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Health Care Tax B.S.

By JLP | May 13, 2009

Read this: Smokers, Drinkers to Carry Tax Burden?

Democrats want to tax bad behavior by increasing taxes on cigarettes and beer. Okay, this is stupid. What about all the other “bad foods” out there:

• Cookies and cakes

• Hamburger Helper (come on, you know it’s junk food)

• Hot dogs

• White bread

• Donuts

• Hamburger that is more than 5% fat

• 90% of boxed cereals

Why stop there?

Why don’t we tax McDonald’s and any other fast food restaurant (or ANY restaurant for that matter)?

Why don’t we stop any obese person we see and make them pay an excise tax?

Why don’t we quit allowing food stamp users to buy junk food with food stamps? Most likely, if you’re on food stamps you don’t have health insurance so it’s even more important to eat healthy.

Should we tax the hell out of riding lawnmowers too? How many guys have you seen mowing their small yards with a riding lawnmower?

Where do we draw the line?

According to the article mentioned above, employer-sponsored healthcare plans are also being targeted:

Employer-provided health insurance is considered part of workers’ compensation but is not taxed as wages are. Proponents of eliminating the benefit say it is poorly targeted because it gives the biggest benefit to those with the highest incomes and is unfair because self-employed individuals don’t qualify for the same break. It also encourages individuals to buy gold-plated insurance plans that can drive up health care costs, experts say.

Correct me if I’m wrong, but weren’t these plans set up to ENCOURAGE people to get health insurance? Instead of scrapping the tax-free status, why not just get rid of the “gold-plated” plans? Why not give the tax-free status to self-employed individuals? Seriously, if the goal is to get people health insurance, then why not make it tax-free?

Topics: Health Insurance | 28 Comments »


28 Responses to “Health Care Tax B.S.”

  1. pezdaddy Says:
    May 13th, 2009 at 12:52 pm

    Point of clarification: it’s not just cigarettes that are being taxed, it’s all tobacco products. April 1st the SCHIP kicked in and raised tobacco taxes for all products. I don’t smoke cigarettes but I do smoke pipes and cigars. Cigarettes and roll your own went up the most percentage wise.

    Tobacco and alcohol are easy to tax because they are “sin” taxes. The other products are not considered sins. It’s pretty ridiculous.

    Taxing a declining user base is another whole debate. It sounds good to the sheep in this country, but once the user base doesn’t bring in the tax revenue, they won’t do away with the program (SCHIP for example), the tax will just shift to the rest of the population.

    I could go on…

  2. Fizz Says:
    May 13th, 2009 at 1:03 pm

    Just a comment with a non-US perspective on things. I’m a Swedish citizen, and I’ve been living with heavily taxed cigarettes and alcohol for all of my life. That is, from my point of view, just fine, since I consume very little of those gods. Saying that it’s stupid seems a little narrow minded to me. The two major differences worth noting are the public health care system in Sweden, and the larger obesity problem in the US. Assuming that you’re advocating a non interfering government and a strong belief in the market economy, I can see that you have problems deciding where to draw the line. From my POV its just fine if the government can fund hospitals by making people who like smoking and drinking so much that it’ll affect their economic and health status.

  3. Stacey Says:
    May 13th, 2009 at 1:22 pm

    I propose a 75% tax on Congress/Senate’s healthcare benefits. Didn’t they write the book on “gold-plated?”

    And the self-employed CAN take a health insurance deduction. See Line 29 of the 2008 1040. Of course it’s not going to be the same treatment as an employee receiving benefits from an employer. It’s apples and oranges. DUH!

