By Emmanuel Saez and Gabriel Zucman
From Chapter 9: A World of Possibility
Private Health Insurance: A Huge Poll Tax
The other specificity of the United States compared to other advanced economies is that public health insurance is far from universal in America. About half of all health care spending (10% out of 20% of national income) is publicly funded. A large fraction of the population must purchase private insurance. The system of private insurance excludes millions of Americans and imposes a mammoth burden on workers.
As we saw in Chapter 5, private insurance premiums are akin to a huge private tax. Although most workers get insurance through their employers – and thus employers nominally foot the bill – the premiums are a labor cost as much as payroll taxes are. Just like payroll taxes, premiums are ultimately borne by employees. The only difference is they are even more regressive than payroll taxes, because the premiums are unrelated to earnings. They are equal to a fixed amount per employee (and only depend on age and family coverage), just like a poll tax. The secretary literally pays the same dollar amount as an executive.
(Historically, in American colonies and in some US states before 1964, voting registration was conditioned on the payment of “poll” taxes. In this book, we use the classic definition of a poll tax, namely a tax levied on every adult without reference to income or resources.)
Poll taxes, unsurprisingly, are not popular. When Margaret Thatcher imposed a poll tax in 1988 to replace real estate property taxes, she faced an unprecedented revolt and was ousted from office in 1990. No government would out of the blue impose a poll tax to fund health care; it would be a crushing burden on moderate-income families. And yet in essence that’s what the United States does today: employers are administering a huge poll tax on behalf of the government. Since the passage of the Affordable Care Act in 2010, employers with fifty or more employees are legally required to provide health insurance to their workers or pay a penalty of $2,500 per employee in 2019. Given how big the average annual health insurance premium has become ($13,000 per covered worker), this system is unsustainable.
To illustrate the magnitude of this poll tax, let’s look at the distribution of US tax payments once we include mandatory private health insurance premiums. As we saw in the first chapter, considering regular taxes only the US tax system looks like a giant flat tax that becomes regressive at the top. But with the health care poll tax added, it is in fact frankly regressive: once private health insurance is factored in, the average tax rate rises from a bit less than 30% at the bottom of the income distribution to reach close to 40% for the middle class, before collapsing to 23% for billionaires.
The poll tax hammers the working and the middle class. At the bottom of the distribution, it’s not as onerous as sales and payroll taxes. But that’s because many working-class Americans do not get health insurance from their employers. They either face the burden of obtaining coverage themselves, rely on a family member to cover them, enroll into Medicaid, or go uninsured. The Affordable Care Act increased the pool of Americans eligible for Medicaid and subsidized the purchase of private insurance for low-income people who weren’t otherwise covered, but the law still left about 14% of the adult population uninsured in 2019. And it provided no relief for workers who fund their health care through a poll tax whose cost for the middle-class far outweighed that of the income tax.
Tax Justice Now: Use the following link to access an interactive website where you can see the current tax system, Triumph of Injustice’s Tax Plan, Joe Biden’s Tax Plan, Bernie Sanders’ Tax Plan, Elizabeth Warren’s Tax Plan, or make your own tax plan.
By Don McCanne, M.D.
The Quote of the Day for Friday, October 25 was from an article in The Guardian by Emmanuel Saez and Gabriel Zucman which was adapted from their book, “The Triumph of Injustice.” In that article they explained how single payer Medicare for All would make health care affordable for everyone while also providing a pay raise for most of us.
If you expect to be able to explain to others how we can make health care affordable for everyone through Medicare for All, then it is imperative that you have a clear understanding of the tax policies that would make that possible. The policies are not that complex, but they are not simply intuitive either. So this is why you should read “The Triumph of Injustice.”
The excerpt selected today explains how private health insurance premiums act like a huge poll tax – one of the least fair forms of taxation since it is not based on ability to pay, that is, it is not based on income nor personal resources. Because health care is now close to one-fifth of our economy, that places a very large financial burden on middle-income Americans who are not eligible for government subsidized programs such as Medicaid or ACA subsidies.
Think about what that means for Medicare as a public option. Presumably those eligible for government assistance will be enrolled in Medicaid or a subsidized plan in the ACA exchanges whereas those with middle incomes who do not qualify for subsidization will be paying high premiums for the Medicare public option just like they would with private insurance plans. Once again, this would be like a huge poll tax – very unfair.
If you go to the Tax Justice Now website (link above) and click on “Tax Breakdown” you can see how the revenue sources would vary by income groups under various tax plans, including that of the authors. It would be difficult to see how we could have a more equitable method of funding health care than that devised by the authors, with two of the three presidential candidates’ plans coming close. Compare theirs with the current tax system to see how unfair the status quo would be (private insurance premiums and out-of-pocket cost sharing would fall in the pink “health” section).
As stated in the last message, let’s make America affordable again.
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