Friday, June 26, 2009

Paying for it

Currently, figuring out how to pay for health care reform is one of the most contentious issues in the debate right now. President Obama favors limiting income-tax deductions for high-income earners, but Congress seems to be more interested in taxing employee health benefits because many economists argue it mainly goes to high-income earners and discourages cost-consciousness (at least according to this article). Both are looking at cutting Medicare costs, particularly by having insurance companies bid for government reimbursements for offering private plans (known as Medicare Advantage). But perhaps the most controversial idea is increasing what are termed "sin" taxes, or taxes on what are considered bad behaviors:

Congressional analyses show that more than $200 billion over 10 years could be collected from new or increased taxes on sugared soft drinks, tobacco products and alcoholic beverages implicated in common health problems like obesity and cancer. Yet while the options are on the lawmakers’ table, Senator Baucus has said they are on “life support.”

The Joint Committee on Taxation calculated that a 3-cent tax on each 12-ounce sugared soda would raise $51.6 billion over a decade. But opposition is not limited to the bottling industry. Major sources of sweeteners include Montana, which has a large sugar beet industry, and Iowa, which produces high-fructose corn syrup — the home states of Senators Baucus and Grassley.

The government could raise $61.5 billion with an additional alcoholic beverage tax that would mean about 40 cents more for a fifth of liquor, 48 cents for a six-pack of beer and 49 cents on a bottle of wine. Advocates point out that federal alcohol taxes were last raised in 1991; adjusted for inflation, they are 37 percent lower now. But local wineries and microbreweries now operate in nearly every state, suggesting that major distillers will not be the only opposition.

Each of these taxes is often criticized as regressive, meaning it would disproportionately affect lower-income people. But proponents counter that the poor have the most to gain from universal health coverage.

I'm usually not a fan, as I imagine most people aren't. These kinds of taxes are most often proposed when legislators are too afraid to ask voters for a progressive income tax but desperately need revenue, so they opt for something silly like a tax on strips clubs (as seen here in Texas, though admittedly that must be a pretty big revenue stream!).

But when it comes to paying for health care, I'm more open to the idea. One of the main reasons our health care costs are so high in this country is because people eat too much, smoke too much, and drink too much. I don't want to tell people how to live, but it makes some sense to tax those things to help cover the costs created by them. It should at least by considered, and perhaps could be used in tandem with some of the other proposals.

As always, Americans want big reforms but they don't want to see taxes go up or deficits increased either. Unfortunately, you do have to spend money or borrow it to pay for these things. Given the current shape of our health care system, it's not like it's a bad investment. And unlike the other proposed taxes, you could actually get out of paying them if you cut down on junk food, cigarettes, and alcohol that are pretty bad for you anyway when not taken in moderation.

And hey, as someone who gets a bag of Cheetos out of the vending machine almost every day for lunch, I'm not saying it wouldn't annoy me sometimes too to pay a little extra than what I do now. But that doesn't mean I won't think it's fair or a good trade if we actually get real health care reform. To me, that's the bigger and more important issue in this debate right now than the cost and how to pay for it.


Nat-Wu said...

I've always supported the idea of a junk-food tax for the reasons you discuss, but I think that more important than discouraging people from eating bad food is making good food available to them. After all, we know that obesity is a worse disease among the poor because of food availability. Not only should we use these taxes to fund health-care, we should find a way to fund decent food.

You know the world is messed up when they sell pre-made pbj sandwiches (with the crusts cut off).

Alexander Wolfe said...

I agree with this, for pretty much the same reasons. I hate that politicians will reach for sin taxes because they lack the balls to impose substantive taxes necessary for programs that benefit most or all of us, but at the same time, a sin tax to fund health care is fairly appropriate, and I'd rather see the chickenshits in Congress impose sin taxes to get it than no taxes at all and lose public health care in the process. So, the lesser of two evils I guess.