    Look under Self-employed insurance deduction:
    http://www.irs.gov/publications/p535/ch06.html#en_US_publink1000144786

    “Treasure the tax benefits from your health savings account? Some experts say the accounts encourage “excess consumption” of health services — and committee Chairman Max Baucus (D-Mont.) agreed they’re worth a look. Money in the pot: $60 billion over 10 years.” Give me a frickin’ break. Excess consumption of health services often occurs when welfare families, b/c the healthcare is free, visit a health provider for every stinkin’ sniffle. Or how about the millions of illegals getting free healthcare from hospitals? Maybe if Immigration had done their jobs 3 decades ago, our situation wouldn’t be as bad as it is. Why not mandate all hospitals have to be not-for profit. Because God forbid any evil business make a profit in our country anymore. Here’s another idea: mandatory sterilization like China and euthanasia for everyone over 60. Would that help the Democrats keep healthcare expenses where they want them? Honestly. I want to puke. Oh, and don’t forget to start taxing tennis balls, because using them could cause you to sprain an ankle and have to consume healthcare services. And tax all sad movies, because I might become depressed and suicidal and need psychiatric help–or get my stomach pumped from all the Tums I’ve consumed during Tax Season. Geez, there I go consuming healthcare services again b/c Big Brother Government didn’t protect me from evil antacids.

    If they keep tinkering w/the tax code as social engineering we’ll all be poor. Who will have the bulls-eye on their back then? The phrase “squeezing blood from a turnip” comes to mind…

    Are you deliberately trying to raise my blood pressure, JLP?

  4. Brandon Says:
    May 13th, 2009 at 1:59 pm

    Hey JLP,
    Ah, the sensitive subject. I am going to try to not get worked up like Stacey as I usually do with this topic.

    Health care in this country is messed up, and the regressive nature of the tax structure is only the start.

    If you really want to start seeing how difficult it will be for us to revise the current system, look at the Rand Health Insurance experiment from the 1970s, and then consider the effects of changing the system away from Employer-Sponsored. That experiment confirmed what Stacey said (that no coinsurance lead to increased utilization) but also that as the coinsurance increased, people reduced their utilization for unnecessary AND necessary care! Do you think the standard person with no health care knowledge has the capability to decide necessary vs unnecessary care and ration appropriately? This just proves that demand-side tactics will not work in this situation.

    Further, there is no way we would ever accept a capitated system in the US, similar to what they have in the UK. There is not an easy way to fix things, and even efforts to provide health care for all have been far more expensive than originally estimated (see what MA did statewide).

    We need to empower the states to experiment with different health care changes, including taxation of smokes, fast food, etc. We can’t keep spending >$2Trillion (16% of the GDP) on health care, especially since we have poor measures of population health. If we have 10 states that try 10 different models, we can then take the best model to the rest of the country.

  5. Craig Says:
    May 13th, 2009 at 2:21 pm

    I know at least in New York they are thinking about taxing soda and other candies so your theory may not be so off.

  6. Lindsay Says:
    May 13th, 2009 at 2:57 pm

    Ah, Jeff, don’t go giving them a list! They’ll be working on it!

    The idea of taxing “bad for you” foods is like trying to prohibit “hate speech”. How do you decide what constitutes “bad”? And is what is “bad” for one person “bad” for another person? What about peanuts? Some people are allergic to them, so does that make it a “bad” food?

    My son’s history course is introducing him to the role of government in our lives, and its role is to take care of two things: the national defense, and the common good. These liberals in charge are working on expanding “common good” to cover every single part of our lives. That scares me.

  7. Corey Says:
    May 13th, 2009 at 3:27 pm

    An excise tax on fat people? How about calling it an exercise tax? Or lack of exercise tax?

    Why does anything surprise us anymore coming from the Democrats?

  8. Nicole Says:
    May 13th, 2009 at 6:54 pm

    Hey, JLP!

    I can’t say I disagree with you.

    That said, this used to be my absolute favorite financial blog. I used to look for it in my Reader and click on your entries first, to see what you had to say. Sometime before the election your content became more and more angry and more and more political. Anymore I don’t even bother reading because I don’t want to waste my time reading another angry right-wing diatribe. I know that you have strong feelings and have also started a political blog. I also know that this is your blog – and more power to you. I just wanted to say, as a long time reader, that I miss the old AFM and don’t like the long-term direction it has taken.

