Debunking the NY Post's Health Care Tax Hysteria

by Tim Foley

categories: Enemies of Reform, Obama and Congress

Published July 17, 2009 @ 06:04PM PT

If “The CBO Director said what?” was the most frequently emailed question to me today and yesterday, “Did you see the NY Post?” was a clear #2.  Funny, I seem to remember a lot of folks saying they would boycott the NY Post after its offensive cartoon a few months ago.  But I guess enough people saw their front-page story “DEM HEALTH RX A POI$ON PILL IN NY” and were concerned that the proposed surtax on the richest 1.2% of the country was going to destroy civilization as we know it.

(Side note, does any one else see a resemblance between Chuck Grassley’s tweets and the NY Post’s headlines?  Just me?)

I’ll be the first to concede that New York State has high taxes, and the numbers that the NY Post presents certainly look daunting.  Not only that, but all of these stock photo people look too innocent to be taxed for the sake of making sure rising health care costs stop crushing individuals, families, small business, big business and government budgets.

There’s just one problem.  The numbers are misleading.

This isn’t too surprising for a graphic that begins, “What Obama’s Health-Care Plan Means to New Yorkers.”  But this isn’t Obama’s plan.  Obama is proposing a cap on charitable deductions for those making more than $250,000, which is a similar idea, but not the same.  It also refers to HR 3200 as “the bill that passed the House.”  Uh, not unless you’re writing from about two weeks into the future.

After that inauspicious start, we get into the numbers.  The “Single Wall Streeter Earning $285,000” looks to have a punishing surtax of $2,850.  Ouch!  Except that number misunderstands the proposal in the House bill.  A surtax isn’t the same as a marginal rate increase.  As helpfully spelled out by documents available on the House Ways and Means Web site, “The health care surcharge only applies to income earned in excess of [the threshold].”  So Wall Street Dude’s surtax is only on the income above $280,000.  His surtax is $50.  That’s not a typo.  $50.  Meaning he spends more on car service in a week than he’ll spend on any new taxes.

Let’s move down to the small business owner.  Yes, they’ve made him successful enough that he clears the $400,000 threshold, so the calculation of the “pay or play” payment for this guy and his half a million dollars worth of payroll is accurate.  What they leave out, of course, is that as a small business owner with only 10 employees, he’s eligible for the small business tax credits which would cover up to half of the cost of his employees insurance for a qualified plan.  Even with the employer mandate, House health care reform bill will actually pay out to small businesses more than it takes in -- to the tune of $53 billion over 10 years.

Let’s go down to the $80,000 a year individual who doesn’t have health insurance.  And let me just say that there’s no way this lady makes tens of thousands of dollars more than I do baking bread for a living.  No.  Freaking.  Way.

As you might guess, the millionaires also featured in the article have the wrong number for their surtax payment as well.  To be precise, the NY Post overestimates their surtax by $45,000.  Horseshoes and hand grenades, right?

And here’s really the crux of the matter.  The millionaires represent 0.27% of households in this country.  They’re households that have done precipitously well over the past ten years while wages for everyone else have flat-lined.  If you look back over the past 27 years, the numbers are even more staggering.  (Chart posted by Matthew Yglesias).

And it’s not like the rich get nothing out of health care reform.  A new generation of doctors will be trained, and more will be lured into primary care.  Health IT will decrease costs and prevent medical errors.  When they get sick, they’ll be more likely to get coordinated care where the providers are communicating and less likely to get care in a fractured system.  Health care will cost less and provide more.  And, not to put too fine a point on it, communicable diseases don’t check to see what your income level is or what insurance plan you have.

I’m not convinced the surtax is the best way to raise this money, which is why I’d appreciate a robust debate between competing options.  But let’s make sure it’s a debate with real numbers, OK?