On taxes in HR 676

By ellenView Comments

Harvey Fernbach, Jonathan Starr and others commented on the proposed reliance on the payroll tax to finance health care in the proposed re-daft of HR 676, a single-payer proposal.  While the Affordable Care Act imposes a progressive tax on the wealthy through a 3,8% tax on “unearned income,” the single payer advocates who have contributed to date in re-drafting H.R. 676 have not adopted this provision. Harvey has called this to the attention of the Congressional staff to Mr. Conyers.

The comments by Jonathan Starr follow. – Ellen Shaffer

 I am a long-time supporter of single-payer  national health-insurance.
But some of the largest of the  proposed changes to HR-676 are so bad that I
would cease to support that  bill as the mechanism for single-payer if they
were added.
The objectionable proposals are to financially support the  single-payer
system with:
1) Per-employee payroll taxes, 6% for employees and 8% for employers.
2) Financial transactions taxes, incorporating the provisions of Rep.
DeFazio’s proposed HR-1068.

Payroll taxes such as those proposed are inherently  regressive.  They
apply only to earned income (wages and  salaries), and exempt unearned income
(interest, capital gains, dividends) which  accrues overwhelmingly to wealthy
people.  And unlike income taxes, for  which there are progressively defined
tax-rate brackets as well as deductions  and exemptions, payroll taxes
apply in full from the first wage-dollar  earned.

Regressive payroll taxes already account for more than 40% of all federal
tax-revenue.  (A similar portion of federal tax-revenue comes from
individual income-taxes, which are very progressive; the net effect is an  overall
tax-system that is moderately progressive.)  The changes to HR-676  being
proposed would double the amount of federal revenue coming from payroll  taxes,
making the overall tax-system far more regressive, a thoroughly
undesirable outcome.
One of the big potential advantages of single-payer is that it could make
American companies more competitive with those from countries that already
have  single-payer, by eliminating the per-employee financial burden of
providing  health-insurance.  This also could make it more attractive to hire
more  employees.

But the new system proposed for HR-676 would constitute a per-employee tax
on hiring, doubling the already large per-employee tax for Social Security
and  Medicare.  This would discourage hiring of additional employees, and
would be inherently unfair.  Why should a labor-intensive business bear  more
of the financial burden for a society-wide program than a less
labor-intensive one?  For example, why should a home-health-care agency  with many
employees pay more for the single-payer program than a similarly  profitable
construction-equipment rental company with few employees?   Profits are the
proper measure of ability to pay (and of the degree to which an  entity, human
or corporate, benefits from the existence of the American  system).  As
such, profitability, not number of employees, should be the  determinant of
tax-levels paid by a business.

By hurting the international competitiveness of American  businesses,
discouraging hiring, and penalizing labor-intensive companies,  the proposed
changes to HR-676 would turn a potential advantage of  single-payer into a

Completely absurd is the proposal to add the content of HR-1068 to  HR-676.
 The DeFazio bill was designed to require financial-services  companies to
pay for their federal bailouts over time.  That at least had  some internal
consistency.  But, obviously, its provisions have no  intrinsic relationship
to health care or to health insurance.

Just grabbing at some arbitrary and unrelated source of revenue is morally
and politically unsupportable and improper.  There is no reason why any
particular area of business activity should bear a special burden for
supporting a fully national program of single-payer health insurance.

Not only would this be obvious to the public, but it would also bring upon
HR-676 the understandable wrath and political opposition of the financial
services industry.  As everyone knows, this is one of the most
politically-powerful and heaviest-lobbying industries in the country.   (That is partly
why HR-1068, even in its present, more creditable form, has  garnered barely
a dozen co-sponsors, a tiny number.)   Antagonizing such a strong entity
unnecessarily, and completely  without justification, would be idiotic and
probably suicidal for the  bill.
Single-payer national health insurance should be supported by progressive
individual and corporate income taxes.  Ability to pay is the most
reasonable and equitable basis for taxation, the financial support for the  general
societal system that benefits us all.  This is what should be  embodied in

We should not add provisions to HR-676 which would make the tax-system much
 more regressive, would discourage hiring, would hurt American business
competitiveness, would arbitrarily target completely unrelated commerce, and
would inevitably and unnecessarily provoke powerful political  opposition.
These proposed revisions to HR-676 are counter-productive  and unfair, as
well as politically damaging to the overall prospects for  single-payer.  They
should be rejected.

– Jonathan Starr
The New Great Society
Santa Clara, CA


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