I believe state & federal taxes existed 3-4 years ago when unemployment was at 5% so I'm not sure how it's relevant to the current unemployment situation. Also as a rule anyone who uses the term "ObamaCare" has an agenda so I just assume he's either lying or misrepresenting the situation with a 28% increase in health care costs. I wouldn't expect anything less from WSJ -- taxes bad, Obama bad. Maybe we'll start hiring again when you elect some Republicans.
I bet you a dollar the 28% increase was the opening bid from his health care provider and not that far off the opening bid those previous years they ended up paying 10+%. Because that's almost exactly what I've seen for the last five years. It's just the way negotiations go. And every now and again, you have to switch providers. It's a horrible hassle, but nothing new.
Further, the health insurance reform legislation included a lot of necessary changes to make it viable to sever the employer/health insurance connection. I have a hard time reconciling his clear dislike of the changes with his claimed desire to reduce his own overhead.
Your post is insightful, on topic, informative, and clear. However, I wish it had been posted somewhere else. In the larger context:
We spend 22% of the GDP at the state and local level, 25% at the federal level and transfer 3.5% of the GDP though taxes and have a ridicules debt. To meet those obligations the government needs to take a little over half of everyone’s paycheck. http://www.usgovernmentspending.com/downchart_gs.php?year=19...
At the same time we have a horribly broken healthcare and education systems, aging infrastructure and little will to build for the future AND an ever growing debt. The problem is many people receive huge subsidies from the current system and nobody wants to give up their slice of the pie.
Now, if WE have something constructive to add feel which may be implemented in the real world free to post, until then let’s try and keep politics off of HN.
Edit: Not to single your post out, but I agreed with everything you said, and yet I still felt like I was wasting time by reading it. I guess I need to simply avoid clicking on link bait.
Sometimes I think that we should switch civil servants and politicians around between countries from time to time. That would be a good learning exercise--for good and bad examples.
E.g. Britain has a socialized health-care system in a broadly capitalist society. It's interesting to see what does and what does not work, instead of spreading all the FUD.
Another, much less charged example are the laws about shop closing times in Germany. Until a few years ago shops were only allowed to open until 18.00 on most day. Looking at other countries, it was obvious that relaxing those rules would not make the sky come down.
On the other hand, you can also look for other countries to spot bad ideas before you have to try them yourself.
It is relevant because the economy is obviously not where it was 3-4 years ago. The bubble has burst, margins are getting squeezed all across the board and footing the bill on ever-escalating government-induced initiatives is no longer as easily stomachable for many businesses.
His exposition contains a lot of interesting facts and numbers. Just because he is not in the same political camp as you doesn't make his point any less valid.
Well said. I agree the 28% was an opening salvo, but in my experience you can't really knock that much off it. You can posture ("hmm, maybe we'll try another broker") and tweak a few things here and there, but it's mostly done.
We got a big increase last time, too, though I can't remember what it was. I think it was near 20%, but just under. We have an aging employee base, and if the author of the WSJ does, too, that might explain the difference.
> Also as a rule anyone who uses the term "ObamaCare" has an agenda
Everyone stop and think for a second - do you hold yourself to the same standard of debate as you hold the other side to? Would you, jsz0, call out a user of the word "teabagger" as coming from someone with an agenda? It's the same level of discourse.
A lot of people get upset when their ideal gets hit with a tacky dismissive label while simultaneously trying to slap one on the other side.
Edit: then perhaps you should look past your own political biases (and mine) and look and what I've contributed in technical, business, and marketing discussions.
"Companies have also been pressed into serving as providers of health insurance. In a saner world, health insurance would be something that individuals buy for themselves and their families, just as they do with auto insurance. Now, adding to the insanity, there is ObamaCare."
Actually, in the saner world, companies don't have to worry about health insurance because it's provided by the government.
Or, alternatively, they don't have to worry about it because there is no health insurance tax deduction to force individuals to get insurance through their employer.
There's not really any reason that individuals couldn't voluntarily band together to bargain collectively. Right now there just aren't that many people in the individual market to make it worthwhile.
Actually, health insurance companies refuse to insure a band of neighbors collectively since they deem the risk of insuring everyone in the same neighborhood too great, due to everyone being exposed to the same environment (power lines, contaminated water, etc.) A friend actually tried to get insured for him and 30 of his neighbors and that was the rejection reason given. So collective bargaining has to fall to a more spread out organization like an employer or a union, with all the politics therein, instead of closer knit locals, which tends to work out better.
This is one reason I'm in favor of government health care: The profit motives of private health care favor denying care, since not paying out money is a good way to make money. So you have case where nobody will cover you for arbitrary reasons, or deny you payment due to a "pre-existing condition" or some other nonsense.
In the case of contaminated water, couldn't the insurance company seek sane recourse from the polluters? Usually in cases where contaminated water is a factor in the health of a community, the contamination and perpetrator is known.
As for power lines.. well, there haven't really been any conclusive studies in this area. But you get the point.
Same-environment shouldn't be a factor, as long as the reasons the environment might impact health are/can be known.
I'd argue that nobody should be living somewhere that might have health risks involved (e.g., underground oil spills, toxic ash, a radioactive waste storage facility a block away from the elementary school .... in other words, williamsburg/greenpoint brooklyn).
