Tag Archives: taxes

Medicare Funding

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The fund Medicare uses to pay hospitals will run out in the next 15 years, and experts say there are no easy answers to solve it.

Certainly not politically easy answers, and that does matter. However, the practical answer is quite simple, if expensive in the transition.

Keep everyone 55 and older in the current Medicare system, with the individual option to leave that system in favor of the one I’ve proposed many times and summarize here. It’s important to note also that the “experts” are referring only to Medicare Part A, the hospitalization part. My reform is broader and applies to Medicare Parts B, payments to physicians, and D, drug coverage.

Rescind the payroll taxes from both the employer and younger-than-55 employee, while requiring the employee to put his payroll tax equivalent into what would be essentially a Health Savings Account. This New Model HSA would contain investment vehicles of the account owner’s choosing—including stocks, bonds, mutual funds for the same, bank savings accounts, etc—and be held for the benefit of the account holder. Unlike the Old Model HSA, with its shameful limits, the NMHSA would have no income limits on contributions, no annual limits on contributions, no requirement to have a High Deductible Health Coverage Policy, none of those government-mandated limits.

Of course, this can’t happen in a vacuum. In conjunction with this, the bankrupt* Social Security system needs to be similarly privatized, also, and the overly expensive Medicare system blocked granted, on a declining-to-zero schedule, to the States. These need to be done, too, with significant tax rate reductions and Federal spending cuts (and not just one-time gimmicks or reductions in spending growth).

Most, if not all of the cost of the transition can be covered by that spending and taxing reform.

 

*Bankrupt: not strictly so because in a few short years, while the Social Security Trust Fund will be emptied of money, current payroll taxes still will be available to make the payouts, requiring the payouts to drop to 75% of their presently scheduled values.

Update: Corrected an empty reference to Part C to the correct reference to Part D.

Democrats and Unions

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Illinois’ Democrat-controlled legislature—both houses—passed a budget earlier this year that spent $4 billion more than it intended to collect in revenue: a $36 billion spending bill against a $32 billion revenue bill. Never mind the rank dishonesty of this—bankrupt Illinois has no hope of raising those $4 billion except by borrowing, and these Democrat legislaturists know that. They have no intention, then, of repaying the borrowing, and that’s the dishonesty.

But leave that aside for a moment, and consider the following.

Governor Bruce Rauner (R) vetoed the bill because of that deficit, so the State is operating without a budget. Nevertheless, Rauner said the State would keep paying its government employees; as AFSCME said in support of Rauner’s decision,

public service workers in state government are on the job despite the lack of a state budget…and they should be paid for their work on time and in full.

Well, not so fast. Illinois’ Democrat Attorney General Lisa Madigan (just by happenstance, she’s also the daughter of the State’s Democrat Speaker of the House, Michael Madigan, whose own father was a New Deal pusher), with the full backing of her Democrat legislaturists, went into Illinois’ courts to block payment for those same “public service workers.”

Strictly to make a political point for their own benefit, these legislaturist Democrats are trying to prevent their employees from being paid, and they’re using their (erstwhile?) union allies as speed cushions for their bus. The Democratic Party of Illinois is typical of the national Democratic Party.

An Excess Profits Tax

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In 1917, Progressive icon Woodrow Wilson instigated an excess profits tax running from 20%-60% because, of course, the Progressive knew better how American business owners should spend their money than did the Americans who’d actually earned it through their businesses.

During the Great Depression, Democrat (and Progressive) icon Franklin Roosevelt instigated two excess profits taxes while openly slandering American businessmen as being on a capital strike: Roosevelt actually accused businesses of refusing to spend—at rates satisfactory to the Democrat (and Progressive)—the profits they’d earned.

Now we get the proud early 20th Century Progressive, Hillary Clinton, with her proposal for a “tax credit…to encourage more businesses to offer profit-sharing to their workers.”

Progressives still claim to Know Better what American business owners should do with their money than those business owners who did the work to earn that money. Progressives now also claim to Know Better what labor agreements are fit to be negotiated between employee and employer than those employees and employers—American citizens.

