- The Foundry: Conservative Policy News from The Heritage Foundation - http://blog.heritage.org -

"Fees" Are Taxes and New Taxes Are Not the Answer

Posted By Stuart Butler On September 8, 2009 @ 4:43 pm In Obamacare | Comments Disabled

According to a New York Times story [1] on Sunday, Senate Finance Committee Chairman Max Baucus (D-MT) plans to propose a new “fee” on insurance companies to help pay for a costly liberal health reform package. This “fee” would allow Congress to penalize their straw man du jour, insurance companies, while attempting to pay for part of one of the trillion dollar proposals being debated in Congress this week. However, these “fees” are nothing more than taxes hidden behind a thin veil of “fairness” rhetoric. They would actually fall on ordinary Americans, not insurance executives or stockholders.

The idea of hiding a tax on families as a penalty on greedy insurers is not new. Senator John Kerry (D-MA) proposed this idea earlier this year, as did Senator Debbie Stabenow (D-MI), Senator Chuck Schumer (D-NY) and Senator John D. Rockefeller (D-WV). Not exactly a moderate gang of four. Senator Schumer said the health insurance companies should “pay their fair share [1]” and Senator Rockefeller accused insurance companies of “…rapaciously, greedily and unstoppably making money [1]…” So does this idea have merit? No. A few liberal Senators attempting to redistribute corporate wealth to fit their idea of “fairness” in reality means more regressive taxes [2] passed down to you the consumer.

To understand why think about this. When you buy something that is subject to a sales tax who pays the tax – you or the vendor? If you need a clue just look at the line “sales tax” on your bill. And if you tax insurance companies the cost is passed through in the same way. Under the proposal, the regressive tax would simply be attached to the costs of more expensive health care plans. Now the most expensive plans are typically found in workplaces that are either unionized or have an older workforce. When health care companies are penalized for providing these superior products, the simple solution to their bottom line is to pass those costs along in the form of increased premiums. So the end result is one insured group of workers paying to lower the costs of another group of insured workers. And who gets to decide who wins and who loses? Senators Kerry, Schumer, Stabenow and Rockefeller to name four.

Is there a better solution? Of course. Rather than this kind of hidden tax to resuscitate the mammoth congressional bill, it’s time to scrap it, take a fresh sheet of paper and start again to craft a reform bill that could garner wide bipartisan support. That sheet of paper would have three main steps written on it — steps we have proposed for years with broad support on both sides of the aisle:

1) Instead of trying to rewrite the health economy, which is larger than the economy of Britain, in one gigantic bill, we should do it in stages, making sure each stage works before going to the next.

2) Let’s start, as we did with welfare reform, by giving states far more freedom to reach the goals of reform. Give them legislative waivers from federal rules and programs to work with insurers to figure ways to widening coverage, and freedom to reorganize existing federal and state programs, like Medicaid, to improve coverage at less cost. States could try competing approaches and we could see which approaches actually work. There are already bipartisan bills we helped to craft that could the basis for legislation.

3) Let’s also reform the tax treatment of health care to target tax breaks on those taxpayers who need help the most, such as those without employer-sponsored plans and also those who cannot afford employer-offered coverage for their families or themselves. Budget-neutral and tax-revenue neutral reform of this kind has long had bipartisan support.

Rather than adding trillions more to the national debt and hiring an army of czars and commissions, let’s take incremental steps that are achievable and can provide immediate relief to all working families. New taxes – explicit or hidden as “insurance fees” – are not the solution.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/09/08/fees-are-taxes-and-new-taxes-are-not-the-answer/

URLs in this post:

[1] New York Times story: http://www.nytimes.com/2009/09/07/health/policy/07health.html?_r=1&scp=3&sq=baucus&st=cse

[2] in reality means more regressive taxes: http://www.heritage.org/Research/HealthCare/wm2578.cfm

Copyright © 2011 The Heritage Foundation. All rights reserved.