Socialist Vermont Shoots Down Super-Expensive Single-Payer Health Care

Gov. Shumlin of the highly socialist state of Vermont shutdown the necessary request to the legislature for the taxes needed to fund the Green Mountain Care state health plan.  This Vermont single-payer health plan was going to require an 11.5% payroll tax on businesses and a 9.5% income tax in addition to the income tax the state already has on those making four times the poverty level income or more.  Vermont already has a top income tax rate of 8.95%, a 6% sales tax, and a 8.5% corporate income tax.  Shumlin reluctantly admitted that the state could not levy such heavy taxes without putting many businesses out-of-business and without many businesses leaving the state.  He said that given that Vermont was still feeling the effects of the Great Recession, this was a particularly bad time to implement a state-run single-payer health system.

Vermont had initially estimated an annual cost of $2.2 billion for the plan for its 627,000 citizens.  The state had received $45 million to study the implementation of a single-payer system from the Obama's Department of Health and Human Services, which hoped Vermont would pave the path to a national single-payer or totally socialized medical system.  William Hsiao of Harvard and Jonathan Gruber of MIT served as consultants.  A more careful look by Vermont accountants put the increased tax revenue needed at $2.6 billion.  Vermont's total tax revenues now are $2.85 billion, so total state tax revenues would have to almost be doubled.  Projected revenues had to be scaled back by $75 million a year due to the lingering effects of the recession.  The state realized it would get $150 million less in federal cost coverage than they expected to set up the system and that they would get another $150 million less in Medicaid assistance from the federal government than they had earlier thought they would.  Setting up the plan was estimated to cost an additional $500 million.

As I have pointed out many times, it is a fiction that the business paid payroll tax is not paid by employees.  All payroll costs are a cost of employment for employees.  They are all compensation for the labor of all employees.  The greater the payroll tax, whether it is Workman's Compensation, unemployment tax, Medicare, Social Security, a withholding tax, an ObamaCare tax, or a Green Mountain Care tax, the lower the compensation that can be offered an employee.  If an employee's addition to the company revenue is not enough to cover all of these tax costs, all of his take-home pay, and other operational costs incurred to provide him with a job, then the employee is not hired or is let go by any rational employer.  This Green Mountain Care plan in Vermont was going to require a 21% increased cost of employment for a company's most value employees minus whatever the employer might be currently paying into health care plans minus whatever wage decreases ensued.  Employees closer to the poverty level would cost somewhere between 11.5% to 21% more depending upon the progressive explicit tax on their income.

As Gov. Shumlin noted, it was particularly difficult to impose these costs given the failure to recover from the effects of the Great Recession.  What is more, any knowledgeable observer has learned that the cost estimates for new government programs are almost always too low.  They are usually much too low.

Of course, while acknowledging that there was no way to practically implement a single-payer health system in Vermont at this time, Shumlin, as a good Progressive Elitist, continued to maintain that it was the Ideal.  Progressive Elitists never actually consider the costs of their programs to be too high and they never ask what the costs displace in other options individuals might have for their time, effort, property, and money.  Their choices and dreams always take precedent over those of others and they are willing to use force to make sure that every individual accedes to that precedence.

All this for a health care system that is sure to deteriorate into another shabby equivalent of the Veteran's Administration System of an unavailable, highly rationed, low-quality, wait-forever, bureaucratic, vindictive, and dishonest morass that treats its patients like peons.  Of course, individuals who do not retain their individual rights are just that -- peons, serfs, begging servants and dependents of the state.

There must be a few individuals in Vermont who are much relieved by the failure of this Great Socialist Dream.  Indeed, Gov. Shumlin nearly lost his re-election bid to Republican Scott Milne, who ran against the Shumlin-backed Green Mountain Care.  Would Milne have won the election if the newer costs and tax estimates had been made available before the election?  Only 2,095 votes separated the two candidates for Governor.

More Obama Misdirection in Campaign Ad

This last weekend, I saw an Obama ad actually endorsed by him that sought to push Romney to release more tax returns and made the claim that Romney "paid only 14% in taxes -- probably less than you."  I believe this was a fallacious and misleading claim, but PolitiFact.com ruled it true by ignoring the context of the ad with a giant switcheroo.