The difference between health insurance and other types is that payouts for health insurance are theoretically unbounded (well, until the patient dies).
Catastrophic health coverage is not particularly expensive. It would be much more reasonable for the government to cover catastrophic costs (say, those in excess of $200,000) and otherwise leave private insurance alone.
With homeowner's insurance the upper limit is known (cost of house + possessions). This isn't the case with health insurance - or at least it's in the millions, and nobody could afford the premiums on a group policy where everybody might have correlated health issues.
Why should correlation be such a big factor? Even if 30 people taking out an insurance are correlated---the insurance company is probably insuring many more than 30 people to balance this out.
So if we divorced healthcare insurance and employment, how do we garentee that Sally gets the $12,000 the business is currently paying as an increse in her salary?
What stops a business from giving her 75% of the $12,000 they currently spend on her benefits, pocketing the difference as increased profit, and leaving Sally to make up the difference with her dwindling discretionary income (despite a pay raise). I'm not sure how this help Sally.
Presumably the exact same thing that stops businesses from just paying everyone minimum wage and only ever hiring people part-time to get out of paying benefits.
I.e., Sally will go work somewhere else, or will unionize and kick their ass (ideally only in the figurative sense).
Her discretionary income, despite the pay raise, will only dwindle if her health care costs remain fixed. But the whole point of moving to a single-payer system (or at least more government-provided coverage) is that those costs go down. If they go down by more than the 25% (or whatever) that Sally is losing, everybody wins: she makes more take-home pay, her company makes more profit, and health care costs less for everyone.
There's a lot of assumptions built into that outcome, but I take it that's the idea, if the numbers work out.
Whilst the idea of the government paying for healthcare may seem ridiculous to you it seems just as ridiculous to us that you might be ill and not be able to afford treatment.
>Should the government also be providing even more necessary items like food
I guess you've never heard of farm subsidies. Our food prices are almost completely controlled by the government, which is precisely why it is so cheap. No one goes hungry in America, because famine costs about 2 dollars a person at the corner store or McDonald's to completely eliminate. And, for those that can't afford that, we have WIC and food banks/pantries or church-run soup kitchens (also indirectly subsidized due to non-profit or church tax status).
You'd basically have to try really hard to starve in this country.
I have, and we should get rid of them. But they're not actually that large in relative terms: $20 billion/year per Wikipedia (http://en.wikipedia.org/wiki/Agricultural_subsidy#United_Sta...). That comes out to around $60/year per American, and even if it goes entirely to lowered food prices (no), that's a small fraction of what we spend.
Furthermore, even if you were right and there was massive subsidization of food prices by the government, how much you pay is still directly proportional to how much you consume, so there's still some pricing signals in the market. Those signals are almost entirely absent in our "free market" (not) health care system: http://www.thefreemanonline.org/headline/doctors-are-governm...
And, for those that can't afford that, we have WIC and food banks/pantries or church-run soup kitchens (also indirectly subsidized due to non-profit or church tax status).
Sure, and welfare for those who need it is a good thing.
Dole money, food vouchers, council houses, roads and subsidized public transport. They pretty much already do and I have no problem with my taxes paying for that.
Think of it from an entrepreneur's perspective. The bigger the safety net the higher you can jump.
it should provide food and housing for those people who can not get either
Agreed. That's very different from paying the large majority of everyone's food and housing costs, which is what the left wants to do with health care.
Every other industrialized country has national healthcare of one form or another, and they all beat the crap out of us on cost while competing on quality. This isn't a theory, this is a fact.
No matter how many times you yell "socialism", that will still be true. The only question is how much money we waste before we finally switch over.
Health and food are two different things. He said he pays $12,000 a year for health cover. There are people there who get $12,000 a year to live on. They can afford food quite fine, but if they get some health problem they would be in deep trouble. Life and death sort of trouble, which you hardly get with food in the west anyway. You only need a dollar to survive at the bare minimum.
So food is not a problem. Nor is housing or transport. The latter are very different from health. You can afford very much not to travel. Walk instead. So too you can afford to not have your own house for a month but live at a friends house. Besides, the vast majority would not want to be provided a free house if they can afford it finely.
But with health there is a matter of principle also. The same principle that each life is precious applies to it. A person should not be free to die because of money in such a rich and prosperous country. Also, there should not be a two tire system whereby the rich can afford first class health care and the poor just enough to get on with plenty of annoyances or worse die.
Spoken like someone who has never had a parent have a health emergency and then get a bill for $200k for the hospital's services. Go free market! Yay capitalism! Every man, woman and child for themselves! Especially those little old ladies. If they can't afford to pay for a health service to save their life, that's just too bad. But thankfully every old woman is rich, or has rich children.
Now, that's just unreasonable. Crazy figures like $200,000 are accounted for by the nightmarish public-private kleptocracy we have here. I challenge you to find someone who pays those kinds of princely sums, even for emergencies and very sophisticated procedures, in one of the numerous countries that has neither a socialised healthcare system, nor the catastrophe we have here in the US. In those places, people just go to the doctor and pay a basically affordable sum out of pocket.
We're in agreement actually. I was actually talking about specific and real cases that happen here in the US. Whereas in many Western European countries one doesn't have to worry about being handed some insanely high medical bill when a health emergency occurs. Their systems work more like how traditional insurance should. You pay more when things are going along normally, but when the shit hits the fan health-wise, you are neither denied medical care or handed a bill so high it wipes you out or have to spend the rest of your life paying. You get the care your body needs and don't have to worry about becoming financially devastated.
