Taxpayers Subsidize Our Healthcare

I recently finished filing my taxes for 2018. Unlike most Americans, who seem to think of taxes in terms of “what did I get for a refund this year,” and don’t really think through how all the complex laws fit together, I am acutely aware of how the rules affect me. Part of this comes from the fact that I do my own tax preparation. But more of it comes because I am a self employed attorney, and thus write checks to the IRS and the State of California every three months. 

One of the problems I have seen with our current political climate is that, while most people are aware of welfare programs (usually mis-described as “socialism”) that benefit the working poor, very few notice the even more generous subsidies that benefit middle to upper class people. So here is a subsidy which benefits me and my family:

Taxpayers paid for $12,236.51 of my family’s health insurance last year.

It’s worse than that, though. For higher income families, that subsidy would be $14,696.11, while for lower income families, it might be as low as $4,57.71.

That’s right, the more you earn, the more taxpayers subsidize your health insurance.

The reason people don’t pick up on this is that the subsidy is cleverly hidden in the tax code as a “tax exemption,” rather than done as a direct benefit, as subsidies for lower income people are.

Tax exemptions basically work like this: money you or your employer pay for certain things is exempted from your taxable income. (It doesn’t matter who “pays” for it on paper - it is still income to you in the sense that you get it in return for your work.) In the case of health insurance, it is “above the line,” meaning it is subtracted even before Social Security and Medicare payments are calculated.

There are plenty of other exemptions that benefit you more as you become richer. For example, the cost of paying for one’s house. This year, taxpayers don’t subsidize my house, because my interest payments are too small to allow me to itemize. (We have lived there for 14 years and have paid down a lot of the loan.) But, for someone with a million dollar loan, taxpayers are probably paying for 32% of the interest on that loan. And, the bigger the loan, the higher the subsidy.

These are just the two biggest taxpayer subsidies (can we call it socialism?) that work to benefit richer people more than poorer.

The point here is this: the Right Wing here in the United States came within a couple votes of eliminating most of Medicaid, the program which pays for the heath care of virtually all of the disabled, people in nursing homes, and fully half of the children in our nation.

And called the parents of those children “lazy” for not paying for their own insurance.

I would strongly doubt that fully half of the parents in this country are lazy and refuse to work. Rather, there is strong evidence that the overwhelming majority of them ARE working. They just don’t have employer-sponsored health insurance. And they don’t have access to those generous subsidies which people like me have.

I am sure most people relying on Medicaid would love to have an extra ~$30,000 in tax-free income (the total cost of our insurance, between what “we” pay and what my wife’s employer pays - all of which is above-the-line deductible). But since they don’t - their employers choose not to pay the full cost for their employees, assuming that taxpayers will make up the difference - they have to rely on public benefits. And the contempt that more fortunate people heap on them for having jobs that don’t come with benefits.

This is where we need to change the conversation itself. Right now, thanks to decades of idolatry of the market, we instinctively value people and the work they do by what “the market” pays as reward. And then, when the market fails to provide workers with basic necessities like healthcare, we assume that the person is defective - “lazy” - rather than realizing that the market is failing to pay people what they are worth.

In the wealthiest nation in human history, there is no excuse for letting people go without necessities like healthcare. Or for subsidizing the wealthy more while blaming the less wealthy for the subsidies they get.

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Actually, here in the United States, it isn’t any mystery why our discussion of social programs is so screwed up. I wrote about it a while back.

Also, Chris Ladd wrote the best summary I have read – he explains that white Americans LOVE socialism for white people. Just not socialism for anyone else.