  9. Ryan Says:
    May 13th, 2009 at 7:04 pm

    Oh the incredulity! The consternation!

    Of course, the government has a long and treasured past of taxing things they want to discourage and not taxing things they want to encourage. I’m sure all of you who deduct the interest payments from your mortgage think that’s a ridiculous idea.

    By the way, the difficulty in classifying something as junk food is exactly the reason why it’s not taxed. Tobacco and alcohol are discrete “sins” and are most definitely responsible for a large number of deaths. That, I don’t think, is in dispute.

  10. Amanda Says:
    May 13th, 2009 at 8:13 pm

    I agree with most of what you have to say, but there are also many things that the United States are doing to dig itself deeper in the black hole that is our national deficit. Interesting blog though.

  11. Dave Says:
    May 13th, 2009 at 10:19 pm

    It is interesting that when McCain proposed taxing health insurance benefits, the Democrats made it a campaign issue against McCain by running ads telling everyone how much that was going to cost them, but conveniently forgetting the tax credit that would level the playing field between those who have employer-paid insurance and those who don’t. Now, the Democrats are proposing the tax, but without the credit. Who has the better idea? Not the Democrats!

  12. kitty Says:
    May 13th, 2009 at 10:21 pm

    I agree with most of what you say. I don’t mind taxes on cigarettes because cigarettes do contribute to a number of deaths as Ryan said not only in those who smoke but in others as well. As to everything else: as people mention – who decides what is bad for you? Take for example salt that they want to tax. Sure there are some people who are predisposed to high blood pressure in whom salt may be bad, but for most people there are no risks from salt. You could probably find doctors’ posts who are saying the same thing.

    Plus, what is thought of as bad for you today may turn out not to be bad for you tomorrow. Look at how food pyramid changed just recently. And then there is a Harvard University School of Public Pyramid which is different from the official one: the official one is too influenced by special interests like grain producers or potato producers.

    This is another issue. Virtually every decision on what is good or bad will be influenced by special interests. The producers of this or that food may not be happy.

    I imagine most of the stuff they are talking about taxing now is indeed bad for you. But they are bound to make mistakes in future.

    Really, if they want people to eat right how about stopping subsidies that encourage farmers produce stuff that is bad for you? Why are fruits and vegetables so much more expensive than grains?

    @Stacey “I propose a 75% tax on Congress/Senate’s healthcare benefits. Didn’t they write the book on “gold-plated?””
    Great idea. If you ever want to run for a political office, you have my vote.

  13. kitty Says:
    May 14th, 2009 at 3:47 am

    I agree with most of what you say. I don’t mind taxes on cigarettes because cigarettes do contribute to a number of deaths as Ryan said not only in those who smoke but in others as well. As to everything else: as people mention – who decides what is bad for you? Take for example salt that they want to tax. Sure there are some people who are predisposed to high blood pressure in whom salt may be bad, but for most people there are no risks from salt. You could probably find doctors’ posts who are saying the same thing.

    Plus, what is thought of as bad for you today may turn out not to be bad for you tomorrow. Look at how food pyramid changed just recently. And then there is a Harvard University School of Public Pyramid which is different from the official one: the official one is too influenced by special interests like grain producers or potato producers.

    This is another issue. Virtually every decision on what is good or bad will be influenced by special interests. The producers of this or that food may not be happy.

    I imagine most of the stuff they are talking about taxing now is indeed bad for you. But they are bound to make mistakes in future.

    Really, if they want people to eat right how about stopping subsidies that encourage farmers produce stuff that is bad for you? Why are fruits and vegetables so much more expensive than grains?

    @Stacey “I propose a 75% tax on Congress/Senate’s healthcare benefits. Didn’t they write the book on “gold-plated?””
    Great idea. If you ever want to run for a political office, you have my vote.
    P.S. – Sorry, forgot to tell you great post!

  14. Stacey Says:
    May 14th, 2009 at 7:39 am

    Thank you, Kitty. I’ll be VP and you can be P. I can tell you are smarter than I am. I’ll be the handshaker/baby kisser! Guess I’d better go get my teeth bleached!