...society. If workers pay for it, there's less money to spend on other things (and they might not have the same bargaining power). If companies pay, they'll have less money to invest. If the government pays, it comes from everybody's taxes.
You can't dissociate any player from the others.
It should boil down to the question of finding the most efficient way for society overall.
Single-payer systems are the cheapest way to provide healthcare for a society. However, they necessarily fund the healthcare industry at a lower level than people would on their own. Some of these savings come from actual improvements in efficiency and the elimination of marketing costs, but the rest comes from the government using its monopsony power to drive down prices. Some see this as a feature, but I see it as a bug. It results in less investment going towards improvements in the field, which I think is undesirable. I think the healthcare bill that was passed was a good way of avoiding disrupting the healthcare market while still providing healthcare for everyone.
Companies will still have to worry about it the same amount that they worry about russian invasion or about the state of the pavement on the interstate. i.e., not much, yeah they pay for it through taxes, but it's not a business concern.
by getting out of Iraq and Afghanistan, and by shrinking the DOD budget by say 30% (by cutting out things not needed to actually defend us), and by eliminating tax exemptions and loopholes for the rich and large corporations. By somehow reducing the spending done on the legal and financial professions, and by making companies pay more of the full share of the costs they impose on externalities like the environment and public health, and by numerous other possible changes to be more efficient economically. Like not having government debt so save money by not having to pay interest payments, etc.
Wait, I don't get it. What is he proposing as an alternative? Would he be happier to pay Sally $74,000 so that she herself can do the whole process of paying $30,000 for taxes and health care and stuff like that? Or is he proposing to pay sally $44,000 and let Sally pay $30,000 out of that? Or is he just whining?
just whining. he could, instead, hire freelance or contract workers. he won't have to pay much to the government, he'll just have to pay the contractor double what he pays Sally.
I don't know how it works in the US. In Canada, if a business hires someone on contract but they are not in an "arms-length" transaction (ie. the 'contractor' is working in their office, using their equipment for more than a 'temporary' period of time), then the Canadian Revenue Agency can force the business to re-classify them as an "employee" causing both the person and company to pay back-taxes and any penalties.
i honestly don't know the details of the current US laws, but i do know that i've worked in a team with reasonably permanent, in-house contractors before.
And that company was likely breaking the law in the state in which they operated. If CA, MA, WA, or most others.
CA and many other states are now going after companies that hire contractors to do the work that is usually done by employees (and they use their own definition of "employee", too). They will hit you with fines and back employment taxes should you be audited. How would you be audited? A contractor files for unemployment, to which they are not entitled (because unemployment taxes are not paid for them). It happens all the time.
Those articles are sad. They are the equivalent of the crackpot in sciences, in that they ignore the most basic rules of economics. Discussing about whether taxes are a burden for business or not without taking care of tax incidence is at best totally ignorant. Which part is paid by him and which part is paid by his employee administratively is meaningless - it all depends on the job market, and the elasticiy of demands and supply. Most likely, if he paid less in taxes, he would have to pay sally more.
What total utter crap. Taxes is the price you pay for a civilized society, and the US has far less taxes that most western countries, and as a result is arguably less civilized. Millionaires whining to other millionaires in the WSJ. Spare me.
He has to make the calculation about hiring people. If he doesn't feel comfortable hiring he shouldn't. Why do you feel as though you're in a position to tell him what his reasons are or should be?
Taxes take money out of the private sector and thus reduce the pool of capital for private sector job creation. Our taxes go to fund bankers and wars. That's why we're in such bad shape. If they went to build roads and bridges no one would care so much.
Yeah, except he's not actually calculating. He's just delivering a pre-scripted rant with a little argument to authority, "I make hiring decisions". Great, I feel better.
He's paying almost as much for his end of the health insurance as the total tax take. What's he whine about? Taxes. Who's providing more bang for the buck, the health insurance company or the relevant federal, state and local governments? Does he have kids in school?
"Taxes take money out of the private sector and thus reduce the pool of capital for private sector job creation. Our taxes go to fund bankers and wars"
This is a nice bit of sleight of hand but in reality our taxes that go to the gov't go back into the private sector, and according to our national debt do so at a greater rate then we take it in. Bankers and the Defense industry are in the private sector. Tax money doesn't just disappear from our economy. Heck even Mr. Bogen probably doesn't complain when he gets a contract for providing A/V systems for schools.
There's private sector and then there's private sector. I am sure we all would agree that it is best to leave the money at the hands of the general population rather than take it from them and give it to a concentrated small elite.
Besides, whether it is the private or public sector wasting money on wars it hardly makes a difference. It's the people's money and the people would rather keep it or see it used for more productive ends to benefit all and not some elite.
You could argue that you don't get much for them, but that wouldn't be true either. Most government programs are very popular, but it is strangely still popular to hate the government. The logical disconnect there should be obvious.
Most government programs are very popular, but it is strangely still popular to hate the government. The logical disconnect there should be obvious.
Most people will enthusiastically support programs that take $2 from other people and give $1 to them. If you have lots of programs like that they're clearly wasteful in aggregate, but each individual one will have vocal supporters.
