The Magazine

Tax Hike in a Lab Coat

Dare to say no to Baucus-care.

Oct 19, 2009, Vol. 15, No. 05 • By MATTHEW CONTINETTI
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Democrats, liberals, and the mainstream media (but we repeat ourselves!) want to convince us that Montana senator Max Baucus's "America's Healthy Future Act of 2009" is a serious, moderate effort at health care "reform." It's not. It's a tax hike dressed in a lab coat.

The Baucus bill, scheduled to come to a vote this week in the Senate Finance Committee, imposes new taxes on insurers that the companies will pass on to consumers. Its employer mandate is a tax on small businesses that will make owners think twice before hiring more workers. The penalty for noncompliance with the individual insurance mandate will hurt younger and lower-income Americans. Meanwhile, the increased fees on medical devices amount to consumption taxes that will raise the price of contact lenses, wheelchairs, prosthetics, and dentures, among many other medically useful things.

It gets worse. As James C. Capretta of the Ethics and Public Policy Center points out, the Baucus plan does particular damage to anyone at the lower end of the income scale seeking to improve his condition. Capretta notes that because the bill's subsidies to purchase health insurance phase out rapidly, and income and payroll taxes are always waiting just around the corner, "the effective, implicit tax rate for workers between 100 and 200 percent of the federal poverty line would quickly approach 70 percent--not even counting food stamps and housing vouchers." So much for helping the unemployed get into the work force. The president has already signed into law a tobacco tax increase and a tariff on Chinese tires that will raise prices for low-end consumers. So much for helping the working and middle classes.

The Baucus plan rewards insurers by forcing millions of new customers to buy their product, limiting choice and competition, and increasing prices by mandating the types of coverage that insurers must offer. It's pro-big business and anti-small entrepreneur. It costs a ton of money--$829 billion over 10 years, according to the Congressional Budget Office--and doesn't even reach the goal of universal coverage. There are plenty of reasons to be skeptical about the plan's cross-my-heart-and-hope-to-die pledge to cut the deficit, since that promise relies on future cuts to Medicare and Medicare Advantage that Congress is unlikely to accept.

Is it worth paying all these taxes and spending all this money for a plan that doesn't even cover everybody? The public doesn't think so. Last week polls by the Pew Research Center and Quinnipiac University both found that a 47-percent plurality of Americans oppose Obama-care--even after the president has spent the past month "calling out" everyone who disagrees with him. The opposition makes sense when you consider all of the cheaper and more practical ways to spur innovation, lower prices, and cover more people in the health markets.

Take the "small bill" proposal that Jeffrey H. Anderson outlined on our website last week. A consumer who wishes to purchase health insurance in the individual market would get the same tax break employers do. He could shop across state lines for the insurance plan that matches his personal needs at the best price. Furthermore, the small bill plan would lengthen COBRA eligibility so that the recently unemployed could continue to pay premiums and receive their old coverage for up to 30 months after losing their jobs. The plan would allow companies to incentivize healthier lifestyles for employees, cap punitive damages in medical lawsuits, and increase federal support for state-run high-risk insurance pools.

The small bill fits on one page where the Baucus bill as amended runs to 262. The small bill would cost $75 billion over 10 years; the Baucus bill, at a minimum, $829 billion. The small bill raises no taxes; the Baucus bill raises taxes and fees by more than $500 billion. And yet the Beltway conventional wisdom is that Baucus's expensive new entitlement, middle-class tax increases, and convoluted regulatory regime is the sensible, centrist policy. Please.

Isn't it time to reject the false choice between Obama-care and the status quo?

--Matthew Continetti