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Paying for Health Care – Part II; The Transaction Tax June 18, 2009

Posted by Kate Ryan in Democrats, Economy, Health Care, National Politics, Taxes.
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health%20care%20finance_3Democratic Congressmen and Senators working on meaningful health care reform – one that includes a public option – continue to be stymied by questions from the other side of the aisle on how the government will pay for it.  By all accounts, any new public plan will cost the government at least $1 trillion per year.  It is obvious that it would be impossible to pay through just wringing out some cost savings – but any idea to bring in additional revenue that has been floated has been roundly criticized and dismissed. 

The idea that I keep hearing from the talking heads, and from Senator Max Baucus, Senate Finance Committee Chair, is to tax employer-provided health benefits as ordinary income for wealthier Americans.  Now, usually I have no problem with soaking the rich, but public heath care needs to be something that is paid for all and available to all.  For the same reason, I reject “sin” taxes on tobacco and alcohol, “fat” taxes on fast  food and sugary drinks, and other miscellaneous taxes that imply that only fat, drunk smokers are the only Americans that ever need health care.

The quickest, easiest, and fastest way to a public health plan is via the expansion of Medicare.  In my first post on this subject on June 12, I explained how doubling the Medicare tax (from 1.45% to 2.9%) on both employees and employers woulf bring in $500 billion more dollars per year.   In addition, charging small premiums of fifty or one hundred dollars a month on working people could bring an addtional $25 billion or more.  Combine all of this with estimated savings by reforming reimbursements, spreading costly medical procedures over a younger and healthier insured population, digitizing medical records, negotiating drug prices, and allowing the reimportation of prescription drugs would bring us over the $1 trillion the public option is initially expected to cost. 

Of course, since nobody can actually say for sure what this will cost, it would be best for the U.S. to look for additional sources of revenue that can be specifically dedicated to health care.  One of the least painful – and pretty egalitarian ways – is via the transaction tax. 

The transaction tax would be levied on every stock, option,  or commodities transaction ocurring on any exchange in the United States.  This is NOT a per-share traded tax, but merely a tax on the stock transaction – meaning it is the same whether the transaction is one share or one million shares.  It is estimated that approximately 600 billion transactions are performed in U.S. markets annually.  If the government charged twenty-five cents per transaction in tax, that would bring about $150 billion into the government health care plan every year.   

The transaction tax is realtively painless and captures funds from small and large individual investors, corporate investors, hedge funds, pension funds, and foreign traders in U.S. markets.  It is not an onerous burden that is unaffordable,  I have seen objections that, one, it will kill incentive to invest and two, that investors will just trade on the Asian markets and European bourses rather than U.S. exchanges.

To the first argument, how ridiculous.  Even to the small investor, this is not a burden that would keep him from stock trading.  I have an account with Scottrade.  Do you think I would stop trading because the cost is now $7.25 a transaction rater than $7.00?  Please.  And I’m only trading like a hundred shares at a time costing me seven and a quarter cents per share.  Large investors are moving millions of shares per transaction their cost per share is negligible. 

The second argument would hold some weight if Asian and European markets had no transaction taxes or fees – but they do.  There is a transacti0n tax on the DAX and the FTSE.  Asian markets, such as the Nikkei have other government fees. 

The most important element of a public health care program is “everybody in, everybody pays”.  Until we get there, let’s examine every creative financing idea.

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