> What total utter crap. Taxes is the price you pay for a civilized society, and the US has far less taxes that most western countries,
Actually, it doesn't. US tax revenue per-person is pretty much in the middle of western Europe.
Things look different because US GDP/person is higher and poor workers only pay for their retirement. (SS payouts are fairly progressive, so it's a good deal for the poor and sucks for those near the cap. The cap exists because we don't want rich people to care about SS and we don't want to pay $400k/year to Ross Perot. If you want to remove the cap, please tell us how you're going to deal with rich people caring about SS, which they will if benefits are capped, or if you're going to uncap the benefits as well.)
"US tax revenue per-person is pretty much in the middle of western Europe."
Not really. The OECD average is 36%, Americans pay 28% and no western European states pay less. http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenu... In nominal terms the US may be higher, but I don't really see that that proves anything. The main problem is of course that so much has to be paid for by the individual in the US that is efficiently taken care of by the state in Europe, so comparing tax rates misses a big part of the issue.
>> "US tax revenue per-person is pretty much in the middle of western Europe."
> Not really. The OECD average is 36%, Americans pay 28% and no western European states pay less.
Yes really. American's pay 28% on a larger number, so the amount of money per person is basically the same.
BTW - you're ignoring corporate taxes, which are a significant fraction of revenues. They don't actually change the equivalence but they do increase the "revenues per person-year" number.
> nominal terms the US may be higher, but I don't really see that that proves anything.
Actually, it does.
> The main problem is of course that so much has to be paid for by the individual in the US that is efficiently taken care of by the state in Europe, so comparing tax rates misses a big part of the issue.
I'm not comparing tax rates. I'm comparing tax revenues per person.
You're pointing out that western Europeans get more for the same amount of money.
Combining those two facts tells us that a tax dollar goes further in western Europe than it does in the US.
If the US govt wants to provide the same benefits, it either needs more money per person than European govts or it needs to take the relevant amount of money from its other expenditures.
The article lists countries by total tax revenue as a percentage of gross domestic product. If it was just federal taxes it would be worthless. They actually specify "all levels" for the US on the list so it should not be possible to believe otherwise.
Not at all. A "progressive" tax system defined as one where those with more money pay a (progressively) larger fraction of said money. Since SS also has direct benefits, you look at the sum.
>the US has far less taxes that most western countries
I own my own LLC, and lose 45% of my "salary" to taxes (in large part because I pay both 7.5% "halves" of my Medicare tax). Is that far less than it would be in most other Western countries?
The real problem is that for roughly the same tax burden, you don't get a fraction of what Western European or Canadian counterparts get. No socialised healthcare, no government-subsidised education, a pitiful two weeks of paid vacation at best, joke unemployment benefits, etc.
I'm not necessarily arguing that any of that should be the government's job or that all aspects of it are fundamentally fiscally sustainable. I'm just pointing out that you get quite a bit less for your money; an alarming preponderance of your income tax goes to prosecuting pointless wars, Wall Street bailouts, and other suitably kleptocratic endeavours. Local and state government operations are substantially funded by sales taxes, property taxes, excise taxes, and other taxes not even accounted for by your 45% figure; the income taxes do not yield many practical, down-on-the-ground results apart from the relatively small portion of the federal budget that goes to state-bound block grants.
That's not bad. 2x social security/medicare and you're a bit under 50%. I'm a wage-jockey in Canada, and I'm paying over 50%. So yeah, US taxes DO look like some of the lowest in the Western World.
> So a government that collects 100% of your income as taxes would create the most civilized society?
This is the sort of comment that drags down discussions about politics. No one is advocating that sort of thing here.
In fairness, the comment changhiskhan is replying to, that US is "arguably less civilized" is quite a mouthful as well, and is the sort of thing that sets of long, fruitless flame wars that lead nowhere.
I was just trying to get him to clarify his point. There was nothing in his original comment that indicated he believed there was an optimum point between 0-100%. I'm at a loss as to why my comment was so much more inflammatory than his comment about the US being "arguably less civilized".
> There was nothing in his original comment that indicated he believed there was an optimum point between 0-100%.
Would you really want to waste any of your time with someone who believed in either 0 or 100? They're some sort of True Believers and nothing you can say - neither facts nor logic - will dissuade them from their view. Luckily though, this community is mostly composed of cleverer folk than that, something that ought to be pretty obvious.
One of the good things about HN is that it can generally be assumed that people are not insane. Nobody in their right mind would NOT believe that "there was an optimum point between 0-100%"
Not sure I agree that it was all that inflammatory. It mas a bit tongue in cheek, but actually has a little bit truth to it. Anyway. You can take the boy out of Reddit, but not ...
It's interesting how his private insurer raising rates is obviously "ObamaCare"'s fault. Like all businesses, insurers raise prices because they can, thanks to market position, scarcity and all the other usual factors (distorted, as the health insurance market is, by oligopoly-entrenching state regulations that have little to do with the Affordable Care Act).
To elaborate a bit - it just really struck me as bizarre that he's basically giving his insurer a pass for raising his prices, because it's "business", and business can do no wrong - as a fellow businessman, he understands the plight of the insurance company. But all the money that's collected in taxes, in his mind, goes into the black hole of Washington & Trenton - including not just the somewhat-opaque things like income tax (which indirectly funds his and Sally's roads, schools, police force and wars abroad) but things like disability & unemployment insurance, which it seems like Sally might need if he has a bad day.
