Raising Revenues Is Getting Bogged Down In Health Care

Matt Yglesias has a good post up on the importance of, you know, raising the damn money to pay for health-care reform. Jonathan Cohn makes the impo

Matt Yglesias has a good post up on the importance of, you know, raising the damn money to pay for health-care reform.

Jonathan Cohn makes the important point that a bit lost in the week’s news that Harry Reid is cracking the whip on Max Baucus is the fact that this whip-cracking seems to have involved ruling out the idea of limiting the tax-exempt status of employer-provided health care as a revenue source for reform. Some important labor unions don’t like this idea and it doesn’t poll very well, but it’s too bad to see it ruled out because it’s a pretty good idea. And what’s more, even if you don’t like the idea you do need some idea of how to raise the $1 trillion to $1.3 trillion over ten years that something like the Senate HELP plan would cost.

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This seems like a good moment to issue my dozenth call for congress to take another look at the Obama administration’s original revenue proposal—limiting tax deductions for high-income itemizers. This would target basically the same group of people (rich people) as House liberals’ plan for a surtax on high-income couples but raise the money in a substantially more efficient way.

When possible, it’s better to raise money by broadening the tax base—curbing loopholes, deductions, and exemptions—than by simply raising the rates. The reason is that higher rates on a narrow base do a lot to encourage people to shift income into loopholes, which both undermines your revenue-raising efforts and also distorts the economy. Both the employer tax exclusion proposals and the itemized deductions proposal fit that good model.

Big Time Ezra says that Obama shouldn't be so stuck on telling people that they can keep what they have:

One of the president's health-care reform principles is that everyone must be able to keep what he or she currently has. But that means we're not really going to change, or improve, what they have. And that means they're not getting much in the way that's new. Higher taxes aren't buying them obvious benefits. Instead, they seem to be paying the health-care bills of poorer Americans.

If support for the overall effort were more robust, the polling on the tax exclusion would matter less. People are willing to pay for things they want to buy. But though they might abstractly favor health-care reform, it doesn't seem directly related to their lives.

So now the Senate is trying to find revenue options that fall on fewer people. That's one response. If health-care reform will only directly help the few, then its fiscal impact will have to be similarly narrow. But another would be to go in the other direction and gamble on policies that would make health-care reform a more direct contributor to the lives of the many, and so potentially something they'd be willing to pay for.

Playing it safe is not helping. I know President Obama is trying to reassure people so the right wingers can't scare them, but no matter what he does, the right wingers will scare Americans. It's in their nature and their only true talent. So start playing hardball because Americans want health care reform.

Sure, they have no idea what a Baucus or Reid or Grassley or a Lincoln means in this debate, but start framing it better and come out throwing hay-makers. The Democratic leadership should have had the money aspect of this worked out already, but you can't accommodate all sides.

It is a complex issue to figure out, but all options have to be on the table, and if losing a seat in Congress is the price that has to be paid, who cares except for Rahm? Health care is too important to be worried about attack ads in 2010. Just get the job done.

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