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The $140 Billion Tax

James Kwak is gets this exactly right:

One reason the Baucus bill is “cheaper” than the House bill is that it has lower subsidies. For illustration, let’s assume that the whole $140 billion difference is due to lower subsidies. Relative to the House bill, then, the Baucus bill costs the government $140 billion less; but it costs middle-income people exactly $140 billion more, since they have to buy health insurance. The difference is that in the House bill, the money comes from taxes on the very rich; in the Baucus bill, it comes out of the pockets of the middle-class people who are getting smaller subsidies. Put another way, the Baucus bill is the House bill, plus a $140 billion tax on people making around $40-80,000 per year. That’ s not only stupid policy; it’s stupid politics.

By Ezra Klein  |  September 17, 2009; 9:38 AM ET
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Not giving someone something for free is taxing them. Right.

Posted by: spotatl | September 17, 2009 9:43 AM | Report abuse

Thats not exactly fair. The middle class people are the ones using the insurance. Baucus' bill just makes them pay for their own insurance instead of having the rich subsidize them. That is not a tax.

Sometimes people on the left get so caught up in the policy weeds they don't realize how they sound.

Posted by: mikehoffman82 | September 17, 2009 9:49 AM | Report abuse

I think yet again this goes to the point of why the dems are ridiculous on this- they are treating this like an insurance problem when its really a cost problem. The problem is not that the insurance companies are gouging the american people- its that people cannot afford the level of healthcare that they need. We have a cost problem- not an insurance problem. But while the democrats think they have an easier time demonizing the insurance companies to get this passed they are doing nothing at all to fix the cost problem. They want to bridge over this problem by having the government pay a big portion of the tab. The real problem is that our politicians have zero reason to actually control costs on government healthcare. Look at how many times our politicians have decide to postpone scheduled reductions in medicare rates to providers. They simply have no stomach for actually making tough decisions.

Posted by: spotatl | September 17, 2009 10:02 AM | Report abuse

The House bill includes the $220 billion Medicare payment (SGR) fix.

So Baucus's bill is in reality more costly than the House bill over 10 years and that's BECAUSE IT DOESN'T HAVE A PUBLIC OPTION.


Posted by: bmull | September 17, 2009 10:05 AM | Report abuse

we understand that the children don't like progressive taxes, but there's no reason to listen to the children shrieking the way they are in the comments thus far.

meanwhile, max baucus has a stupid bill with stupid politics because he's a stupid man.

Posted by: howard16 | September 17, 2009 10:08 AM | Report abuse

Bmull- why do you think that the public option would actually save money? Its supposed to be by definition revenue neutral and fund itself completely on incoming premiums.

Posted by: spotatl | September 17, 2009 10:08 AM | Report abuse

"Sometimes people on the left get so caught up in the policy weeds they don't realize how they sound. "

Yeah, caring about actual, real-world outcomes instead of 'how they sound' is SO left-wing.

Posted by: adamiani | September 17, 2009 10:27 AM | Report abuse

what spotatl said. by this logic, the government taxes me every time it doesn't subsidize one of my activities!

Posted by: jfcarro | September 17, 2009 10:32 AM | Report abuse

Less money for the middle class.

Big fine if you opt out of insurance coverage.

More customers for insurance companies.

Who's winning here?

Posted by: anne3 | September 17, 2009 10:36 AM | Report abuse

spotatl- My bad, I forgot about how the public option got watered down.

Still, I think it would save much more than the CBO projects--because they assume it wouln't be actively managed to be a low-cost alternative.

Posted by: bmull | September 17, 2009 10:53 AM | Report abuse


I have a little summary followed by a question.

Ok, so I am of the the people deeply worried about a double dip recession. Three reasons. First, Commercial Real Estate which although a lagging indicator could put the brakes on growth and could cause more financial panic. Second, state budget gaps because cutting spending and/or raising taxes will be as Paul Krugman said "like 50 Herbert Hoovers" and those problems will continue into next year. Third, the two variables above combined with the fact that things could slow after the inventory rebound makes a double dip quire possible.

Thats my little analysis, but I do have a question. Does the Baucas or any other bill have a Medicaid expansion that alleviates state budget shortfalls?

Posted by: econowonk | September 17, 2009 11:03 AM | Report abuse

adamiani - my point was that sometimes you get so caught up in weeds you fail to realize simple facts, like that "failure to subsidize" does not equal "new tax". Like jfcarro said, is the government taxing us every time they don't subsidize something? If so, I hate that cost of movie ticket tax! and that paying for my big mac tax!

Maybe if you consider it in conjunction with the individual mandate you get somewhere, but I don't think that's what Ezra was driving at.

Posted by: mikehoffman82 | September 17, 2009 11:08 AM | Report abuse

And, the public option isn't there to make subsidies more palatable in the long run by decreasing costs.

I hate these 'budget hawk' demorcats that always make us pay more for the same thing. They are the types of idiots that make medicare part D a handout to drug makers, while slashing coverage, and say 'I just want to be responsible.'