This guy probably spent 8 years defending the Bush deficits and discovered he was a fiscal hawk on January 29, 2009. Until 2016, that is, or earlier if he's lucky.
To those upvoting this speculation about the author's frame of mind, why does this add to the conversation? To my mind, it distracts from the argument by focusing on the arguer. Is this TPM?
Understanding the motivation behind irrational thinking usually requires some degree of focus on the one doing the thinking.
And just for the record, I've been a registered Republican since I turned 18, and I've also noticed this sudden surge of fiscal hawkishness in the party. This isn't liberal bas talking.
This also isn't to say the guy is necessarily being disingenuous. Just that somebody in his chain of trust is playing politics and that's causing him to form opinions that aren't entirely rational.
patio11 has said in the past that he's a Republican. And even though I think I'd disagree with him about various topics in politics and economics, I think he's got a pretty good mind.
And I would vastly prefer a site where I can talk with people like him about tech and startups, rather than the Nth echo chamber site about politics where you get a self-reinforcing feedback loop that tends to marginalize those who disagree with the majority opinion.
Health insurance is a fairly competitive market - narrow profit margins, commodity good, many competitors (in most states, including NJ). If a health insurance company can raise prices, it's probably because costs are going up or are likely to do so in the near future. The calculus is fairly simple:
If I raise prices, my competitors don't, and costs don't go up, I lose customers.
If I raise prices, my competitors don't, and costs go up, I lose competitors.
Insurance companies all seem to be placing their bets on the latter case. If you feel they are wrong, feel free to bet against them.
I don't quite know the situation in that market, but to provide an alternative, it could also be an oligarchy. That is, there's a number 1 guy with 60% share, a number 2 guy with 20% a number 3 with 10% and some little guys.
It is not hard in an oligarchy to act like a monopoly.
Oligopolies do tend to be correlated with monopolistic pricing, but I'm not sure they allow it in an otherwise competitive market. Most oligopolies which successfully raise prices tend to be in uncompetitive markets, e.g. cell or cable service, and the price increases may be caused by the hindered competition rather than the oligopoly itself.
Consider the case of an oligopoly in the DRAM market: when they tried to raise the price of DRAM (2001-2002), they succeeded for a short time. They also collectively lost 3.3% of market share over those 2 years and members of the oligopoly (Hynix was the first, I think) quickly broke ranks in pursuit of increased profits.
If you are going to make a misleading statement, at least do not provide the data to clearly show your bendy argument.
The combined market share of the largest and second largest insurer provider goes below 50% only in four states. It goes below 60% in only 5 states. That makes a combined 9 states out of 52 or so where there might not be an oligopoly. There are 19 states where their combined share is above 70% and I have used that cut off line strictly, not counting for example 69%.
So yeah, it might be very competitive in 4 states, ok maybe in 9 states. These states seem to be the one I recognise such as California where the combined share is the lowest at 44%, but it seems that for the vast majority of people the market is hardly "very competitive" or competitive at all.
What misleading statement do you feel I made? Would it be the statement where I explicitly gave market share for the #1 and #2 companies, cited a source, and asked if you considered that an oligopoly?
Also, a market can be highly competitive even if it supports an oligopoly. It may simply be the case that the oligopoly is outcompeting smaller players. See, for example, DRAM, PC's, cars (ignoring their recent bailout), big box retail stores.
Well yes it is not a misleading statement strictly. The statement is true, but it is presented in a misleading way as the one you chose is hardly representative of the general market.
I am not saying that the market is or is not highly competitive. Personally with seeing such share markets of 80% and 90% and one even 98% I think they hardly differ much from monopolies especially since unlike internet businesses there is I would think a high barrier to entry and unlike PCs it is not a new market.
As for retail stores, at least in the UK, they hardly are competitive. We hear of price fixing all the time. They just engage in some game where they lower the prices by a penny and put them up by ten pence etc.
But in any event my point was not to conclude whether the market is or not competitive, but only to provide and alternative.
The article gives an explanation of why I picked NJ: "Mr. Fleischer [the author] is president of Bogen Communications Inc. in Ramsey, N.J."
Incidentally, counting states is a bad approach. 1.1% of the US population lives in states where the top 2 insurers have at least 90% market share. The 4 states you described as being competitive (CA, NY, FL, Oregon) account for 25% of the population of the US.
In retrospect, this is roughly what you'd expect. You can't sell health insurance across state lines. Small states can only support one insurance company (due to the fixed costs of hiring actuaries), while big states can support many. So after some thought, I suppose you are right, and the oligopoly model probably does apply to insurers in small states.
The author has an agenda. However he also has a point.
During the Bush recovery there was much complaining about how salaries didn't go up. Well it turns out that the amount spent by employers on employees did go up at normal rates for a recovery. However increasing health care costs absorbed that surplus, and employees did not directly see more. In fact employees got moved to crappier plans and so saw less income.
It is too early to tell whether Obama's plan is going to cost us all more or less than the distorted market has been costing. But it is certain that the USA cannot long afford to let current cost trends continue unchecked.
$74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits.
