Taxing High-Cost Health Plans: Voodoo Economics for the Punditocracy?

[Omaha Steve]

http://www.inthesetimes.com/working/entry/5376/taxing_high-cost_health_plans_voodoo_economics_for_the_punditocracy/

Monday January 4 6:32 pm

The biggest remaining progressive fight over health care reform hasn't yet been fought: the conflict between the House and Senate versions on how to pay for reform. Yet in the eyes of most editorial pages and policy wonks, taxing working families' benefits somehow makes more sense than taxing the rich.

Has this become the "voodoo economics" of so-called pragmatic moderates and Administration economists? Like supply side economics, this could be a chimerical tax policy that, they believe, will magically rein in costs and pay for all health care reform without significantly cutting back on vital services for working families or raising their out-of-pocket costs. Somehow, to those who remember it, it's all eerily reminiscent of earlier wishful thinking, a reverse version of the economic snake oil proffered by Arthur Laffer, who reportedly drew on a napkin the Laffer curve that set the stage for the lower taxes for the rich and ballooning deficits of the Reagan years. His cocktail napkin curve and rhetoric promised that lower taxes would spur productivity and raise government revenues -- while higher taxes would deter economic growth and lower revenues.

Unfortunately, even as the Senate's excise tax on benefits entranced most of Washington's opinion leaders like a shiny new Christmas toy, the prospects for liberal and union influence in the final legislation that passes both houses faced a new potential setback Monday. That's because of reports that the House leadership was considering skipping a formal conference with the Senate and working out an informal deal between leadership and staff of both houses. Some Democrats spun this latest development as a progressive alternative: "The reasoning given by Democrats is that going to conference allows Republicans with multiple opportunities to block or delay the bill's ultimate passage," as the Sunlight Foundation summarized this development.

But a strong liberal champion of health reform, Rep. Raul Grijalva (D-AZ), co-chair of the Progressive Caucus, told me he found this no-conference prospect worrisome.

"The idea of no formal conference is disappointing. A formal conference at least allows a variety of constituencies to give input and provide pressure on what's decided. The Senate is in the driver's seat, and our concern is that we're basically allowing the Senate bill to be dictated to us during negotiations," he said.

He added that the current Senate bill misses key elements he and other progressives strongly support, including not just the faded public option but removing the anti-trust exemption, tough regulation of insurance companies in the states, and taxing the rich, not benefits as the Senate does. "If we're merely replicating the Senate, that's going to be a nearly impossible vote for me and other progressives," he declared.

And without at least 20 votes from his 75 or so caucus members, "the party's over," he observed.

FULL story at link.

[dkf]

1. I have been wondering about this myself

They are expecting most of the revenue to come from this tax but it is so punitive with the highest tax rate possible that if it works there won't be any revenue at all.

[slipslidingaway]

2. knr nt

[Faryn Balyncd]

3. k and r.