Now, the Progressive wants to foist tax credit onto us, to “encourage” businesses to spend their excess profits—her definition—because, of course, she Knows Better.

She also knows full well that with a tax credit, she’s intends to force all of us to pay a tax on a business’ “excess profits.” She knows full well where the money must come from in order to pay that “credit:” from higher taxes or more borrowing.

She closed her proposal with this bit:

I really think our corporations are missing a big bet. Because credible studies prove that profit-sharing with your employees is good for the employees, good for the businesses, good for the economy. I want to incentivize more companies to do just that.

Never mind that businesses are in the business to make money, not to serve as privately funded, government mandated jobs welfare programs. Never mind that in a competitive—that is to say, a free—market economy, businesses have to compete for employees as well as for customers. Never mind that the incentives are present in a free market economy for businesses to get the most out of their employees.

And so never mind that to the extent “credible studies” are right about the efficacy of profit sharing, in a competitive, free market economy businesses already would have profit-sharing plans.

Oh, wait, they’re just not set up in a way that suits this Progressive. The businesses are missing her bet. And so she demands that we all pay.

As an aside, some homework: crunch some numbers, and see whether a $750 credit for a $5,000 profit-sharing payout makes any sort of sense for a company laboring under the US’ highest corporate tax rate in the world—35%—on all profit, “excess” or not. See whether Clinton has any clue at all.

A Misunderstanding

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Or a non sequitur. A recent Wall Street Journal editorial was headlined thusly: Should There Be a Tax on Soda and Other Sugary Drinks? The subhead had this: Supporters say it is an effective way to cut obesity. Critics say the health benefits are far less than claimed.

The piece then proceeded to a debate between Kelly Brownell, Dean and Robert L Flowers Professor of Public Policy at Duke University’s Sanford School of Public Policy, and William Shughart II, J Fish Smith Professor in Public Choice at Utah State University’s Jon M Huntsman School of Business, among other titles.

Both entirely missed fundamental point. The answer to the headline question can only be a resounding “No.” The debate was a waste of bandwidth and of newsprint and ink because it doesn’t matter whether taxing sodas is an effective way of curbing obesity.

As James Madison once said in the Third Congress about a related subject,

Mr Madison wished to relieve the sufferers, but was afraid of establishing a dangerous precedent, which might hereafter be perverted to the countenance of purposes very different from those of charity. He acknowledged, for his own part, that he could not undertake to lay his finger on that article in the Federal Constitution which granted a right of Congress of expending, on objects of benevolence, the money of their constituents.

Charity of one sort, or charity of another sort, or simply the Federal government presuming to pressure us toward government’s definition of society, it’s all the same. And so it is with taxing as well as spending. Our tax code, in no way shape or form, should be used to conduct social engineering. Full stop.

Some Economics Numbers

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…from the Tax Foundation, via AEIdeas. First this graph (right-click on it to get a bigger, more readable version):TaxMap_100-Map

The figures are regional price parities of $100 for each of the 50 states, where the national average price is taken as 100. In other words, whereas on average across the whole country, $100 would buy $100 worth of goods, in California those $100 would buy only $89 and change, in Arkansas those $100 would buy a bit over $114 worth of the same goods. The bulk of the differences across the US was driven by relative housing costs: California’s housing, for instance, costs one-third more than the national average while Arkansas’ housing is one-third cheaper.

Mark Perry expanded on these data in his article at the AEIdeas link above, and adjusted per-capita personal income for differences in personal taxes and those price levels. California, based solely on income, ranked 12th in the nation at $48.5k per person. After adjusting for California’s tax bite and pricing, though, the value of a California’s average citizen fell to just $34.8k, dropping California to 37th in the nation the value of that nominal income.

Arkansas, on the other hand, started out 43rd in unadjusted income, with a citizen getting $36.7k. After tax and price level adjustment, though, the state rose to 31st, with that income becoming $35.5k.

There’s something to be said for cost of living and taxes in determining where actual prosperity resides.