Saturday, December 11, 2010
Thursday, December 9, 2010
The Flat Tax: A Bad Idea Whose Time Will Never Come
When the Republicans assume control of the House next month, they will undoubtedly start talking about tax "reform." At least some Republicans will push for a flat tax, a notion embraced in its essence by the misbegotten Deficit Commission's recommendation of a greatly flattened tax. Sounds fair and sounds tantalizing doesn't it? Everyone regardless of income pays a the same rate -- the typical proposal is 15%, although one-time presidential candidate Steve Forbes pushed for 10%. Just about everyone's bracket drops, and we all live happily ever after. What could possibly be wrong with this picture?
Lots, as it turns out. For one thing, the flat taxers never take the deficit into account. We'll see why that's important in a minute. For another, just because your top rate is, say, 25%, doesn't mean that you pay 25% of your income in taxes. Remember that the current tax system still has vestiges of progressivity, so if you file singly and earn 50K -- which puts you in the 25% bracket -- your actual income tax paid is less than 10% before deductions. That's because only the income that exceeds 34K is taxed at 25%.
Consider these five taxpayers, all filing singly:
A: Earns 20K, pays $2,581 or 12.9% (.1% of all taxes paid)
B: Earns 50K, pays $4,681 or 9.4% (.2% of taxes)
C: Earns 100K, pays $13,609 or 13.6% (.7% of taxes)
D: Earns 500K, pays $139,616 or 27.9% (7.4% of taxes)
E: Earns 5M, pays $1,714,616 or 34.3% (91.4% of taxes)
The total tax revenue is 1.875M. Let's posit that by some miracle we have a balanced budget and that expenses equal revenue. And let's remember that in the real world, there are a lot more B's and C's than anyone else (millions more than E's), meaning that their share of the total tax burden is much higher.
Now, consider the effect of a flat tax of 15%
A: pays $3,000 (.4%)
B: pays $7,500 (.9%)
C: pays $15,000 (1.8%)
D: pays $75,000 (8.8%)
E: pays $750,000 (88.2%)
Notice what has happened here. Taxpayers A, B, and C are paying more, not less, taxes. Moreover, the tax burden lowers for only one of these taxpayers (if you think it's the one most like Steve Forbes, you get a gold star); it increases for everyone else. And don't forget: The actual distribution of taxpayers means that B and C -- the middle class, in other words -- will wind up absorbing the brunt of the shift in burden.
And, it gets worse. Under a progressive system, these taxpayers raised and spent 1.875M. Under a flat tax, they raised 850K, meaning that they have to cut expenditures by 1M or create deficit. And the deficit is apportioned equally. Thus, the low income taxpayer who makes 20K must shoulder 200K of the deficit, putting himself 183K in debt (including his 3K tax liability). But taxpayer E can absorb his share of the deficit easily: In fact, his share plus his 15% tax liability comes out to less than his tax bill under progressive taxation and a balanced budget. In this scenario, a balanced budget works against him.
Which is why Republicans talk big about a balanced budget and do little. The malefactors of great wealth that bankroll Republicans from the leadership to the teabaggers not only care little about a balanced budget, they don't want one. Balancing the budget inevitably means raising taxes progressively, and the Koch brothers, Jamie Dimon et. al. would rather have the middle class crash and burn than face the prospect of actually contributing to society. So they oppose government with one hand while seeking to master it with the other.
Lots, as it turns out. For one thing, the flat taxers never take the deficit into account. We'll see why that's important in a minute. For another, just because your top rate is, say, 25%, doesn't mean that you pay 25% of your income in taxes. Remember that the current tax system still has vestiges of progressivity, so if you file singly and earn 50K -- which puts you in the 25% bracket -- your actual income tax paid is less than 10% before deductions. That's because only the income that exceeds 34K is taxed at 25%.
Consider these five taxpayers, all filing singly:
A: Earns 20K, pays $2,581 or 12.9% (.1% of all taxes paid)
B: Earns 50K, pays $4,681 or 9.4% (.2% of taxes)
C: Earns 100K, pays $13,609 or 13.6% (.7% of taxes)
D: Earns 500K, pays $139,616 or 27.9% (7.4% of taxes)
E: Earns 5M, pays $1,714,616 or 34.3% (91.4% of taxes)
The total tax revenue is 1.875M. Let's posit that by some miracle we have a balanced budget and that expenses equal revenue. And let's remember that in the real world, there are a lot more B's and C's than anyone else (millions more than E's), meaning that their share of the total tax burden is much higher.