The Obama ad is a discussion of Romney's tax returns, which report on his income taxes.  One naturally assumes that the final statement by Obama that Romney probably paid less in taxes than you means that he probably paid less than you in income taxes.  So, let us discuss the truth of Obama's claim based on income taxes reported on the income tax forms Obama is demanding Romney add to those already released.

I was stunned because most Americans who pay any attention to politics, government, and the economy are well aware that about 46 - 48% of Americans pay no income tax at all.  Immediately this would make one think it is unlikely that half of Americans are paying 14% in taxes on their Adjusted Gross Income (AGI).  In fact in 2011, Romney paid a 15.37% average effective tax rate on his AGI and he claims he paid 13% or more in every one of the last ten years.  This contradicts Biden's claim that he often paid no taxes in this period of time.  Apparently, Biden's unnamed source was rather impeachable, as is Biden's intellect.

The median household income in 2010 was $47,022.  According to Table 3.4 of an IRS study of 2010 Individual Income Tax Returns, broken down by tax brackets, one can estimate an upper bound on the average effective tax rate on AGI for a taxpayer with median income.  142.89 million individual tax returns were filed in 2010, we can examine when we reach half this number of tax returns (71,446,026 returns) as we work down the column in the table of tax returns by margin tax rate.  Including all returns with a marginal tax rate of 10% or less, we have accounted for 63,744,030 returns.  The next group in the table is 42,321,591 returns in the 15% marginal tax bracket without capital gains.  Adding this to the lower tax brackets takes us way over the mid-point number on the returns of 71.45 million to 106.07 million returns.  The median return is clearly among the first one-fifth of the returns in this large group of returns.  Nonetheless, the average effective tax for this entire 15% marginal tax rate bracket group is only 5.1% of AGI.  The 10% tax bracket that brought us close to the median return paid an average tax of only 0.7%, so it is likely that the median return paid substantially less than 5.1% of AGI!

So, the Obama ad claim that you probably paid more taxes than Romney is false.  But no, according to PolitiFact.com, the Obama claim is true.  How do they substantiate this claim?  Well they decide that Obama, the context of the remainder of the ad notwithstanding, was talking about the sum of income and payroll taxes.  Of course, they choose not to add in property taxes because that is not something the Democrats wish to consider when they talk about comparing the taxes of the rich and the median person.  According to our Democrat politicians, the Medicare and Social Security money extracted from our paychecks by unpaid tax collecting employers goes into a lock box and is paid back to us when we retire or reach age 65.  They like to call it an insurance premium which will lead to payouts to us in retirement which scale in accordance with the amount of premiums we paid in.  But in this context it is convenient to forget all that and treat this payroll extraction as general tax money and forget that Romney gets a worse deal in payback even than the median taxpayer does from these extractions.

Now most people have an employer who according to the government pays half of the Medicare tax and, generally, half of the Social Security tax.  So, the employee's share of Medicare is 1.45% and his usual share of Social Security, before the recent 2% reduction of limited duration, was 6.2%.  Adding these together would produce an upper bound average tax payment on AGI of 12.75% in normal times, but of only 10.75% in 2011.  This is lower still than Romney's effective tax rate.

Oh, but wait.  The truth, always suppressed by Democrats otherwise, is that it is a fiction that the 6.2% for Social Security and the 1.45% for Medicare paid by the employer is really paid by the employer.  People who are self-employed pay it all and those who work for an employer are actually paid less by that amount because of this extraction.  That money would have been paid to the employee in the market for labor if it were not siphoned off by the government instead.  This is the argument of the Tax Policy Center of the liberal Brookings Institute.  As a result they add in both the employee's and the employer's extractions for Social Security and Medicare and claim that the median taxpayer probably does pay more tax than does Romney.

If the Democrat fiction on employer contributions to Social Security and Medicare were maintained, then Romney could claim his share of those payments as a shareholder in many companies with many employees and show that he paid a much, much larger tax due to his huge employer tax payments!  But it does not work that way.  Inventive approaches to issues are the province of Democrats only.  Republicans are usually too straightforward to make such arguments and if they did, the Progressive media would raise an incredible fuss!

