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The Downside of Decades of Anti-Tax Rhetoric

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Matt Yglesias gets this right:

On the merits, I’m not a huge fan of the employer mandate concept in general. Unfortunately, conservative economists and conservative politicians have been extremely effective at making the American political system extraordinarily tax averse. This has created huge incentives to finance things through de facto taxes rather than de jure ones (which is what’s happening here) or through tax expenditures rather than actual expenditures. The aggregate impact of this on American public policy has been quite bad, and its pernicious effects continue to be felt as we watch the health care and cap and trade debate unfold. Unfortunately, as far as I can tell only Bruce Bartlett is willing to come out and say that the conservative anathematization of taxes is now having this negative impact and that conservatives ought to change their view on the matter.

When passing a piece of legislation, there are a couple different types of compromises you can make. If your opponent is reasonable, you can try to compromise on the merits. That would leave you with something like the Wyden-Bennett plan, which there doesn't appear to be much serious support for on either side of the aisle. If your opponent is not reasonable, however, you can try to compromise with the attacks your opponent is likely to use. That leaves you with policy that avoids making hard choices, because hard choices are vulnerable choices.

And that's pretty much where we are now. Democrats are making a lot of bad policy compromises because doing so is good politics. They're trying to fund the bill in the way pollsters would advise rather than policy wonks would choose. They're leaving the employer-based system alone. They're letting everyone keep what they have, even though what everyone has is expensive and inefficient, and is in fact the reason we need health-care reform.

Is it worth being disappointed about that? Sure. But legislation cannot be understood in a vacuum. The place to change the tax argument isn't in final days of health-care reform. It's in the intervening years when Republicans are attacking the very idea of taxation. Any given piece of legislation is only as good as the political culture that's produced it. Right now, our political culture isn't that good. The question is whether legislators are getting the best plausible outcomes out of a badly compromised process.

Photo credit: Linda Davidson -- The Washington Post Photo.

By Ezra Klein  |  July 16, 2009; 11:55 AM ET
Categories:  Health Reform  
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Comments

Please explain to be how being tax averse is a bad thing? Why wouldn't I be tax averse? After all, the IRS is taking money I earned. Politicians are allocating my money for their projects, some valid, some not. I think the bar should be set pretty damned high when it comes to increasing taxes.

Posted by: BeatKing11 | July 16, 2009 12:08 PM | Report abuse

Also, if it's the employer based system and insurance that is the cause of "everything that is inefficient" then why is Medicaire/aid so inefficient? I wish Mr. Klein would reread his interview with Mr. Gawande, who clearly says that the biggest problem with health care is the physician or surgeon making the choices, that the most expensive piece of equipment is the Dr.'s pen. So far, the health care expansion programs do nothing to address health care reform.

Posted by: BradBlasiar | July 16, 2009 1:13 PM | Report abuse

While I see the merits of the funding methods you advocate, I think at this point in time that there are huge psychological dividends to adding to the tax burden of the richest 1%. In short, if we use this "surcharge", the sky doesn't fall and health care improves, I think it could help break the anti-tax deadlock.

Posted by: flounder2 | July 16, 2009 1:58 PM | Report abuse

There are two separate issues here that the mess of health care reform has mashed together.

1. We can get good health for everyone for less money than we are now spending. Every other country does so. There is no reason to raise taxes for health care.

2. "Taxes are the price we pay for civilization." Oliver Wendell Holmes, Jr.

The rich and the super rich have been making out like bandits since 1973. They have financed a 'vast right wing conspiracy" to demonize taxes. Here a quote from a Post editorial: "The average rate paid by the top 1 percent of households shrank from 33 percent in 1986 to about 23 percent in 2006. At the same time, the share of adjusted gross income claimed by that highest-earning sliver of American society doubled, from 11 percent to 22 percent."

But there are zillions of such results. If you are against taxes on principle and you are not rich, you have been duped.

Posted by: lensch | July 16, 2009 3:23 PM | Report abuse

I said, "There is no reason to raise taxes for health care." which wasn't exactly what I meant. We may to raise taxes, but the total cost for health care will be less.

Posted by: lensch | July 16, 2009 4:00 PM | Report abuse

Maybe people are tax averse because they believe they can put their money to better use than the government can? I think it's easy for liberals to blame conservatives when the public doesn't support liberal policy goals.

That said, i agree with you on ending the employer tax deduction of healthcare - not for tax generating purposes, but on the gounds of efficiency. There is no reason the gov't should effectively subsidize the consumption of healthcare (or housing for that matter). Ending this subsidy would certainly "bend the trend" much more effectively than other proposals i've seen.

Posted by: mbp3 | July 16, 2009 4:03 PM | Report abuse

"Maybe people are tax averse because they believe they can put their money to better use than the government can?" [QFT]

If you mean specifically spending on things like security and infrastructure, then no, no they can't.

I don't mean to attack you or disagree with you. Of course paying taxes is a burden and there is deadweight loss when imposing taxes. There is also merit to the idea (such as with income taxes) that you punish hard-work and efficiency when you can punish unfavorable outcomes (gas tax, cigarette tax) instead.

But these need to be outweighed with the overall benefit of society when imposing a tax of any kind.

Which is why I have a problem with your statement. It is slogans like yours that has led the general public to believe that they can get something for nothing. Which is why, like you I assume, I oppose just soaking the rich versus taxing benefits.

There are reasons and benefits for making taxes more progressive. Taxing the rich just for healthcare will perpetuate most people's sense of entitlement without having to pay for anything.

Posted by: mezcalero | July 16, 2009 6:04 PM | Report abuse

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