Tags: obamacare | tax reform | medicare for all | single payer healthcare

On Taxes, Obamacare Complexity a Dangerous Common Denominator

On Taxes, Obamacare Complexity a Dangerous Common Denominator
Demonstrators gather near Trump Tower to celebrate the defeat of President Donald Trump's revision of the Affordable Care Act (ACA) on March 24, 2017, in Chicago, Illinois. (Scott Olson/Getty Images)

By Friday, 07 April 2017 11:43 AM Current | Bio | Archive

Excessive legal complexity is probably the biggest obstacle to effective democratic control of American government. As James Madison put it in Federalist #62:

"It will be of little avail to the people that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood."

Major changes in taxes are now being discussed at the same time as we have a continuing debate about the fate of Obamacare. Both taxes and Obamacare suffer from outrageous complexity. Minimizing this complexity should be a high priority in both cases if we want to increase government responsiveness to public opinion.

In addition to being a problem for democracy, the complexity of Obamacare forces people to make impossible decisions in their private lives. Those not insured through employers must determine whether they are Medicaid-eligible or must purchase insurance. People working through exchanges must document their income to enable the government to determine how much subsidy they will get. This causes problems for those whose employment is not constant. Changes in employment status lead many people to get "churned" back and forth between the exchanges and Medicaid or to find their subsidies going up and down or even disappearing. And in states which didn't expand Medicaid, many people have too much income to get Medicaid and too little to qualify for a subsidy.

In the exchanges people must choose which insurance policy to buy, assuming there is any choice left. But it is nearly impossible to compare one insurance policy with others. Policies have different deductibles and co-pays, and each policy covers treatment only by a limited network of doctors and hospitals. Patients who are churned from one type of insurance to another often find they cannot stay with the same doctor.

Those of us insured through employment or Medicare may find it hard to understand the pickle in which people insured through Obamacare find themselves. Replacing Obamacare with an improved Medicare For All program would eliminate unnecessary complexity. It would save hundreds of billions of dollars spent annually by individuals, medical providers, and insurance companies trying to cope with the current complexity. For a hair-raising report on how much this complexity is costing us, see Elizabeth Rosenthal's recent article in The New York Times: "Why Does American Health Care Cost So Much?"

The most popular part of Obamacare is that insurers cannot blacklist people with pre-existing conditions. But for this to work everyone must purchase insurance, which is very unpopular. The question must be asked bluntly: if government is going to require everyone to be insured, why not just provide taxpayer funded insurance to everyone and save all the hassle and expense involved in the current system?

The fact that Medicare would continue to be financed by taxes reminds us that we also need to reduce the horrible complexity of our tax system, which drives many to employ experts or to rely on preparation software. The number of different tax "brackets," often blamed for this complexity, is not the fundamental problem. The basic problem is that different sources of income — wages, dividends, interest, capital gains, etc. — are taxed at very different rates. People naturally manipulate their affairs to put their income into categories with the lowest tax rates. This leads to situations like the scandalous "carried interest" provision which allows hedge fund managers favorable capital gains rates on what is obviously earned income. As a result, sometimes those earning billions pay lower rates than the janitors who clean their offices.

At the very least, tax reform should ensure that all types of income are taxed at the same rates.

Our current tax system is obviously unjust. But also, as James Madison suggests, it prevents intelligent democratic control by the public. I devoted an entire chapter in my 1981 college textbook, "Thinking About Politics: American Government in Associational Perspective," to the incompatibility of complex government with democracy.

As I noted in 1981, it is impossible for people to vote intelligently for or against leaders when the laws they have enacted cannot be understood: ". . . as things presently stand in the U.S., although the electorate has the legal right to boot the rascals out on the basis of their decisions regarding taxes, voters are in no position to exercise that right methodically in their own interests. Public discourse on taxes is uniformly unsophisticated and demagogic. As long as the present degree of complexity in taxes is preserved, there is very little that anybody will be able to do about this."

Does anybody think that things are any better in 2017?

Paul F. deLespinasse is Professor Emeritus of Political Science and Computer Science at Adrian College. He received his PhD from Johns Hopkins University in 1966, and has been a National Merit Scholar, an NDEA Fellow, a Woodrow Wilson Fellow, and a Fellow in Law and Political Science at the Harvard Law School. His college textbook, "Thinking About Politics: American Government in Associational Perspective," was published 1981 and his most recent book is "The Case of the Racist Choir Conductor: Struggling With America's Original Sin." His columns have appeared in newspapers in Michigan, Oregon, and a number of other states. To read more of his reports — Click Here Now.

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Excessive legal complexity is probably the biggest obstacle to effective democratic control of American government.
obamacare, tax reform, medicare for all, single payer healthcare
Friday, 07 April 2017 11:43 AM
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