No, you just want money, shill.

Posted by: rat-raceparent | September 17, 2009 11:14 AM | Report abuse

I am starting to view this as a 'humane tax'.

Rich people are simply entitled to take 20-30% out of anything we want, in pure profit. How on earth do we, the biggest customer in the world, not negotiate for prices under Med D? It's really so offensive, but due to our political system being run by corporate $$$.

Posted by: rat-raceparent | September 17, 2009 11:17 AM | Report abuse

I'm with anne3.

Who's raking in big profits, now and for the foreseeable future?

Who's going bankrupt on a regular basis?

If you're too poor to afford coverage, even with the subsidies, if you get hit with a penalty -- you're still not insured. And you pay -- out-of-pocket, or through taxes for others' coverage (such as those lucky Congress members), and physical pain, mental stress, and even life.

Posted by: jshafham | September 17, 2009 11:25 AM | Report abuse

rat-raceparent, my attitude is that any democrat who did not support john kerry's efforts to pay for the iraq war in 2004 has no business pretending to be a budget hawk.

Posted by: howard16 | September 17, 2009 11:25 AM | Report abuse

mikehoffman82 - did you seriously just compare whether or not you can afford to take your kid to the doctor with going to the movies or buying a big mac? Presumably you've needed to visit a doctor before? Perhaps once or twice you've been sick, maybe injured? When you sought the care you *needed* did you really treat that decision the same way you *chose* to stop for a snack on the way home from work last night?

Posted by: gymno | September 17, 2009 11:35 AM | Report abuse

Thats not exactly fair. The middle class people are the ones using the insurance. Baucus' bill just makes them pay for their own insurance instead of having the rich subsidize them. That is not a tax.

Well considering that this segment of people - people making around $40-80,000 per year, has the highest percentage of employed individuals without health insurance and that they would now be REQUIRED to buy health insurance, it is very much like a tax.

Posted by: lostinthemiddle | September 17, 2009 11:37 AM | Report abuse

Failure to subsidize is a new tax when you force people to buy something whether they want it or not. If before you had a choice on whether or not to buy insurance and then you were forced to buy insurance, the mandate to buy something whether you want it or not is a new tax. If the mandate was removed so people still have free choice, I wouldn't view it as a new tax.

Posted by: SpanishInquisition | September 17, 2009 11:46 AM | Report abuse

"The problem is not that the insurance companies are gouging the american people- its that people cannot afford the level of healthcare that they need."

This simply isn't true. As Marcia Angell MD, former editor of NEJM, has said, "With the money in the system right now, we could cover everyone for every medically necessary service. But the system has to be distributed according to medical need and not as it currently is — as a commodity."

There's actually more than enough money in the system now to cover everyone, there's just too much waste.

Posted by: steveh46 | September 17, 2009 12:24 PM | Report abuse

Spanish Inquisition nails it. It is the mandate that distinguishes health insurance from buying a Big Mac. (The other difference, of course, is that one is supposed to help you treat illness and the other makes you more susceptible.)

There is simply no way to square a mandate with a relentlessly and protected for-profit health insurance industry. It produces neither health nor protection from catasptophe. It is a fatally flawed model which simply allows dollars, now tax tax dollars, to be transfered to the gougers from the gougees.

But as rat-raceparent says, a 20-30% guaranteed return for the rich at our expense is the new normal.

Posted by: Mimikatz | September 17, 2009 12:33 PM | Report abuse

I'm amazed that it took twenty comments or so for somebody to finally point out to the teabaggers that the reason that this is (for all intents and purposes) a tax is that it is a mandate. The government doesn't make me by Big Macs. But if the government makes me fork over the money for health insurance (or a fine if I don't), but they don't help me pay for it, they have effetively taxed me. They simply farmed out the collection power to the insurance industry. Perhaps the conservatives might understand it more clearly if we call it an "unfunded mandate", kind of like the expansion of Medicaid ( a good thing, by the way, as are most of the structural elements of this bill....they just need to be subsidized better.)will be. Ezra keeps saying that you can't do this right for much less than a trillion. That's seems to be proven by the Baucus bill.

Posted by: rvanwye54 | September 17, 2009 1:38 PM | Report abuse

If you want to call the individual mandate a tax on individuals or the employer mandate a tax on businesses then I have no problem whatsoever. But I think its awfully ridiculous to call the lack of subsidies a tax.

Posted by: spotatl | September 17, 2009 2:37 PM | Report abuse

steve- if you think that people could afford a public option without it being subsidized then I think you are grossly misunderstanding the problem. People cannot afford the level of healthcare that they need in this country even without insurance companies taking their part. If you ahve a magic wand to pass legislation that would help control costs then maybe there is enough money already in the system, but given the current paramenters we have a cost problem and not an insurance problem.

Posted by: spotatl | September 17, 2009 3:36 PM | Report abuse

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