Tag Archives: taxes

Medicaid Cuts?

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Some conservative Republican Senators are looking to cut Federal transfers to the States earmarked for those States’ Medicaid programs.  Others are concerned.

[T]he [conservative Senate Republicans’] Medicaid plan could affect many more people and shift significant costs onto hospitals and states.

One State’s Medicaid program, though, should be paid for exclusively by that State and not subsidized by the other 49 through those Federal transfers. Medicaid is, after all, a state program by design, and Medicaid eligibility is determined by each State.  The Federal transfer subsidies are made the more egregious by the fact that each State determines its own citizens’ eligibility for Medicaid, and that eligibility is income-based—with the maximum income for eligibility in most States being a multiple of the Federal Poverty Guidelines.  This means that in those States, a citizen can be eligible for Medicaid funds even though, by definition, that citizen isn’t in poverty.  Other States ought not be required to subsidize, through Federal Medicaid transfers, such eligibilities.  Not only are the States are defining “low income” much too loosely, other States have to pay into those definitions.

If each of those other 49 were able to keep the monies collected by the Feds for transfer, they’d also have more money—of their own—with which to fund their own Medicaid programs, and each of the States, absent attendant Federal strings, would be freer to structure their individual Medicaid programs according to their own citizens’ needs and demands.  As it is, States wanting to structure their programs must waste time and resources pleading to the Feds “Mother, may I?” and then argue the matter.

Such State-initiated restructuring—subject to central government approval—already is beginning to include things like work requirements, drug testing and time limits on coverage, all of which would free up State resources for the State’s truly poor.  Federal cuts to transfers to State Medicaid need not interfere with this; on the contrary, such cuts would encourage needed restructuring, while moving to insulate each State from other States’ decisions.

Of course, such Federal transfer cut would have complex implications and require serious Federal tax code restructure and reform—the taxes the Feds transfer for Medicaid come from a variety of sources: individual and business income taxes, dividend and cap gains taxes, and on and on.

That just puts a premium on getting started.

A Thought on Tax Reform

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The Wall Street Journal‘s piece by Laurence Kotlikoff, a Boston University economist, on tax reform had this subhead [emphasis added]:

The House proposal beats Trump’s plan, which is more regressive and would induce huge tax avoidance.

There are a number of questions considered in the article, but the prior question, it seems to me is that tax avoidance bit.  The question of tax avoidance is an interesting non sequitur.  Kotlikoff (or the WSJ‘s headline writer), like too many others, is tacitly assuming Government is entitled [sic] to our money; he is giving not the least particle of thought to the need to establish, first, that Government even needs the money before there can be any tax to be avoided.

While us individual citizens must obey the law as it exists, our representatives in Congress must consider that premise, and we must inveigh our representatives to do so.

Going Soft

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Senate pseudo-Republicans are balking at one good item that was contained the House-passed American Health Care Act: repeal of Obamacare’s trillion dollars’ worth of taxes.  These guys actually don’t see the value of that repeal.  Senator Susan Collins (R, ME) is typical:

I don’t see how you can repeal all of the pay-fors…and still meet the goal of providing health-insurance coverage for people who truly need assistance[.]

Aside from the false premise of needing Federal government “pay-fors” as a default position, rather than a last result, the Lady from Maine and her fellows plainly either don’t understand free market principles, or they have no confidence in free markets.

One path for the Senate could be a repeal of the taxes but a delay in the effective dates.

This is the only legitimate point of discussion on the repeal of these taxes.  The AHCA makes the repeal retroactive to 1 Jan 2017.  It’s the repeal that’s important, not its date of effectivity.  Effective 1 Jan 2018 is fine, so is a date (certain) in 2019, to the extent health coverage providers, businesses, and individual citizens need time to plan and prepare.  The repeal itself, however, must be inarguable.

I’ve decried the House’s Freedom Caucus of No, but the Caucus of Squish in the Senate is going too far in the other direction.  These folks need to do the job they were sent to the Senate to do vis-à-vis Obamacare and our nation’s health provision and health coverage industries.  Failing to repeal the Obamacare taxes in addition to the reductions in other business and personal taxes that have been proposed is unacceptable.  If the Caucus of Squish fails to do this, its members need to be replaced at the next available elections for each of them.

If that costs the Republican Party control of the Senate, well—how will we tell the difference?  The Caucus of Squish is, with its timidity, worse even than the Progressive-Democratic Party.

Confusion

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The latest whiner pundit to weigh in on President Donald’s tax reform principles, laid out in a concise one-pager.  And yet these pundits pretend to confusion over it.

President Donald Trump’s plan is silent so far on crucial details Americans need to calculate their tax bills, including the personal exemption and the size of the tax brackets.

And

The president’s latest plan for middle-income households…has left tax experts puzzled. That is because his one-page tax outline released in April is silent on essential details, including how the tax code will treat the personal exemption that reduces taxable income depending on family size. It sets tax brackets of 10%, 25%, and 35% without establishing the income levels that divide them.

And

[T]he plan says nothing about how personal exemptions or head-of-household filing status would be treated….

Geez.  It’s an outline; it’s not intended to be finely detailed. The President has proposed the principles and broad parameters of the taxation portion of his budget, and that’s both entirely appropriate and sufficient.  How personal exemptions, head-of-household filing status, etc, might be treated easily follows from those principles.

The fleshing out—the actual legislation, including bracket income boundaries and those other matters—is Congress’ responsibility, even though it would in an ideal world work with the President in the development of that legislation.  Oh, wait:

The White House is now working with the House and Senate on a unified GOP tax plan, including on the core issue of how much of a household’s income should go untaxed.

It seems more likely that these guys are just bellyaching because nobody is consulting their august selves.

Little Compelling Evidence?

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Greg Ip, in his Monday Wall Street Journal piece on the matter of corporate tax cuts, says that

most of the US’ largest trading partners cut their corporate rates. But their experience offers a reality check. There is little compelling evidence any enjoyed substantially faster growth as a result, and certainly not on the scale of Mr Trump’s ambitions….

He offered some examples:

Britain reduced its corporate rate from 30% in 2007 to 19% now. A 2013 study by the British Treasury predicted the tax cuts since 2010 would eventually boost the level of gross domestic product by 0.6%. That is certainly worth having, but spread out over, say, six years, would boost the growth rate by a barely noticeable 0.1 percentage point.

British investment as a share of GDP is actually lower than before 2007….

But the EU, which included a full-throated Great Britain at the time, suffered even more deeply from the Panic of 2008 than the US, and its “recovery” has been even poorer than ours, albeit Great Britain was one of the nominal leaders of that sham recovery.  Not many of the EU member nations have recovered to their pre-Panic levels.

And

Canada cut its corporate rate from 28% in 2000 to 21% in 2004. While growth from 2000 to 2004 was about half a percentage point faster than the prior decade, it has since slowed.

A couple of other things contaminate Ip’s thesis that “[t]here is little compelling evidence” that corporate tax rates actually stimulate economic growth. In Great Britain’s and Canada’s cases in particular, and in the EU generally, the presence of VAT taxes (20% for Great Britain, 13% for Canada, similarly high rates for the continental nations of the EU) vastly dilute the impact of a mere corporate income tax cut.

Also, the existence of régimes of heavy regulation in Great Britain, Canada, and in continental EU add costs that heavily dampen the favorable impact of corporate tax cuts.

The small bumps in economic growth that followed those corporate tax cuts came despite those road blocks.