Taxing Reform

Since passage of health-care “reform,” many in the media have been quick to point out the supposed positive effects of the new law. Take for example this recent article from Stacy Johnson at Money Talks News touting the “positive changes” stemming from Obamacare.

After listing the perceived benefits, the article then displays this list of taxes that will be used to pay for this new government power grab:

  • Fees on drug companies and insurers.
  • An excise tax of 10% on overly generous health plans.
  • A 2.9% tax on the sale of medical devices.
  • A 3.8% tax hike in your Medicare payroll taxes and on your investment income if you make more than $250,000/yr.
  • Fees on employers who don’t offer required coverage.
  • Fees on people who don’t get mandated coverage.
  • A 10 percent excise tax on tanning salons.

Despite this list, the author displays a typical economic fallacy when attempting to argue that these taxes won’t really affect the average person:

Not a penny coming from any individual taxpayer other than those who don’t comply or those that are making more than $250,000/yr.

Somehow, it is argued, the taxes to be levied on drug companies, insurance companies, medical device companies and employers will simply be absorbed by these companies, and not a dime will be shifted to consumers and employees. Lost in this simple view of how economics works are the unintended consequences of such taxes. The drug, insurance and medical device companies will no doubt pass their added costs onto consumers; employers will pass their new burden on by either reducing benefits and pay or reducing their workforce.

You can’t just add taxes onto these companies and not expect some unintended (but all-too-often predictable) consequences. Taxing an activity virtually guarantees you will get less of it. If you tax pharmaceuticals, health insurance, medical devices and employers, you can expect to get less pharmaceuticals, less insurance, less medical devices and less employment.

If there is anything studying political science over the last several years has taught me, it’s that many politicians would do well to take an applied economics class. Or, if they chose not to, maybe they should at least avoid meddling with the economy — a subject they usually appear to understand very little about.

* The preceding was originally posted on the Young Americans for Liberty blog.

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One Response to Taxing Reform

  1. Oh, don’t be a party pooper. Meddling in the economy is so easy and fun for them, since they pay no price for being wrong.

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