Elizabeth Warren’s Head Tax Is Indefensible
Elizabeth Warren’s proposed head tax to finance Medicare for All is regressive and far inferior to alternative income- and payroll-tax funding proposals.
Democratic presidential candidate Sen. Elizabeth Warren speaks during a campaign stop at Broughton High School on November 7, 2019 in Raleigh, North Carolina. Sara D. Davis / Getty Images
Earlier this month, Elizabeth Warren released a financing proposal for Medicare for All. The core feature of that proposal is an employer-side head tax, which will charge every employer with more than fifty employees a flat dollar amount for every worker they employ. As I noted then, Warren’s head tax is very regressive and far inferior to the usual income- and payroll-tax proposals. More recently, the Tax Policy Center’s Howard Gleckman and Center on Budget and Policy Priorities’ Jared Bernstein have made the exact same point.
As part of the response to this undeniable point, it appears that Warren’s team, e.g., Simon Johnson, has been pushing out arguments that conflate Warren’s temporary maintenance-of-effort (MOE) payment with the permanent head tax that she transitions into. This conflation has been at the root of similar arguments made by Mike Konczal and Jordan Weissman, among others.
Maintenance-of-Effort Payment
In year one of Warren’s financing proposal, employers will calculate how much they paid in health premiums in the prior year, adjust that sum upward for health-care inflation, adjust that sum downward by 2 percent, then divide that sum by their number of employees. This modified per-employee amount will then be paid by the employer to the government. This kind of payment is usually called a maintenance-of-effort (MOE) payment.
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