Employees get to keep more the 75% of what the company spends for them? (56k / 74k)
Employees in Italy and Scandinavia countries barely get 50% of what companies pays them...
Yep, move to Sweden and he'd be shelling out some 90k to put $44000 in his employees pockets (46% payroll tax, 5-15% social security, then 30% income tax on that).. And then there's the 25% sales tax.
Yeah, and employees in Italy and Scandinavian countries get a metric butt-ton more government services for their money.
Not to turn this into an argument about what government should be doing; don't care, irrelevant. The point is simply that you do get a lot for giving up ~50%+ of your paycheck in those countries. Here, you just give up whatever you give up (your figure doesn't take into account sales taxes, excise taxes, use taxes, property taxes, etc.)
It's worse then outlined in the article. Sally also pays other taxes with her "net" income. If she rents, her rent is certainly higher because of the landlords property taxes. If not, she pays it herself. Then there is sales taxes and excise taxes to may. Truth be told, of the money that the employer pays to keep her employed, only a little more then half of it ends up in her pocket.
Here is a huge opinion that could be incorrect. Most people work for what they need to live. If it becomes more expensive to live, Sally will want a raise. If it's cheaper to live, she won't be so pissed when she doesn't get a raise. The bottom line is all that matters to most people. Therefore, no matter what taxes are created, purported to be income tax and what not, are paid by businesses.
What does this mean in practice? It means that by having incoming taxes at all, we are encouraging business to hire people outside of the US. The only way to level the playing fields, as far as I can see, would be to shift the taxes from income to sales. I don't know if that is plausible or not, but it's the only way I can see the US government really encouraging job growth here in the US. It would mean that no matter where your company does it's business, if it uses the US market, it has to pay the piper, and would give a real shot to US workers at competing with other world-wide workers.
Shifting taxes to sales, especially in a significant way, will just dampen aggregate demand, and push us into a deeper and longer recession. (See a comment I made here, on an article that didn't get any front-page time about states looking to raise revenue by taxing online sales: http://news.ycombinator.com/item?id=1513784)
An alternative solution is to tax the unused value of illiquid capital like land. Unlike income and sales taxes, which act as disincentives on economic exchange, this kind of tax acts as an incentive for exchange, production, and employment: if you own capital which is not being put to use, this tax is either an incentive to put it to use or to sell it to someone who will.
This isn't a new idea. It was put forward by Henry George in Progress and Poverty in 1879: http://en.wikipedia.org/wiki/Progress_and_Poverty (Disclaimer: I haven't read the book, but I did buy it recently and it's on my to-read list.)
It forces people to be more aggressive with their investments if they want to maintain wealth. If your making 15% ROI each year 2% inflation is nothing, if you make 2.5% ROI each year inflation is going to crush you. Now which one of those people has demonstrated a better utilization of capital?
Consider property taxes: if your ranch makes 100k / year many people will haply keep doing that for sentimental reasons, if however the land is worth 50 million and you need to pay 100k in taxes each year you will sell it to someone who will use the resource more productively.
It also eats away at debt. So if say the housing market is under water inflation is going to help people get out from their debt load.
PS: Or consider what happens with 20% deflation, what would you invest in?
Ah, I see: the argument is that we ought to try to maintain a little inflation, but not too much, because it acts as an incentive for better capital utilization.
Perhaps I'm being thick, but I'm still unsure: when you say, "Actually, this is the argument for low inflation," do you mean that we should focus on maintaining a low level of inflation instead of taxing underutilized capital? or in addition to it? or that, in policy terms, they're two sides of the same coin?
> It forces people to be more aggressive with their investments if they want to maintain wealth. If your making 15% ROI each year 2% inflation is nothing, if you make 2.5% ROI each year inflation is going to crush you. Now which one of those people has demonstrated a better utilization of capital?
Please be careful to talk make clear whether you are talking about nominal ROI or inflation-adjusted (i.e. real) ROI.
If you have a tame investement with x% real ROI, you will get approximately x%+inflation nominal ROI.
So your argument needs patching up.
It is true, that inflation deters one from just holding onto cash.
But how does that avoid rewarding companies for moving overseas? It basically gives a huge competitive advantage to foreign companies. You have to tax the use of our market if you want to be fair. How else can we do it with a fair law that isn't protectionism?
Also, is there data to back up sales taxes in relation to dampening demand? It's the same tax, just taken from a different place. I find it hard to believe that the common consumer would hold on to money. They just don't do that.
I agree in general. Also many economists at least thought about tax systems based on mostly consumption taxes, not taxes on income or production.
> If she rents, her rent is certainly higher because of the landlords property taxes.
But here I disagree, at least somewhat. Property prices and rents are---to some degree---determined by how much people bid them up. Taxes on real estate influence how much of the rent goes to the owner and how much to the state. But the absolute level of rent won't be affected much.
(This is more the the more fixed the supply of real estate happens to be.)
By the way, that's why real estate is one of the better things to tax. Those taxes don't distort economic activity as much as e.g. a tax on the house that's build on the real estate, or taxes on wages.
Fair enough; perhaps we should make the system a bit more progressive. Perhaps if FICA weren't capped at ~$100K, we could reduce Sally's share of the burden? Or if we eliminated any number of corporate-tax loopholes, or agribusiness subsidies, or defense spending, we could reduce personal income tax rates?
