Health Care Reform: At What Cost?

The initial pieces of the Obama health  care reform, revealed today in excerpts published in newspapers and by Obama himself, show us some of the “how” behind the financing of his health care reform. Of the 634 Billion to be raised on the backs of “upper income” Americans, 318 Billion will come from reducing or eliminating certain tax deductions for upper income earners. All of the examples state that these net tax increases will not effect “families” earning less than $250K per year. Fairness depends on how you define “family”. Take for example the tax filing status of two very common scenarios. First is the “family” definition used by many of the examples sited by Mr. Obama and his spokesmen.  Married filing jointly implies a family of two, one or two income earners, with an income of $250K or less.  This equates to an adjusted gross income (AGI) of approximately $208,850 per year (according to Mr. Obama and company). For that couple, it also means a tax liability of $47,649.

Another very common family scenario is a single adult home with children, called head of household.  Assume the same income with three children of varying ages, all in school.  The AGI for this family is also $208,850 and their tax liability is $51,483.  Include the parent’s health insurance contribution, state taxes, social security taxes and local taxes, leaving about $140,010 (assumes social security and medicare taxes on the first $105K-didn’t include the remainder of the medicare taxes,  state tax rate of 7%,  no local taxes, health insurance contribution of $150 per month). Why would a family household with apparently greater financial needs be taxed at higher rate?  Does the IRS think that it is cheaper to care for children than for two adults? Do they think families with children have more disposable income than two adult households? Perhaps they think the children should all work after school and on weekends to supplement the household income.  Which family do you think will be more heavily impacted by Mr. Obama’s tax increases?

If I were working at Walmart as a cashier, making $32,000 per year, married with five children, I could potentially pay no taxes and with the Earned Income Credit, get a refund of $2,000.  I would also qualify for food stamps, with a maximum allotment of more than $900 per month. I, and every member of my family, would also qualify for Medicaid under the Categorically Needy definition of eligibility, as published by the Centers for Medicare and Medicaid Services. Keep in mind that Medicaid is the most costly of the government run health programs at a whopping $14K per person per year (see my previous post for the cost per person of the different programs). This brings my Walmart family’s total annual income and benefits to $142,800. All tax free.  Talk about a redistribution of wealth!

Under the circumstances, I don’t think it is fair to ask any American to pay one more penny of tax until the waste is removed from our mostly costly programs. First and foremost are Medicaid and SCHIP, with a cost per person of more than $14K per year.  Next is Medicare.  Both government run, government managed (or mismanaged).  Lastly is private insurance and self pay.  Our original scenarios above show how unfair the increase in taxes can be to heads of household.  I think all we really need is some common sense, and a real sense of fair play.  Don’t just look at a household’s income,  Look at the people in that household. They might need every penny.  They struggle.  They earned it. They work and pay taxes.  And the government isn’t giving them any handouts.  The government is wanting to take more from them.  Not fair.

Doc B.

My opinion is free.

Advice is worth exactly what you pay for it.

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