This week, New York Times columnist Bob Herbert warned that the Senate version of ObamaCare imposes a huge, new tax, a 40 percent levy on gold-plated insurance plans that cost more than $23,000 per year.
Herbert is not the sort to oppose high taxes, but this one is different. It would strike squarely at labor unions, a narrow but well-funded constituency without which few liberals would ever be elected anywhere. Amusingly, the unions’ dilemma has liberals suddenly rediscovering the power of economic incentives.
Liberals look down their noses at the ideas behind supply-side economics. They rarely consider the incentives that government creates when they affect Americans who don’t belong to powerful special-interest groups that bankroll the Democratic Party.
Higher tax rates on the rich will hurt businesses? Who cares? Costly health and safety regulations with marginal benefit will destroy hundreds of small, family-owned businesses? Not a problem – do it anyway.
Draconian environmental rules (such as carbon regulation) will affect millions of people’s livelihoods? So what? Liberals don’t care if such policies cause many thousands of Americans to lose their jobs – and their health care – every year.
But then cross one of their Sacred Cows – say, try to impose new health or safety regulations on an abortion clinic – and suddenly there’s a huge problem. (As governor of Kansas, Obama’s Health secretary Kathleen Sebelius vetoed several such bills.)
The ObamaCare tax on luxury health-insurance plans offers another great example of this. Herbert calls it “a confiscatory 40 percent excise tax.” He opposes it because it is opposed by one very important special interest group.
Unions provide manpower for Democrats at election time. They contribute huge sums of money and run independent advertising campaigns – like the one the AFL-CIO is running now in opposition to the luxury health-care tax.
This tax would not affect most low-, middle- or even high-income Americans. The national average cost of an employer-based family insurance plan is only $12,300 per year. But labor unions regularly negotiate plans that cost employers twice that amount.
The Communications Workers of America noted earlier this year that in four states, union-negotiated health plans already exceed the very high “Cadillac” threshold at which the confiscatory tax begins.
The Communications Workers of America noted earlier this year that in four states, union-negotiated health plans already exceed the very high “Cadillac” threshold at which the confiscatory tax begins.
For example, they point to a union-negotiated family health plan in Arkansas that costs nearly $25,000 per year. (The state average there is just over $11,000, in case you’re wondering why employers are hesitant to let workers unionize.)
Over time, CWA argues, medical inflation will push more workers into the taxable category. (Well, more union workers, anyway.) When the tax causes some luxury health plans to disappear, there will be even less incentive for workers to join private-sector unions, which have been on the decline for decades and represent just 7.6 percent of private-sector workers today.
It adds greater costs to the insurance that people already have, in the name of insuring more people. Its threshold begs for tax-avoidance. Businesses will scale back health care coverage to avoid the tax, or else they will reduce wages or lay off workers in order to pay it.
If you’re a conservative, you’ve understood these principles all along. Government never acts in a vacuum. It creates incentives that distort people’s behavior.
Over time, such distortions have given us such wonderful institutions as subsidized agriculture, the housing bubble, too-big-to-fail, and our current, unfortunate health insurance system.
Ronald Reagan summed up government’s view of the economy: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” If you’re Bob Herbert, Reagan’s maxim is all crazy talk, but in this one special case involving unions it suddenly makes sense to him.
The incentive toward selective perception of reality is a powerful one indeed.
Examiner columnist David Freddoso is online opinion editor. He can be reached at [email protected].
