March 4, 2012 2 Comments
Yesterday, I noted that Obamacare’s unconstitutional malady — the individual mandate — may not be its biggest policy flaw. The Independent Payment Advisory Board, the unelected tribunal of 15 appointees who will determine reimbursement rates, is one, but by no means the only, pernicious part of the legislation. If Republicans are to win the battle over Obamacare, they would be wise to make two other policy arguments: 1) It creates new taxes on everything from medical devices to medication to flexible savings accounts (which many Americans now use to pay for insurance deductibles and other noninsured items); and 2) It worsens the business environment and adversely affects the labor market, especially for small businesses.
Americans for Tax Reform compiled a helpful list of the taxes in Obamacare, which total approximately $500 billion. These include a new 3.8 percent surtax on investment income that will push up the top marginal rate on dividends and capital gains (as the administration blames Wall Street and Republicans for the anemic recovery); a hike in the Medicare payroll tax; a tax on medical device manufacturers; and a new tax on drug companies. There are 20 separate taxes. Only if you believe insurance companies provide contraception for “free” would you think that these costs wouldn’t be passed onto consumers. Obamacare is a massive redistribution scheme in which huge taxes are extracted to subsidize health-care plans for a subset of the population. To achieve that, the government has to raise a whole bunch of revenue, and it certainly aims to do that.
A related and serious drawback in the Obamacare scheme is the impact on hiring and on small businesses. Last July, Douglas Holtz-Eakin of the American Action Forum testified before a House subcommittee on the impact on small businesses. The testimony is worth reading in full, but this portion is especially noteworthy:
Sadly, the new health-care law is an assault on small business, beginning with the 3.8 percent Medicare tax on net investment income – a direct tax on many business owners. Of even greater concern is the law’s most celebrated feature – the mandate to cover full-time employees with health insurance. For businesses with more than 50 workers, this means paying a penalty if any full-time workers receive subsidized coverage.
The mandate creates a tremendous impediment to expansion. Suppose, for example, that a firm does not provide health benefits. Hiring one more worker to raise employment to 51 will trigger a penalty of $2,000 per worker multiplied by the entire workforce, after subtracting the first 30 workers. In this case the fine would be $42,000 to hire an additional worker. How many firms will choose not to expand?
Because Republicans have done a poor job of making policy arguments (in addition to the constitutional arguments) against Obamacare, I doubt many voters, who already are opposed to Obamacare in increasing numbers, know a fraction of what is in the bill. It is incumbent on Republicans to take them through these aspects of the bill and make the connection to the dismal economic outlook that many voters face.
When the GOP presidential and congressional candidates talk about Obamacare they ignore these aspects of the legislation at their peril. Outside the conservative base, commerce clause arguments and appeals to limited government may have limited traction. But telling voters that Obamacare brings a bevy of new taxes and new burdens on small businesses, along with a 15-person uber-medical decision-making board, should get their attention.
If nothing else, voters understand that their current insurance costs are going up, not down. According to President Obama, that wasn’t suppose to happen. The pie-in-the-sky promises that Obamacare was going to save us money, limit small-business costs and cut the deficit have proved to be false. And the president and those who voted for this monstrosity should be held accountable. To do that Republicans had better start making the case to the voters and stop relying on the Supreme Court to do the heavy lifting.