> Perhaps if FICA weren't capped at ~$100K, we could reduce Sally's share of the burden?
Are you planning to uncap benefits? If you do, Ross Perot gets $400k/year. If you don't, rich people start caring about SS. Those are the reasons why Social Security advocates used to like the cap. Were they wrong?
FWIW, SS payouts are very progressive. Folks on the low end get a reasonable return on their contributions. Folks near/at the cap get a crappy deal. The rich ones don't care because of the cap.
Exactly, if Sally only brings in $30K / yr, BYE BYE Sally! Otherwise, if she allows the guy to bring in another $150K, the guy should quite whining and hire a few more.
Never miss an opportunity for a good libertarian rant, though, at the Journal I guess.
Oh, and it should have read: costs 74K to give her 56K in pay and benefits -- 18K in taxes.
So is she a force multiplier? Part of a tandem or group role? You can't just say that she brings indirect revenue as an excuse for not discussing what she adds.
The logical conclusion I get from this article is that if the government wants to improve hiring, they should remove all income taxes on people making <$100k a year, and tax business profits to compensate. Also increase taxes on those making >$100k to discourage upper-middle class and uber-rich hiring.
I don't think that's the solution he's looking for, but I didn't hear him offer one.
The solution is for government to cut its spending. But that brings up an interesting question. Has any government in history ever significantly cut its spending and reduced its taxes for the long-term benefit of its people, without a violent revolution?
It's clear that that would benefit the OP, but your assertion that it would be to the long-term benefit of the people is completely opinion. You take any piece of government spending and cut it, there's a rational argument as to why cutting it would cause serious harm in the long term, and many of those arguments are stronger than the reverse.
Taking home 66% after taxes / healthcare is considered normal in large parts of the world, so why are Americans so much more likely to make a fuss about it? [Edit: jswinghammer enlightened me below: "Our taxes go to fund bankers and wars." That indeed may make a big difference. Over here in Europe I feel most of my taxes do good, not evil. So I'm kinda ok with them.]
Really? Which country are you from? Because if you are in the EU we gave loads to Greece. We gave much more to banks some 500 billion on EU level, then there is the national level.
And Nato is in Afghanistan so I think loads of EU nations are fighting wars. Many Eu nations joined the Iraq war too, so I do not think any American is taking a moral stance over high taxes which a European needs not because their moral conscience is clean.
The guy, as said in many other comments has an agenda. SO it is hardly "Americans" but republicans, or conservatives, or democrats as they may be called in some countries.
Health care, etc. are indeed covered by taxes here in the UK, but the bottom line adds up the same anyway.
Obviously, the services different countries "provide" for your income tax vary by country; some countries provide "free" healthcare, some offer high (perhaps sometimes too high) unemployment benefits, while others decide to wage wars instead to protect their interests overseas.
Not from the US, but I don't understand his issues with taxes.
What does change for his company if Sally has to pay higher taxes? Wouldn't it just mean that Sally ends up with less cash, not with his company having to pay more.
Is it mandatory now to offer health insurance to employees? How has this system of companies arranging for the health insurance emerged? I can only guess: providing health insurance is a way of giving employees a tax free bonus (like a company car, or free food)?
Presumably he is contracted to pay Sally $59,000 gross + some level of benefits. But his costs to pay this are higher ($74,000). Presumably as taxes rise, he will still have to pay Sally $59,000 gross + the same level of benefits, and his own costs will have increased. He is unable to pass on the full cost of a tax rise to Sally.
From what I understand, the health insurance situation has arisen due to buying power. It is impossible for Sally to buy her own insurance at the same rate that her company can do it (even ignoring any tax breaks).
That could explain it, but it seems weird. In my country salary is usually negotiated pre-tax, and I think in this case it makes sense.
But is there a law to set up salaries that way? He cites it as a reason for not hiring, so presumably he could just negotiate salaries post-tax and do away with the problem.
As I understand it, employer-sponsored health insurance is not required, but it is expected in many jobs.
According to the history above, health insurance tax breaks originated with Blue Cross and Blue Shield programs in the 1930s (thought to be progressive because it helped lower-income people). Employer-sponsored health insurance became popular during WWII, when companies weren't allowed to compete on wages, but were allowed to compete on benefits. And then, for some reason (parity with BCBS?), laws were passed in the 1950s that made employer-sponsored health insurance enormously tax-advantaged.
In the US the employer shares the income tax burden. So If your boss gives you a raise the company sees its own taxes go up. I am not sure of the tax implications of health insurance.
Perhaps due to my incessant optimism about people's reasonableness, the way I understood the argument seems to me to be primarily about the regressive character of the tax system. $59k/$44k just isn't that much anymore, especially in a relatively high-cost area, and especially considering the sources of cost inflation he identified.
But okay, $59k/44k is one thing. You want to talk about regressive taxes, tell me why I have to pay nearly $2k to employ a part-time person who nets just a little shy of ~$1400 (roughly ~$22k annual gross), and that's without any benefits. Talk about a disincentive for job creation! I'd much rather pay my part-time employee more of that ~$2k, and if I could, I would.
If I give him a $300 bonus one month, he's going to see about $180 of it if it's run through the normal payroll withholding mechanisms. At that level of income, that really is ridiculous.
