.
Unlike the current-version of the GOP which has driven out all moderates, the Dems have a varied group … some Pro-Life and some Pro-Choice, thus they have impacted the legislation … (this is a good example of the result from the tactical mistake – Obama should have submitted a bill that answered the question on abortion, illegal immigrants, etc., then let the Dems fight it out to change it.)
Let’s move on to question #3.
But before answering it, how about a few questions related to tax fairness ?
Do you think that “work” income should be taxed at the same rate, a lower rate, or a higher rate than “investment” income. (i.e What your employer pays you versus when you sell a stock with capital gains.)
Do you think that employee fringe benefits should be included in taxable income ? If so, should there be a limit that is “tax-free” and once that threshold is reached it be treated as taxable income?
OK, let’s consider an illustrative family of three in which the father earns $30,000 as an independent contractor for a small plumbing company and the mother earns $25,000 from a small retailer. Neither small business provides health benefits. They pay income tax on $55,000 and have to pay all their medical bills from whatever they have that is left over … they may elect to purchase insurance or self-insure themselves.
Now, let’s consider the father is an investment banker … also married, but the mother donates her time at the local Humane Society and the child attends a private school. The investment banker gets a base compensation … plus since he participates in the hedgefund that he manages, much of that income is considered captial gains income (which is taxed at 15% instead of 35% which is the highest level.) In addition to his salary, the banker receives paid for health insurance valued at $40,543. The company also provides life insurance, but after the first $50,000 (this number may have changed) it is considered imputed income and taxed at the 35% rate.
So who would you rather be ?
I suspect that you would like to be one of the top 400 employees at Goldman Sachs … because, yes, they do get $40,543 in benefits on top of the base salary of $600,000.
I have not read Obama’s latest proposal, but the early ones included some sort of tax on “Cadillac” plans.
The proposed excise tax would be levied on health insurance companies and third-party administrators that offer health insurance plans with premiums that exceed a specified amount. The threshold for the tax might range from $21,000 to $25,000 for a family policy starting in 2018 (I believe). At those thresholds, the vast majority of health insurance plans would be unaffected. The last figures that I saw for Minnesota (data from 2008) was that a family policy was that the total cost was $13,639 of which the employee paid $3279 (24%) and the company provided $10,360 (76%).
In some ways, this is a high threshold … sorta like the imputted income for life insurance.
Let’s remember that the plumber (heh, should we call him Joe?) and his wife have gotten no help from the tax code.
IMO, the Obama plan is being fair to existing programs but overall the taxcode is unfair to working families.
One last point, a health care package costing $40,000 or more a year would generally have no co-payments or deductibles … which has a value … and may have a impact on your thinking … did you know that Minnesota’s Governor has a “no deductible” medical policy ? It’s pretty easy to shutdown GAMC when you haven’t even asked your group to pay a deductible.
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