Why Are Pundits Fawning Over Elizabeth Warren’s Medicare-for-All Financing Proposal?
Somehow, the least progressive Medicare-for-All funding proposal I have ever seen is being championed by many in the media as our best and only choice.
I have been swimming in the Medicare-for-All waters for over a decade now, going back to when I worked on the Ralph Nader presidential campaign that made Medicare for All (M4A) its number-one issue. During this time, I developed a specific understanding of what we might call “the M4A Financing Problem.”
The M4A Financing Problem, in simple terms, is that even if you bring in existing federal spending on health care, existing state spending on health care, and a bunch of new rich-people taxes, you still fall short of financing the program. Thus, to actually complete the financing, you have to use some middle-class taxes.
The proper response to this “problem” has always been to point out that it is no problem at all. Yes, you will have to impose some middle-class taxes to round out the total amount of money you need, but those taxes will charge the middle class far less than they are currently paying for health care. What people don’t like about taxes is that it means they have less money. But swapping these taxes for the elimination of premiums and out-of-pocket expenses would actually mean that the middle class has a lot more money.
However, for some pundits, this explanation has never been satisfactory. They say that any tax imposed on the middle class is a problem and has to be avoided. And, insofar as you cannot do M4A without some middle-class taxes, it is a nonstarter.
When Warren released her Medicare-for-All financing proposal this week, nearly every left-liberal journalist declared she had made a huge breakthrough: an M4A financing plan with no middle-class taxes.
David Dayen of the American Prospect announced that “Warren’s Medicare for All Plan Includes No New Taxes on the Middle Class.” Sahil Kapur says that, contrary to Bernie Sanders, Warren’s plan has “no middle class taxes.” Danielle Kurtzleben of NPR says Warren’s plan has “no new taxes on the middle class.” Ady Barkan of the Intercept writes that “her plan doesn’t raise taxes on working families.” Even Eric Levitz of New York magazine, who seems to know better in parts of his piece, says that the plan “does not raise the American middle class’s taxes by a dime.”
Every single one of these people is incorrect, under the typical definition of “middle-class taxes” that has always been used in this discussion. Just like every person that came before her, Warren realized that after bringing in existing government spending and some targeted rich-people taxes, there was still more money that needed to be collected. And, just like those people, she came up with a middle-class tax to do it. Her middle-class tax is an employer-side head tax. It is an $8.8 trillion tax hike on the middle class.
To understand where the discourse has gone so far off the rails on this, it is necessary to distinguish between three concepts.
- Middle-class taxes. Any tax whose incidence falls on the middle class, meaning that it is the middle class who really pays the tax, regardless of how it is collected.
- Direct middle-class taxes. Any tax that is directly charged to middle-class people, including employee-side payroll taxes and income taxes.
- Indirect middle-class taxes. Any tax whose incidence falls on the middle class but is collected from entities other than the middle class, including employer-side head taxes, employer-side payroll taxes, and value-added taxes.
Discourse participants who are claiming Warren’s employer-side head tax is not a middle-class tax hike seem to be stuck in a kind of weird conceptual vortex in which they drift between the point that (a) Warren’s employer-side head tax is charged to employers rather than directly to workers (i.e., it is an indirect tax), and the point that (b) the employer-side head tax simply replaces employer premiums in a way that actually costs less than the status quo. Somewhere in the intersection of these two concepts comes the claim that Warren’s head tax is not a middle-class tax hike.
But point (b) is just the standard point mentioned at the top of the piece, that what matters is not whether something is a “tax” or a “premium,” but rather what the total cost is to the middle class. Pointing out that you are replacing health-care spending with a lower tax has never been enough in the past to be able to claim that you are not imposing “middle-class taxes.” Yet now it somehow is.
And point (a) just says that indirect middle-class taxes are not middle-class taxes. But in that case, employer-side payroll taxes and value-added taxes are also not middle-class taxes, and so proposals to use those have actually been solving the M4A Financing Problem all along. Yet, as with (b), nobody has ever previously permitted people to claim that indirect middle-class taxes are not middle-class taxes in this debate.
Of course, my analysis probably gives pundits on this more credit than they deserve. A heaping dose of pro-Warren bias and a general inability to really evaluate policies that are put in front of them no doubt goes a long way toward explaining why so many people ran with the talking points put out by the Warren campaign.
Regardless of that, if we want to be serious about this debate, we really should establish some kind of ground rules for what solves the M4A Financing Problem (however defined). If an employer-side head tax solves the problem because middle-class health-care costs are still lower after its imposition, then every M4A financing proposal I have ever seen solves the problem — and does it in a much more progressive way than Warren has. If the employer-side head tax solves the problem because it is less costly while also being an indirect tax, then an employer-side payroll tax also solves the problem, but in a way that is far more progressive than Warren’s head tax.
The idea that Warren’s specific cost-saving indirect middle-class tax hike — an employer-side head tax — is the only thing that counts as solving the M4A Financing Problem is clearly nonsensical. And yet, here we are, with the least progressive M4A funding proposal I have ever seen being championed as the only one that solves the problem.