Now, consider the effect of a flat tax of 15%
A: pays $3,000 (.4%)
B: pays $7,500 (.9%)
C: pays $15,000 (1.8%)
D: pays $75,000 (8.8%)
E: pays $750,000 (88.2%)
Notice what has happened here. Taxpayers A, B, and C are paying more, not less, taxes. Moreover, the tax burden lowers for only one of these taxpayers (if you think it's the one most like Steve Forbes, you get a gold star); it increases for everyone else. And don't forget: The actual distribution of taxpayers means that B and C -- the middle class, in other words -- will wind up absorbing the brunt of the shift in burden.
And, it gets worse. Under a progressive system, these taxpayers raised and spent 1.875M. Under a flat tax, they raised 850K, meaning that they have to cut expenditures by 1M or create deficit. And the deficit is apportioned equally. Thus, the low income taxpayer who makes 20K must shoulder 200K of the deficit, putting himself 183K in debt (including his 3K tax liability). But taxpayer E can absorb his share of the deficit easily: In fact, his share plus his 15% tax liability comes out to less than his tax bill under progressive taxation and a balanced budget. In this scenario, a balanced budget works against him.
Which is why Republicans talk big about a balanced budget and do little. The malefactors of great wealth that bankroll Republicans from the leadership to the teabaggers not only care little about a balanced budget, they don't want one. Balancing the budget inevitably means raising taxes progressively, and the Koch brothers, Jamie Dimon et. al. would rather have the middle class crash and burn than face the prospect of actually contributing to society. So they oppose government with one hand while seeking to master it with the other.
Monday, December 6, 2010
Consumer-Driven Health Care
One of the many problems facing health care delivery in the United States is the performance of unnecessary procedures. This contributes greatly to a health care economic model driven by the supply of a particular provider, as opposed to patient need or demand, and which in turn ratchets up cost. The underlying logic is complicated, but for now it's enough to now that fraud is rarely a factor.
A -- not "the" but "a" -- recognized driver of this is a tendency on the part of employer-insured patients to request (and get) care and procedures that they don't need simply because the cost is invisible to them: They show their insurance card, make a co-pay, and leave the rest to their employer and the insurance company. Consumer-Driven Health Care is a conservative response to this problem aimed at righting the supply-demand relationship, making the patient more prominent and responsible for health care decision making, and reducing the role of the employer so that insurance becomes portable.
Generally, this involves an individual or family establishing a Medical Savings Account (there are a number of different types) paired with catastrophic health insurance. The individual contributes pre-tax dollars to the account (some plans permit an employer match) that incur tax penalties if spent only on anything but health care. Unspent dollars roll over to the next year and the account belongs to the individual: Even if an employer matches it or sets it up as part of a health coverage plan, an individual changing jobs take the account with him or her.
Criticisms of the plan take aim at its lack of utility for the chronically ill, unsuitableness for low income people who might quickly use up their medical savings and repeatedly hit the gap between the account and the insurance policy, the issue of health literacy, and the real possibility that the pendulum will swing too far and create a situation where people don't get care that they do need. In my mind, though, none of these objections are necessarily insurmountable. (Health literacy is a complex issue that I don't deal with here.)
But I believe that the real Achilles Heel of CDHC lies elsewhere, and that if it becomes the dominant health care financing paradigm -- a real possibility -- it will if anything exacerbate the problem it is designed to solve.
It's a curious thing that when experts on left and right debate health policy, they conduct the debate from an Olympian perch that ignores one of the most important commercial forces in American life, and that has certainly happened here. When the aggregate dollars in the various accounts reach a certain level, they will attract the attention of a marketing and advertising apparatus. This apparatus will labor mightily to separate that money from the accounts and transfer it to the interests they represent. And the apparatus is very good at what it does. People will be told that they "need" certain procedures and that they should not "forget" to get a regular this or that, none of which they will actually need, at least at the pace recommended by the various advertisements.
The campaigns will work well enough that the health care system will wind up performing just as many or more unnecessary procedures. We'll be right back where we started from, except that the health care system will have deprived people of their savings and turned hospitals, clinics, and group practices into racketeers. I don't think that that is the kind of doctor-patient relationship that Hippocrates or Galen had in mind...
One of the most important ongoing health care projects is the Dartmouth Atlas of Health Care. Dr. John Wennenberg, the genius behind the atlas, discovered and first documented the phenomenon of unnecessary care driven by provider supply in a particular area. Unnecessary procedures do not affect health outcomes in a given area. For example, it's possible for heart surgeons in one area to install twice as many stents as heart surgeons in a different area but resulting in no discernible difference in overall cardiac health. In this case, we would say that the difference in the number of procedures may have been unnecessary. Use the atlas to find out which procedures in your area may be performed at an unnecessary rate...
