Columns » Ernest Dumas

Tax cuts no cure



George W. Bush did not bankrupt the country in vain. There are still plenty of people who think that any problem, including the health-care crisis, can be solved by the simple expedient of lowering the taxes of companies and individuals who make enough to pay a significant amount of federal income taxes.

Remember the president's boast in 2000 that he was going to unleash the mighty job-creating machine that was America's rich and corporations? If you cut Paris Hilton's inheritance and capital gains taxes she would use her savings to build a factory and put 500 people to work. Lots of our representatives in Washington never heard how that turned out.

Sen. Mitch McConnell, who steers the Republican minority in the Senate, declared Sunday that Republicans would not vote for a health bill that included a government insurance option for people who cannot afford the staggering premiums of the insurance oligopoly. McConnell said the way to get 46 million uninsured Americans covered and to protect the rest who are hanging on to insurance despite the mushrooming cost is to cut taxes and shield the industry from competition. Just give individuals the same tax deduction that businesses get for employer premiums, he said.

Arkansas's beloved Sen. Blanche Lincoln is still a true believer, too. She thinks the way to get Arkansas's 500,000 uninsured people covered and protect the rest from rising health costs is to offer them a tax carrot or two. The same magic she thinks will solve the problems of unemployment and energy dependence, and she asked people last week to endorse her “Arkansas Plan” so that the rest of Congress will take notice. She says her health-care and employment tax breaks are the blueprints for national reform. “What's good for Arkansas is usually good for the rest of America,” she said.

That is probably true, but high taxes are not keeping small businesses and self-employed people in Arkansas from buying health insurance, and they are not preventing small businesses from hiring more workers. If people are not buying your product or services another half-dozen workers will not move the merchandise. Businesses are not laying off workers and shaving their health benefits because of high federal taxes. The taxes have been going down, not up.

Lincoln theorizes that most of the uninsured in Arkansas work for small businesses or else are self-employed so a little encouragement from the IRS through a deduction for health insurance is all that is needed. The state government has been trying for 20 years to enlist small businesses in insurance pools but nothing has worked, including having the federal government pay three-fourths of the cost of care for low-wage employees if the business will arrange private insurance for the rest of its staff, a little bit of socialized medicine that Gov. Mike Huckabee advanced as he was getting ready to run for president as a free-market conservative.

High premiums, low incomes and the simple unavailability of insurance for many individuals are the problems, not tax rates or a complicated tax code.

Here is a clue to the Arkansas problem — and the national one, too. From 2000 to 2007, the median earnings of Arkansas workers rose only 12 percent, from $20,328 to $22,692. Health insurance premiums for the average working Arkansas family rose over the same period by 66 percent. Senator Lincoln cannot fashion a tax incentive that will induce those people to buy a policy. If you aren't paying much in the way of income taxes anyway — your burden is excise, sales and payroll taxes — what good is another deduction?

But the Republican leaders of both the Senate and House of Representatives oppose any significant effort to extend coverage to the 46 million because it would entail competition to the near monopoly in the health insurance industry. Senator Lincoln, who along with Rep. Mike Ross holds considerable power in the health-reform movement, has not come down squarely on the government insurance option but her statements are troubling.

McConnell on the CBS interview show Sunday said a public insurance option would be unfair competition for the handful of big insurers that now dominate the market. The government plan with its low premiums and controlled payments to providers would chase Blue Cross, United Healthcare, Cigna and Aetna from the field over time, he said, and medical care would be rationed, costly and unavailable to many.

What he described is what we have today, and there is an example of the government insurance that he fears. Medicare is not rationed, it covers everybody, people can choose their doctors and hospitals, and the administrative cost is a tiny fraction of private insurers'.

Competition? For most of the country it doesn't exist. The Justice Department considers an industry to be “highly concentrated” if one company has 42 percent of the market. In Arkansas — Senator Lincoln should take note — Blue Cross Blue Shield has 75 percent of the market. If you take government self-insurance plans out of the equation, it's higher. The state ranks as the ninth most concentrated in the country. Is it any wonder that insurance premiums have risen five times as fast as wages?

That is not a system that will be fixed with a dozen or a hundred tax breaks.


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