It is generally conceded that the first President Bush made a fatal error during his presidency when he said, “Read my lips. No new taxes,” and then proceeded to make an agreement with Congressional Democrats to raise taxes. History may be repeating itself. Like his father, President George W. Bush has also proposed raising taxes, despite his reputation as a tax-cutter. Our media have done a good job of highlighting the new tax-raising approach of the administration in the health care arena, saying it resembles something that Democrats might offer, but some conservatives seem to be having difficulty openly acknowledging what their anti-tax President is doing.
The case is being made by some conservative groups that the Bush proposal is a necessary reform of the health care system because it gives tax breaks to individuals for health insurance that had only gone to people covered by employer-provided policies. That case can be made. But it’s foolish and misleading for them to insist that the Bush proposal is not a tax increase. In fact, Katherine Baicker, a member of the White House Council of Economic Advisors, goes so far as to call the Bush proposal “progressive.” This may be why liberal Washington Post columnist Ruth Marcus embraced the plan, calling it a “tax increase” that “would actually bring in extra revenue as the years go on?” Marcus was upset, however, that Congressional Democrats have rejected the proposal for various reasons. She thinks they are rejecting it simply because it comes from Bush.
Bush’s health care proposal would provide a new tax deduction of $15,000 per family and $7,500 for individuals who purchase private health insurance. The trouble is that 30 million Americans are covered by policies that cost more than $15,000 a year. The proposed Bush tax increase will affect 20 percent of all employer-provided health care plans. The Tax Foundation found that, for a middle class family of four with two children that earns $80,000 per year in wage and salary income and receives $20,000 in employer-provided health insurance, it pays an additional $1,500 in taxes.
After I wrote a column on this controversy, noting that the Bush proposal constitutes a tax increase on 30 million people, I was contacted by a leading conservative anti-tax group, wondering if I would come to its meeting to make the case that conservatives should oppose the Bush plan. I replied that I wasn’t a tax expert, only a media analyst, and that I relied on information provided by the White House itself to make the case that the Bush proposal would raise taxes. The media have done a much better job in covering the proposal than some conservative groups have done in telling their members and supporters what it entails. They seem to want the public not to grasp that the proposal seeks to raise taxes on 30 million Americans. These are the “losers” under the proposal, according to the White House, and many come from middle-class families.
Don’t take my word for it. Here are excerpts of a White House briefing in which Katherine Baicker, a member of the White House Council of Economic Advisors, was questioned by reporters about the plan:
Q: This will be a tax hike for some people?
Baicker: This is revenue-neutral tax reform. There are always going to be some winners and some losers, but the people who might initially be losers have options.
Q: What is the cost of this over five years?
Baicker: I don’t have the year-by-year breakdown. So it’s revenue-neutral over the 10-year window and it’s a loser in the first five years, and a winner in the second five years-or at the beginning and at the end, but I don’t know exactly where the break-even point is.
Baicker: …it makes the tax code slightly more progressive than it was before, so it’s a slight increase for people at the high end of the income distribution, and a slight tax decrease for everybody else.
Q: I had a couple questions. So the President is going to acknowledge that he would be raising the taxes on 20 percent of the public, do you know how many people that is?
Baicker: That’s not quite right.
Q: Okay, okay. And then the second question is, wouldn’t this be encouraging people to get-both the people, the 20 percent to get less quality health care than they’re getting now so that they’re not paying extra taxes? And overall, wouldn’t that be true on everybody because everybody would be saying, well, if I get the very least health care I possibly can get, then I can get more cash in terms of my taxes, therefore, and aren’t you sort of doing a race to the bottom in terms of how much coverage people would be getting?
Baicker: So let me first correct a small factual thing and then answer the bigger question overall. So the 20 percent is-let me put the 20 percent in context again. Twenty percent of employer policies offered now are above that standard deduction. So it’s not 20 percent of people, everybody in the whole country. It’s 20 percent of employer policies, so?
Q: Do you know how many people that is?
Baicker: That is about, ballpark, 30 million.
For these 30 million people, their taxes will go up. That is, if they don’t “change their behavior,” as Baicker put it, and pursue other “options.” This does not strike me as a conservative approach to public policy. The correct policy, it seems to me, would have been to give the same kind of tax break to an individual that was available through a group. The Bush proposal strikes me as anti-family. Then again, I am not a fan of the “progressive” approach that is now being adopted by the Bush Administration.