We really ought to also remember that the many companies partially owned by Romney as a shareholder may have paid the world's highest corporate taxes on any profits they made.  They also spent a fortune on foolish laws, mandates, and regulations arising from local, state, and federal governments for vanishingly small or non-existent benefits for Americans generally.  More and more, these governments delight in moving the expenses of gifts to others, commonly to special interests, to the accounts of businesses in the private sector.  The governments are awash in red ink, or they would be if they were forced to do the kind of accounting that businesses are forced to do by governments.  So, they force businesses to pick up the tab more and more often without regard to the impact on lower profitability, less hiring, less capital investment, and more bankruptcies for businesses.  Not only does Romney pay out huge sums on his investment in many companies making these government mandated payments, but he also pays a capital gains tax on any money earned by him due to sales of appreciating stock.  Romney does much more than his fair share in supporting the cost of government.

Obama's Job Creation Summit

This is really a funny event.  Obama has gathered together some executives from large companies, government Labor and Commerce Department people, and his ever popular labor union leaders for a jobs creation conference.  After taxing small business owners to death and wanting to tax them still more beyond the grave, after threatening everyone with energy restrictions under the ridiculous claim that CO2 is a pollutant causing catastrophic man-made global warming, after telling businessmen in industry after industry that he has a Marxist hatred for them, after threatening to saddle companies with new health care expenses, after a Stimulus Package that creates no private sector jobs, after threatening business contracts and property, and after making all investment decisions a roll of the dice, Obama is having a job creation conference.  Is he admitting finally that he who sits at the feet of every Marxist professor he can find in college has no idea how the economy works?

Indeed, he does not.  Including labor union leaders in such a meeting flies in the face of its purpose: job creation.  Labor union leaders are experts in one thing related to jobs: killing them.  This is why private sector employees have been avoiding labor unions now for decades.  They have come to understand this.  This is also why the labor union bosses so badly need card check.  Without intimidation, they cannot force private sector employees to join the unions.

The executives of large businesses are not really interested in spurring job creation either.  The large businesses do not hire many people.  It is small businesses that hire most people.  So, if a large business executive were to spur more jobs in the economy in general, he is doing more to grow his competition, the lean and mean small companies who are always trying to make inroads in his product and service areas.  The big businessman usually fears small business.  The last thing he wants to do is to help them grow.

With 15.7 million Americans unemployed, this jobs summit should have an easy job creating new jobs.  There are plenty of sufficiently skilled and interested potential employees available for hire.  All we need is for large numbers of small business owners to gain the means and the confidence to hire them.  Within a framework of Marxist theory, there is no way to motivate the small businessmen to hire.  No, it would require Capitalist theory to understand what government actions and inactions are needed to spur job creation.  The answers are tried and true.  Most small businessmen can tell you what is needed.  They just need these very simple encouragements:

• No new payroll taxes.
• No threats to take down their businesses when they die with a death tax.
• Lower individual income taxes for higher income brackets.  Finally come to understand that the net government revenues increase with lower upper bracket income tax rates than those we presently have, while encouraging growth of the economy.  The onlyreason for higher rates is to punish the rich.
• Remove the minimum wage laws or at least lower the minimum wage.
• Stop increasing unemployment insurance rates.
• Control Workmen's Compensation Insurance costs with tort reform.
• Do not raise the cost of health insurance as ObamaCare will certainly do.
• Do not increase energy costs and lower energy reliability as carbon cap and trade or the EPA's plan to declare CO2 a pollutant will do.
• Do not threaten businesses with union takeovers as card check will do.
• Cut back on government spending so investment capital is available for the private sector.
• Lower corporate income taxes, so American companies can compete with companies abroad, almost all of which now have lower taxes than do American corporations.
• Reduce barriers to trade.  Simplify both import and export laws and regulations.
• Understand that Medicare and Social Security will both be turning in their IOUs in just a very few years and that increasing payroll taxes on them at that time will kill many jobs.
• Reduce the burdens of government regulations, instead of constantly increasing them.
• End subsidies that distort the markets into inefficient activities.
• Allow the drilling of oil and gas fields in the US and its offshore waters.
• Sell off much of the federal lands which are not being used productively, so that private owners can use them productively.  Use the income to reduce government tax rates.
  
• Encourage the states to stop business discouraging activities, such as those common in California, New York, Michigan, and Ohio to name a few.

OK, so if we saw Obama and the Democrat Congress doing these things, rather than the opposite in every case, we small businessmen would be hiring people instead of firing them.  As long as Obama and his cadres of comrades refuse to recognize these basic factors in the economy, there is simply no justification for companies to hire.  It is all very simple, if you are not a childish, Marxist blockhead.