I appreciate Ezra saying he has a lot of respect for HCAN. We continue to differ on the policy issues around taxing higher cost health benefits, whether doing it head-on as was proposed in the past, or through the back-door, as is the case with the 40% excise tax on high cost plans in the Senate Finance bill.
First, Ezra claims that the excise tax is isn't really a tax on the middle class:
The ad says the excise tax is "a 40% tax on health-care benefits of middle-class workers." It isn't. It's not even a little like that. It's a 40 percent tax on employer-provided health-care benefits above $21,000 for a family, and $8,000 for an individual. If your family's health-care premiums cost $23,000, then there's a 40 percent tax on $2,000 of your premiums. It's inconceivable that anyone's full health-care policy would be taxed at 40 percent.
Moreover, your family's health-care premiums probably don't cost $23,000. The average employer-provided health-care plan cost $13,375 in 2009. There are some middle-class workers with uncommonly generous health-care plans, but they're not the norm. This isn't as progressive as a tax on millionaires, but it is, in general, progressive. Goldman Sachs traders, for instance, have health-care plans valued around $40,000 a year. Wal-Mart employees don't.
But income and the value of people's health care plans do not correlate. The Communications Workers of America, using data from the Joint Committee on Taxation (JCT) and an analysis by Citizens for Tax Justice (CTJ), concluded that 40% of health care plans will be hit by this excise tax by 2019.
Second, as Ezra notes, the excise tax "isn't as progressive as a tax on millionaires. " Yup. Health Care for America Now is for progressive financing, which is why our new ads push for having people who earn more than $250,000 pay their fair share. That's what the House bill does and it's what the President's initial proposal to fund health care through lowering tax deductions for people who earn more than $250,000 does too.
Ezra goes on to support employers buying less generous health care plans for their employees:
The argument against the excise tax is that it cuts the deficit by encouraging employers to shop for cheaper plans. The Joint Committee on Taxes suggests that the tax won't raise money because people will pay it. It will raise money because it will encourage employers to purchase cheaper plans for their employees and divert money they've saved into wages, which are taxable income. That means that a number of very generous plans will become more like middle-range plans. They'll have deductibles if they don't already, tighter networks, tiered drug formularies and so forth. Any plan that's lavish enough to even near the tax is going to remain a very generous plan, but it will become less so on the margin.
Some people, myself included, think that's a good thing.
The problem here is confusing cutting costs with shifting costs. Cutting costs means finding ways to make health care more efficient and to provide better care for the same or less money. But shifting costs is different. By incentivizing employers to offer less generous health care benefits, which means higher deductibles and the like, "costs" may go down, but in reality the policy simply transfers these costs to the worker. Moreover, higher out-of-pocket costs can discourage people from getting the care they need.
Cutting a "generous" benefit like dental care just means more cavities and poorer health. The U.S. already has much higher out-of-pocket costs than other developed countries, which of course spend much less on health care. Let's control costs by developing the right incentives for providers of care, not the wrong incentives for consumers.
Ezra's off too when he says that the current tax exclusion is regressive, because the marginal tax rate is higher for richer people. Because the cost of health care is a fixed amount, independent of an employee's income, the tax break given through employer sponsored coverage is more valuable to an average family than a wealthy family, even after the tax impact is accounted for.
For example, for a family that makes $60,000, if their employer pays $12,000 towards coverage, that's 20% of their income. The tax break make makes it worth closer to $15,000, 25% of their income. For a family that makes $240,000, that same employer coverage is worth 5% of their income and the tax break is higher, which takes the value up to $16,000, or 7% of their income. Sure the rich guy gets a bigger tax break, but that extra $3,000 is worth a lot more to the working guy than the $4,000 is too the rich family. That's why the tax break for employer coverage actually makes health care much less regressive. And it's a benefit not to be given up lightly.
To put it another way, Ezra is saying that it would be unfair to give a working family grandstand tickets to the World Series because you're giving the rich guy a box seat as well. Who would be happier, the guy who would be thrilled to get to go the game he couldn't afford on his own? Or the rich stiff who can settle into a box seat anytime he wants.
Here's the bottom line: Policy wonks need to think more like an average person. Placing a tax on high cost health plans will simply make health care less affordable for lots of middle class families. That's exactly the opposite of what health care reform is supposed to do.