Sanders keeps making very clear arguments about its benefits in order to counter the distortions.
— Jordan (@JordanChariton) October 25, 2019
Economists Emmanuel Saez and Gabriel Zucman explain how the Sanders’s plan for Medicare for All will result in reduced taxes, because what we now pay in health care premiums are in fact taxes, something that opponents of universal health care plans try to ignore.
A frequent objection to calling health insurance premiums a tax is that people have some choice. Can’t the poor, the argument goes, enroll in cheap health plans? If you start calling health insurance premiums a tax, then shouldn’t we also call spending on food and clothes a tax?
This argument, however, is wrong, because cheap healthcare does not exist. There are cheap meals, there are cheap clothes, but there is no cheap way to treat your heart attack, to cure your cancer, or to give birth. Cheap health insurance means no healthcare when you need it. All wealthy nations, even those that try hard to control costs, spend 10% of their national income on health – the equivalent of $7,500 a year per adult in the United States. The view that healthcare services are like haircuts or restaurant meals – services for which there is a product tailored to any budget – is a myth. Healthcare is like education: everybody needs it, regardless of their budget, but it’s expensive. That’s why all advanced economies, except the United States, fund it through taxation.
The main difference between the insurance premiums currently paid by American workers and the taxes paid by workers in other countries is that taxes are based on ability to pay. The income tax has a rate that rises with income. Payroll taxes are proportional to income, at least up to a limit. Insurance premiums, by contrast, are not based on ability to pay. They are a fixed amount per covered worker and only depend on age and the number of family members covered. Insurance premiums are the most regressive possible type of tax: a poll tax. The secretary pays the same amount as the executive.
This is the context needed to understand the current debate at the heart of the presidential elections. Proposals such as Medicare for All would replace the current privatized poll tax by taxes based on ability to pay. Some believe that it would result in a big tax increase for America’s middle class. But the data show that it would, in fact, lead to large income gains for the vast majority of workers.
Supporters of Medicare for All are right. Funding universal health insurance through taxes would lead to a large tax cut for the vast majority of workers. It would abolish the huge poll tax they currently shoulder, and the data show that for most workers, it would lead to the biggest take-home pay raise in a generation.
How issues are framed goes a long way to determining how people respond. It must be said over and over again: the health care premiums that we pay have to be considered as taxes and must be included in any discussion of whether taxes will go up or down.