  15. Sam Says:
    May 14th, 2009 at 8:17 am

    I thought this was a personal finance blog and not a political blog.

  16. JLP Says:
    May 14th, 2009 at 8:30 am

    Sam,

    Please explain to me how this issue IS NOT personal fiance-related.

    I’m really tired of readers policing the content of this blog. Yes, there was a tone to this post. That’s because I think this idea is crazy and frankly, it has made me angry.

  17. JLP Says:
    May 14th, 2009 at 8:33 am

    One other thing…

    Is it the fact that I used the word “Democrats” that has people up in arms? Sorry about that but guess what…it is the Democrats who want to make these changes.

  18. pezdaddy Says:
    May 14th, 2009 at 9:03 am

    @ Ryan: “By the way, the difficulty in classifying something as junk food is exactly the reason why it’s not taxed. Tobacco and alcohol are discrete “sins” and are most definitely responsible for a large number of deaths. That, I don’t think, is in dispute.”

    If you think for a moment that junk food doesn’t cause it’s own sort of problems, you’ve been living under a rock.

    While I can’t argue that alcohol isn’t responsible for someones death, tobacco is as deadly as fast food, soda, etc.

    Your argument may be that second-hand smoke causes problems for others, but so do parents who buy junk food for their kids and contribute to their obesity.

    See my point? Where do you draw the line?

  19. JLP Says:
    May 14th, 2009 at 9:14 am

    Pezdaddy,

    EXACTLY!

    It’s crazy how far we could take something like this.

    What about all the environmental things out there that can cause cancer? How the heck do we tax sunlight?????

  20. LOL Says:
    May 14th, 2009 at 10:56 am

    JLP: I agree with your sarcastic posting here — we are on a slippery slope. I don’t need government outlawing (or sin-taxing) salt because salt happens to be bad for a small minority of the population.

    This entire debate is about medical costs, and medical insurance costs (hence this is a personal finance issue, and appropriate for this blog).

    We should not taxing more just so we can line the pockets of HMOs and insurance companies even more than they currently are! We should be modifying the system so that the HMOs and insurance companies can not increase the cost of BASIC medical care into ridiculous levels.

    It should not be cheaper for me to get American-made pharmaceuticals from Canada! Why is it that an MRI costs $200 (converted) in Japan, yet someone with insurance in the US would pay $900 for the same diagnostic test?

    Why is it that if I go see a doctor, I have no idea how much I’ll be charged until I get the bill months later. What I do get is a paper that I must sign that says I agree to pay whatever I happen to be charged. Most doctors and office personnel have no idea how much the patients are paying for their care (I’ve asked), because everyone pays a different price depending on who your employer is (which dictates who your insurance company is).

    The medical system in the US is a joke. We pay many times more than other “western” countries for our care. Yet we receive sub-par treatment that is tailored to the number of “procedures” performed, instead of actually HEALING people — and that is a direct result of having for-profit companies being in control of your personal health, designed to extract the maximum amount of money from your wallet.

    I vote that we only have “not-for-profit” insurance companies, and upfront pricing information in doctor offices / hospitals so patients could actually “shop-around” for lower costs.

  21. Geoff Says:
    May 14th, 2009 at 1:06 pm

    I agree with LOL that health insurance companies should be nonprofit. They are putting too much interest in profits and not enough in healing people and preventing disease, which would keep all costs down (and hurt profits).

    I realize that taxing some products may lead to a slippery slope, but ultimately that’s all speculation.

  22. Steve Braun Says:
    May 14th, 2009 at 2:49 pm

    @ Sam — Perhaps if the politicians kept to politics and left the economy and financial systems alone, then JLP wouldn’t need to call out them out on their dumb ideas that direcly impact our pocket books (i.e., personal finances). The sad fact is that the government, and hence politicians, are completely emeshed in the economy and only a fool would ignore that fact.