This seems like a lot of whining to me. 33% does not seem high for total taxes for employment. That's the total that both the employee and employer pay together. Sure, they could do more without having to pay that, but they also wouldn't have, I don't know... roads, police, fire department, public education, an army to protect them, etc. What percent do they think they should be paying? Sounds like they think they should be entitled to get it for free.
This is a ridiculous article. By ignoring the reality and focusing on only a small aspect of the economy, the author attempts to covey the idea that the current tax structure is not only bad for business, but bad for employees.
The author suggests that his company pays $74,000 to get $44,000 into his employee's, Sally's, pocket. The tone used implies that the other $30,000 is purely a waste. The key point conveniently ignored, however, is where that $30,000 goes. He mentions the abstract ideas of state and federal taxes, unemployment insurance, disability insurance, Medicare, and Social Security.
If we assume the author would be happy eliminating all taxes and insurance payments, we're left with a range of possibilities; he wants Sally to have between $44,000 and $74,000. Considering the article's purpose is to suggest he's not hiring because he doesn't believe Sally is worth $74,000 and we can eliminate the high-end (let's take of the top 10% and put Sally's max at about $66,000).
Starting from the $44,000 figure. $7,322 of that would have to go toward a supplemental system for Social Security. It's not government backed and Sally has to spend time managing her investments. As we've all recently learned, even without making any mistakes herself, she stands to lose a lot of money if the stock market fails. $1,712 would be spent on supplementing Medicare. The $12,000 in benefits would have to come from somewhere, in this worst-case for Sally, we'll take it out of her pocket. Without paying taxes, Sally must pay however much the privatized school charges her. She must pay the privatized police force to protect her. She must pay the privatized fire station in case there is a fire. She'll pay tolls for every road she uses to get to and from work. I'm sure the author enjoys the ability the company has to lay off workers, so Sally will have to put back some money in case she becomes suddenly unemployed or temporarily disabled. That's $275 for the author today -- but Sally wouldn't have the benefit of a collective pool of funds, so she'd have to build up a buffer very quickly. So far, we're well above $21,309 not counting the costs to which we've failed to attributed any value (police, fire, roads, schools, et cetera). Let's assume those and associated services currently provided by the government are a very reasonable $8,691 per year (many private schools would be beyond Sally's reach). Whereas the author would save $30,000 to put the same $44,000 in Sally's pocket, just to maintain her standard of living today, she would need to easily spend that $30,000 out of her own pocket. Whereas the employer might then be willing to hire someone, Sally wouldn't be willing to work. Well, actually, she wouldn't have any choice but to work or die.
What about the magnanimous author who'll now pay Sally $66,000? Well, she'd bring home $66,000 and immediately spend $30,000 to pay for all the gaps that taxation left. Which means she'll effectively receive $36,000. That sucks for Sally and distills the author's argument down to: he wants to place the burden squarely on the shoulders of the workers so he can save money.
Obviously any employer will only spend as much on an employee as they make from having hired that employee. So, either Sally creates $74,000 in wealth or more OR she doesn't. That's the bottom line. Stop trying to blame taxation when the reality of the proposed system merely punishes the employee to the additional benefit (beyond the value already created by the employee for the company) of the employer.
Also, please note the multitude of public services I failed to mention which are supported with taxation. Research, universities, military, postal services, social services, public health, water, sewage, oversight and regulation... Without these, Sally's standard of living would likely be much worse than it is today.
By the way, you ~could~ argue that Sally could get by with less money for Social Security, Medicare, and benefits. It wouldn't work, though, as it would be predicated on the idea that individual endeavors would be more sustainable than large-scale investments among an aggregate population. Even if we opened these services up for private enterprise, it's unlikely that they would operate as efficiently or more than the government bodies. Some people take that as a maxim, but they don't evaluate the services currently offered with the appropriate considerations. The most notable of which is "Caveat Emptor." Private enterprise can cut corners and save money, sure -- but someone's paying the cost. In no research that I've seen do private industries significantly out perform government institutions without a lot of cajoling and numerical torture.
The postal service is a frequent scapegoat here. Yet, the price of a stamp has been nearly constant when evaluated based on purchasing power and inflation. Further, try doing a cost comparison between FedEx, UPS, and the USPS for the same package. I've worked in shipping and receiving and both FedEx and UPS have more than their fair share of delivery issues and damages. Yet, I get bills and letters in the mail _very_ regularly and reliably. Go figure.
Good observation. The decision to hire comes down to a very simple "will hiring this person cause us to make more money than the person costs us." He's blaming the cost side of the equation for all of the decision to not to hire. He could just as easily blame himself for having failed to streamline his company's old-school high-markup sales network.
He lost credibility with me somewhat when he threw out the term Obamacare. I think it's a tactic by the Right meant to be derogatory by implying that somehow only Obama wanted it or designed it. In reality, many people contributed to it and shaped it, and the majority of Americans polled wanted major health care reform and the majority of Congress passed it.
That said, the OA author made points I agree with that it seems unfair and inefficient to require businesses to perform tasks and provide services which are unrelated to their core business, and arguably should be the responsibility of individuals or the government. I hate the fact that businesses are involved in providing health care for employees, it seems horribly inefficient and out-of-place. Businesses should only pay cash to employees, ideally, since that is most efficient and the most transparent and ungameable. Employees should then get health care from the market and/or from the government.
