So far, the Republican presidential contest has been light on Obamacare, with Scott Walker — who has essentially championed the 2017 Project’s “Winning Alternative to Obamacare” — providing a noteworthy exception. Since Obamacare is the biggest issue of Barack Obama’s presidency, why are most GOP candidates shying away from talking about their plans to bring about its full repeal? The answer, in part, is that while almost all Tea Partiers and most grassroots Republicans are fully committed to repeal, two groups within the Republican party or the conservative (or libertarian) movement are either not fully dedicated to the cause or are actively working against it.
The first group is the Chamber-of-Commerce Republicans, of which congressional leadership is the most noteworthy example. This group isn’t losing any sleep over Obamacare and doesn’t wish to spend any political capital fighting it — except to “fix” it by repealing things like the medical-device tax, which the Chamber (and hence congressional leadership) is targeting. The second group is the libertarian-leaning wing that opposes essentially every Obamacare alternative. This group pretends that the American people are ready to repeal Obamacare and replace it with nothing. It refuses to recognize that conservatives’ refusal to offer real reforms has paved the way for liberals’ efforts to socialize American medicine.
In a piece at Forbes, John Goodman takes aim at this second group. He writes, “Michael Cannon, who directs health policy at the libertarian Cato Institute, calls…any plan that is based on a refundable tax credit…Obamacare lite.” (Refundable tax credits are tax credits that go both to people who pay taxes and those who don’t. Since nearly half of all Americans don’t pay income taxes, a non-refundable income-tax credit would be useless to the poor or near-poor who make up the vast majority of Obamacare’s newly insured — and hence would be useless politically to anyone who wants to get rid of Obamacare.)
Goodman continues,
“So where did the idea of a refundable tax credit come from? The Brookings Institution? A George Soros organization? Some other liberal think tank? No. None of those. The idea came from the Cato Institute!
“I know. I proposed the idea along with the idea of Health Savings Accounts in my book Patient Power, published by Cato in 1992.”
Goodman then lists five reasons why tax credits are “such a good idea”:
“They would (1) make tax relief for health insurance fair, (2) eliminate perverse incentives to over-consume health care, (3) minimize the role of government, (4) privatize a large part of the welfare state and (5) empower individuals rather than impersonal bureaucracies.”
Goodman could have added a sixth — and most important — reason: They are the small pill we must swallow to achieve the nation-defining victory of repealing Obamacare.
Goodman then rebuts a series “of Cannon’s complaints about the refundable tax credit”:
“Are tax credits like an individual mandate? All credits, deductions and every other form of tax relief encourage one kind of behavior and penalize another. Because of the mortgage interest deduction, you have to pay higher taxes if you don’t buy a home. Because of the child tax credit, you have to pay $1,000 more in taxes for every child you don’t have. You can call these ‘financial mandates,’ if you like. But that is a strange use of language. The health tax credit functions no differently in this respect than every other form of tax relief….
“Are refundable tax credits welfare under a different name? If they are, then they are a way to privatize the welfare state. As noted, no one has seriously suggested that people who cannot afford health insurance should go without needed health care. One choice is to pay for their care with funding from government agencies, non-profit institutions and through cost shifting to paying patients by hospital bureaucracies. The other option is to empower individuals and let them make their own choices in a competitive marketplace.
“Do tax credits require Congress to intrusively define what the insurance must look like? No. For roughly 70 years employer spending on employee health insurance was excluded from the employees’ taxable income. For almost all that time the only requirement was the insurance be ‘creditable.’ That’s a fancy way of saying it can’t be a sham.”
Goodman also takes aim at Cannon’s preferred policy, which (in Goodman’s words) “would require employers to put the dollars they now pay out in premiums into ‘large Health Savings Accounts.’”
Goodman writes,
“This apparent individual empowerment…comes with its own set of distortions….If you take a dollar out of an HSA and spend it on non-health care goods and services, you must pay income taxes and a 20 percent penalty. Someone in the 30 percent tax bracket would have to choose between spending a dollar on health care or 50 cents on other goods and services….”
He also questions the wisdom — and realism — of giving a health care tax break to people who don’t have health insurance:
“[T]here is no way that Congress would ever insist that employers convert from a system under which 150 million people have catastrophic insurance to a system where millions of them would have the option to save their share of the money and not buy insurance at all. The only argument for government involvement in this sector is the free rider problem. If people don’t buy insurance and if they consume all their income instead, when they experience a catastrophic illness the rest of us will end up paying for their care.”
Read the whole piece here.
Jeffrey H. Anderson is executive director of the 2017 Project, which is working to advance a conservative reform agenda, including a winning alternative to Obamacare.