A -- not "the" but "a" -- recognized driver of this is a tendency on the part of employer-insured patients to request (and get) care and procedures that they don't need simply because the cost is invisible to them: They show their insurance card, make a co-pay, and leave the rest to their employer and the insurance company. Consumer-Driven Health Care is a conservative response to this problem aimed at righting the supply-demand relationship, making the patient more prominent and responsible for health care decision making, and reducing the role of the employer so that insurance becomes portable.
Generally, this involves an individual or family establishing a Medical Savings Account (there are a number of different types) paired with catastrophic health insurance. The individual contributes pre-tax dollars to the account (some plans permit an employer match) that incur tax penalties if spent only on anything but health care. Unspent dollars roll over to the next year and the account belongs to the individual: Even if an employer matches it or sets it up as part of a health coverage plan, an individual changing jobs take the account with him or her.
Criticisms of the plan take aim at its lack of utility for the chronically ill, unsuitableness for low income people who might quickly use up their medical savings and repeatedly hit the gap between the account and the insurance policy, the issue of health literacy, and the real possibility that the pendulum will swing too far and create a situation where people don't get care that they do need. In my mind, though, none of these objections are necessarily insurmountable. (Health literacy is a complex issue that I don't deal with here.)
But I believe that the real Achilles Heel of CDHC lies elsewhere, and that if it becomes the dominant health care financing paradigm -- a real possibility -- it will if anything exacerbate the problem it is designed to solve.
It's a curious thing that when experts on left and right debate health policy, they conduct the debate from an Olympian perch that ignores one of the most important commercial forces in American life, and that has certainly happened here. When the aggregate dollars in the various accounts reach a certain level, they will attract the attention of a marketing and advertising apparatus. This apparatus will labor mightily to separate that money from the accounts and transfer it to the interests they represent. And the apparatus is very good at what it does. People will be told that they "need" certain procedures and that they should not "forget" to get a regular this or that, none of which they will actually need, at least at the pace recommended by the various advertisements.
The campaigns will work well enough that the health care system will wind up performing just as many or more unnecessary procedures. We'll be right back where we started from, except that the health care system will have deprived people of their savings and turned hospitals, clinics, and group practices into racketeers. I don't think that that is the kind of doctor-patient relationship that Hippocrates or Galen had in mind...
One of the most important ongoing health care projects is the Dartmouth Atlas of Health Care. Dr. John Wennenberg, the genius behind the atlas, discovered and first documented the phenomenon of unnecessary care driven by provider supply in a particular area. Unnecessary procedures do not affect health outcomes in a given area. For example, it's possible for heart surgeons in one area to install twice as many stents as heart surgeons in a different area but resulting in no discernible difference in overall cardiac health. In this case, we would say that the difference in the number of procedures may have been unnecessary. Use the atlas to find out which procedures in your area may be performed at an unnecessary rate...
Sunday, December 5, 2010
Sunday Funnies and Arts
As always, click to enlarge...
I didn't read the entire book, but what I did read of Christopher Hedges The Death of the Liberal Class was a tedious disappointment. The author of the excellent War Is A Force That Gives Us Meaning has a good idea: How the decay of liberal institutions such as the press and the Democratic party has opened the door to a corporate assault on the middle-class way of life. But the sections I read were just another tired left-wing assault on liberalism, the kind of thing I've been reading and hearing since high school.
Hedges can't understand, for example, why liberals detest Ralph Nader. Nader is a saint, after all. And his candidacy had nothing to do with Bush's win in 2000. Bush cheated, Gore ran a poor campaign, and anyway there is really was no difference between the two. Hedges doesn't consider why liberals found this claim wrong in 2000 and ludicrous by 2008. He merely shakes his head sorrowfully when Eric Alterman explodes at Nader in the film An Unreasonable Man.
The problem with liberalism, Hedges argues, is that it never heeds the left. But that's a two-way street: The left never listens, either. It issues policy pronouncements and then accuses liberals of selling out on imagined commitments that could have been met had they only believed more.
Progressive systemic change in this country has typically been driven by mass movements. Hedges' liberal establishment cannot by definition produce movements, but historically it has (eventually) heeded them. Despite a disappearing middle class, the left has failed -- if it's even tried -- to organize. What is needed is not yet another left wing critique of liberalism, but a left wing critique of the left...
Extending the Bush tax cuts for the wealthy is anathema to me. But I have to ask myself: If my choice is to extend the cuts and extend unemployment benefits or let the cuts expire at the price of the Republicans killing unemployment benefits, what do I do? Do I call their bluff? But what if it's not a bluff? Do I put people in danger of losing food and shelter when I can take on the tax cuts next year when when the economy may have improved?...
