Oh, and did I mention that it’ll cost $52 trillion over ten years?
Today, I’m releasing my plan to pay for #MedicareForAll. Here’s the headline: My plan won't raise taxes one penny on middle-class families. In fact, we'll return about $11 TRILLION to the American people. That's bigger than the biggest tax cut in our history. Here's how:
— Elizabeth Warren (@ewarren) November 1, 2019
Instead, we’re going to spend more on care itself. And thanks to getting rid of all the waste in the system, we can offer top-of-the-line care for all 331 million people in the U.S. for LESS than what we’ll pay if we do nothing to fix our broken system now.
— Elizabeth Warren (@ewarren) November 1, 2019
Despite the massive price tag, Warren says she’s able to save families $11 trillion from it for fantastical reasons. How? Because that’s what she says people will be paying less in out-of-pocket healthcare costs over the next decade, which wouldn’t exist under her plan. Never mind that those exact costs will still be paid, just by taxes.
She’s practically arguing semantics when she says she’ll save the middle class money, and she’s playing loose with definitions when it comes to alleged healthcare savings she projects.
Warren assumes that the states will take the $6.1 trillion they’re projected to spend on healthcare over the next decade, and simply redirect those funds over to the federal government when they take over healthcare. Not only would that never happen without coercion, the federal government doesn’t have the ability to do that. Furthermore, Warren is just crediting a shift in taxation as a cut in costs here.
Another $4.1 trillion in savings comes from merely assuming that insurance administrative costs, drug prices, and national health cost growth will be that much below projections. Or in other words, we have to assume that things will be come cheaper once the government takes them over.
For just a sample of how much revenue needs to be raised, and why it’s impossible to do without taxing the middle class, to finance “only” $30 trillion over the next decade in new spending would require either:
- A 32 percent payroll tax
- A 25 percent income surtax
- A 42 percent value-added tax (VAT)
- A mandatory public premium averaging $7,500 per capita – the equivalent of $12,000 per individual not otherwise on public insurance
- More than doubling all individual and corporate income tax rates
- An 80 percent reduction in non-health federal spending, or
- A 108 percent of Gross Domestic Product (GDP) increase in the national debt
So how does she plan on raising all that revenue without raising taxes on the middle class? “To cover the cost, we start by taking the money that employers are currently paying in the form of premiums to private insurance companies and have them pay it to Medicare instead” she says. “We cover the remaining $11 trillion largely with taxes on big corporations, Wall Street, and the top 1%—and enforcing the tax laws we have now. Add in a targeted cut to a Defense Dept slush fund and that’s it.”
Here’s her plan to pay for it represented graphically:
Unfortunately for middle class taxpayers, those funding sources can’t even raise enough money for Warren’s $20.5 trillion cost estimate. And bear in mind, this $20.5 trillion represents new healthcare spending in addition to the $30 or-so trillion already projected to be spent over the next decade. While Warren says she won’t raise taxes on the middle class, presumably she plans to attempt to tax the previously privately insured proportional to what their premiums were.
In fact, upon release of her plan, Warren declared that “Anyone with under $1 billion in net worth, she said, ‘is not paying a penny more.'” Her plan says otherwise.
As the Manhattan Institute’s Charles Blahous notes (and I’m quoting him loosely):
- Warren campaign memorandum asserts that $1.4 trillion in new taxes would be collected, because the elimination of employer-provided health insurance would increase worker take-home pay subject to taxation (which would affect the middle class). This is true, but it is already accounted for in the top-line cost estimate. It cannot be credited a second time.
- Warren assets taxes on the top 1% would provide another $3 trillion, but her campaign has already proposed to use most of this to finance other programs.
- The campaign asserts that another $2.3 trillion can be collected from reducing the “tax gap” through more effective IRS enforcement. We simply have to take her word on this and wonder why it wasn’t closed sooner, and assume that better tax enforcement wouldn’t’ raise more money from everyone.
- The campaign also asserts that another $800 billion will be generated by eliminating Overseas Contingency Operations military spending. This doesn’t really work because of the budgetary distinction between mandatory spending (such as Medicare for All) and appropriations spending (such as military spending). Appropriations such as military spending are only enacted one year at a time… it’s not really possible to commit to appropriations cuts lasting ten years and beyond, in order to finance a mandatory spending program.
Warren jacked up her proposed wealth tax on wealth about $1 billion to 6% just for this proposal. Her initial 3% wealth tax on billionaires assumed a 15% avoidance rate, yet she makes the impossible assumption that this tripled tax will be avoided at the same rate. Another financial tax she proposes is to have capital gains taxed at an annual basis in non-retirement accounts at 37%, as opposed to once a stock is sold. That would affect more than just billionaires, and would be far larger than the advertised rate, given the compounding nature of financial wealth.
The Warren plan is out, and yet we have no clue what it would really cost, or how we would pay for it. In addition to many issues with double-counting, every cost estimate is a massive underestimate, and every proposed tax increase will fail to raise whats intended. Warren’s plan relies on a “best case scenario” on both funding and execution, even though we could literally tax billionaires for 100% of their wealth and it wouldn’t cover half of her proposed new spending.
All we really do know for certain is that, by Warren’s own admission, it’ll cost the American economy at least two million jobs, boosting the unemployment rate by nearly two percentage points overnight. Hows that for a sales pitch?