    @ Nicole — I suppose you style yourself as an open-minded, tolerant person. Or does your openess and tolerance only extend to those who agree with your political dogma? Is it possible that Democrats or Republicans might propose bad laws or regulations that affect our personal finances? What’s wrong with calling them out on it? There’s no need to freak out just because (in this case) Democrats are proposing some new taxes and JLP rightly challenges their logic. Honestly, I’ve seen very little from JLP that gets into pure politics since the election. Last time I looked tax law is a personal finance issue.

  23. Ron@TheWisdomJournal Says:
    May 14th, 2009 at 9:46 pm

    Anytime the government gets involved, the result is inefficiency and waste. $600 hammers, seen the insolvency of Social Security and Medicare, or watched 5 workers watch one guy dig a hole on the side of the road? Get ready to have the ex-head of the Department of Motor Vehicles deciding if your child gets to take that new medicine for his autism based *solely* on the cost.

    President Obama admitted he wants the government to decide what health care Americans receive. He said in the Washington Times, “There’s always going to be an asymmetry of information between patient and provider. And part of what I think government can do effectively is to be an honest broker in assessing and evaluating treatment options.”

    He stated that “the chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here.” For them, he said, “I think that there is going to have to be a conversation that is guided by doctors, scientists, ethicists. And then there is going to have to be a very difficult democratic conversation that takes place.”

    The time to *really* worry about your health is when a government bureaucrat, not your personal doctor, tells you what treatment you can have. Yet that’s exactly the scenario endorsed by Mr. Obama. This position clearly leads to health care rationing. Nobody in the government or in any “political channels” should tell individuals how to make decisions about “the end of their lives.” The only conversations happening should be personal, not democratic. It’s not up to government to pull the plug but that’s where we’re headed.

    “Change you can believe in” will become “change you won’t believe.”

  24. Stacey Says:
    May 14th, 2009 at 11:17 pm

    Ron, I guess we’ll all be saying a lot of “goodbye Grandma” and “goodbye Grandpa” b/c they won’t pass the checklist tests w/ the “asymmetry of information” you quoted. Maybe our President will have a great revelation about the sanctity of life while he’s speaking at Notre Dame.

    Heaven help you if you need an organ transplant and are older. It’s all a bit scary. Guess I better drink more red wine to keep my ticker in shape, altho’ I’ll apparently be paying more “sin” taxes to do it…

    Gosh, am I being political again? Sorry for the potential backlash, JLP. Here I am after 2 glasses of wine tonight and I’m still an uptight Republican (well actually a closet Libertarian…)

    Have a great weekend everyone! I’m going to engage in every sinful thing I can think of before I have to pay taxes on them!

  25. Geoff Says:
    May 15th, 2009 at 9:43 am

    Ron,
    The problem now is that instead of government, the profit-focused healthcare industry makes the decision whether you need medical care or not, not your doctor. My doctor had to fight to get me a ct scan, which was very necessary, but the insurance company continued to deny the request based off of a review by their doctors, who never met me, examined me, or anything except read a report that unfortunately didn’t describe me as on my deathbed and therefore there was no reason to grant the request. Btw, this was with one of the top 3 rated heath care insurers in the country.

    The government, which should have the best interests of its people in mind, may not always do the best especially with money, but I sure don’t trust a for-profit health system that takes my money and they refuses to allow my doctors to do what is necessary.

  26. RA Says:
    May 15th, 2009 at 12:41 pm

    I don’t think taxing beer and cigarettes is such a bad idea. And JLP’s Republican state of Texas taxes junk food, including McDonald’s. So maybe it is not just a Democratic idea.

  27. Chris Says:
    May 15th, 2009 at 1:21 pm

    Haha.. Stacey, you rock.

  28. John Says:
    May 20th, 2009 at 7:56 pm

    Of course you would blame the Democrats. Meanwhile, Mayor Bloomberg of New York, a Republican, has been yapping about this for years. First he started with the no trans fat. Then he went to posting calories and fat content on menus. Now he want to tax sugary drinks. You must be watching Fox News too much

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