PWALLY takes on the red wombat eyes of the older sister...
PHOTO GALLERY
I wish were lions...that would be nice...
Babylon Cafe, NOLA...
Song sparrow in Russian olive...
To Echo Mountain via Castle Canyon...
Stone...
Volatile soup...
I didn't read the entire book, but what I did read of Christopher Hedges The Death of the Liberal Class was a tedious disappointment. The author of the excellent War Is A Force That Gives Us Meaning has a good idea: How the decay of liberal institutions such as the press and the Democratic party has opened the door to a corporate assault on the middle-class way of life. But the sections I read were just another tired left-wing assault on liberalism, the kind of thing I've been reading and hearing since high school.
Hedges can't understand, for example, why liberals detest Ralph Nader. Nader is a saint, after all. And his candidacy had nothing to do with Bush's win in 2000. Bush cheated, Gore ran a poor campaign, and anyway there is really was no difference between the two. Hedges doesn't consider why liberals found this claim wrong in 2000 and ludicrous by 2008. He merely shakes his head sorrowfully when Eric Alterman explodes at Nader in the film An Unreasonable Man.
The problem with liberalism, Hedges argues, is that it never heeds the left. But that's a two-way street: The left never listens, either. It issues policy pronouncements and then accuses liberals of selling out on imagined commitments that could have been met had they only believed more.
Progressive systemic change in this country has typically been driven by mass movements. Hedges' liberal establishment cannot by definition produce movements, but historically it has (eventually) heeded them. Despite a disappearing middle class, the left has failed -- if it's even tried -- to organize. What is needed is not yet another left wing critique of liberalism, but a left wing critique of the left...
Extending the Bush tax cuts for the wealthy is anathema to me. But I have to ask myself: If my choice is to extend the cuts and extend unemployment benefits or let the cuts expire at the price of the Republicans killing unemployment benefits, what do I do? Do I call their bluff? But what if it's not a bluff? Do I put people in danger of losing food and shelter when I can take on the tax cuts next year when when the economy may have improved?...
PWALLY takes on the red wombat eyes of the older sister...
PHOTO GALLERY
I wish were lions...that would be nice...
Babylon Cafe, NOLA...
Song sparrow in Russian olive...
To Echo Mountain via Castle Canyon...
Stone...
Volatile soup...
Saturday, December 4, 2010
Thursday, December 2, 2010
Devil in Disguise
And the LORD God commanded the man, saying, Of every tree of the garden thou mayest freely eat: But of the tree of the knowledge of good and evil, thou shalt not eat of it: for in the day that thou eatest thereof thou shalt surely die.
The Book of Genesis, 2:16-17I don't spend much time wondering about who will head the Republican National Committee, but I did happen to glance through this article. And was rewarded with these utterly stupefying remarks from former ambassador to Luxembourg and would-be RNC Chair Ann Wagner:
I left after four years of living in and around socialism. What it really did on a daily basis for me and my children, and my husband...it deepened our love, our appreciation, and our respect for America. I believe in American exceptionalism. I believe in the soul of America and the things that make us, not better, but unique.Think about this for a second. Four years as the American ambassador to one of the smallest and most easily traversed countries on the continent, and she can't tell the difference between socialism and a constitutional monarchy.
The half million people living in Luxembourg would no doubt be surprised to discover that their application of democratic capitalism is in fact a socialist worker's paradise. Many of them, though, might wonder exactly what Ms. Wagner finds so threatening about an unemployment rate of 6%, a deficit of 5%, the 16th-best health care system in the world, the third-highest GDP per capita in the world, and an income per capita of nearly $61,000. If this is socialism, we should welcome it with open arms.
Not that I really think that Ann Wagner or any of these fools know what socialism is. (But an ambassador? Even a Bush appointee?) It's become one of many meaningless catch-alls for "not like us," another casualty in the right's assault on the English language -- in its assault on meaning itself. That is, I think, at the root of right-wing paranoia: The fear of knowledge and the dread places it might lead. To them, knowledge is not a path to enlightenment, but the road to uncertainty and doubt. What to any sane person is the signal trait of humanity is to them the devil in disguise, with the black president nothing less than the beguiling serpent in the Eden of America.
They'd like nothing more than to return the apple to the tree. Try as they might, though, it's been plucked and we're the better for it.
Wednesday, December 1, 2010
Great Endings: The Natural (1952)
When Roy looked into the boy's eyes he wanted to say it wasn't but couldn't, and he lifted his hands to his face and wept many bitter tears.
Bernard Malamud, The Natural, 1952
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