NYC finally understands taxes, freaks out and quits

NYC Councilman Peter Vallone Jr (Democrat, hold on read that again its important. This is a story about a Democrat from one of the most liberal areas in the Nation) wants to secede from NY State. Why you ask?

This is where it gets good. See NYC Mayor Michael Bloomberg testified in Albany that NYC pays $11 billion more in taxes than it gets back from the state. This ticked Mr Vallone off.

Welcome to the world of taxation and wealth redistribution Mr Vallone. Surely, as a Democrat you are passingly familiar with these concepts. But maybe not when it applies to you. Anyway, lets look at some fun quotes.

somebody please tell me what other options we have if the state is going to continue to take billions from us and give us back pennies.

Ummm, this is the exact concept of wealth redistribution. The wealthy give lots get little. Maybe its not fair, but I'm assuming as a Dem that you've voted to "redistribute" the wealth many, many times.

Next.

They take $11 billion from us and give us back a mere pittance and they make it seem like they're doing us a favor to give that pittance back. Somehow they missed the point that that is New York City's own tax money and we deserve it.

Wait, you feel that its your money and you "deserve" it? Capitalist pig! Seriously, are you new to your party? This sounds like the mad rant of a greedy capitalist, what with earning and keeping money and all. Railing at the government and feeling upset that they took a lot from you and gave you little. Mad that they want to take the money you earned and give it to...to...others. Don't they "deserve" a better life on your dime? Isn't this what your team wants? How can you sleep at night with all those billions under your mattress? Maybe you missed the point, its not your money, its your obligation.

But who are the problem according to Mr Vallone?

It would be much, much simpler to be able to govern 8.5 million people without having to ask legislators who represent villages on the Canadian border for permission before we do anything.

Oh, now I understand, the problem is the poor. Very egalitarian of you Mr Vallone.

What do other Councilmen think of this raving conservative and his idea to choke the poor? Let's go to Mr Simcha Felder a Brooklyn Democrat.

It certainly has merit. Why in the world should New York City be held hostage to the state? It just doesn't make sense...I think the people in New York City are very interested for the most part in it. The question is the people outside New York City in New York State who have been eating the fruits of our labor for all this time. They aren't going to be ready to just say forget about it." (italics mine).

What the? Am I living in some kind of Bizzarro world where Liberal Democrats are shouting Conservative Philosophy.

My only question is how did these Conservative Republicans get elected Councilmen for Queens and the Brooklyn? I mean they clearly favor letting the wealthy keep their wealth, not only that but they're so mad they want to opt out. They clearly can't stand the idea of forced wealth redistribution. They clearly disdains the poor. So much so that they feel wronged even giving them a say. By their own words they just want to be left alone with their money to do what they want. I don't see any difference between this platform and the most conservative Republican's I know (Shout out to Stalin).

What I can't accept is that Mr Vallone is some kind of hypocrite. Happy to give away other people's money, but not his own. Because a NY liberal Democrat decrying disproportionate taxation on the rich and forced wealth redistribution would just be too much.

*On a more serious note, and just to be clear, while I am definitely mocking these two Councilmen, I am not intending to mock liberal ideas in general. While I have a different, some would say "much" different, view of taxes and free markets, I firmly believe that the conflict between the "liberal" and "conservative" views on economic policy are crucial to our nation. I have never held that "liberal" views on taxation and economy are anything other than intelligent people doing what they think is best for America. What I cannot stand are hypocrites (see the above Councilmen). If one really believes that high taxes and wealth redistribution are the best policies, then those policies should also, happily, apply to oneself.

Thank you, and now we can all return to my lame attempts at comedy. sarcasm and wit (yes, yes I am aware that what I mostly achieve is tragedy, chasm, and sh...(nope, my mommy reads this here blog).

My take on W's Insurance Tax Plan

I've been mulling over W's health insurance initiative, at least the tax code part. Here's the passage from the Sate of the Union Address.

And so tonight, I propose two new initiatives to help more Americans afford their own insurance. First, I propose a standard tax deduction for health insurance that will be like the standard tax deduction for dependents. Families with health insurance will pay no income on payroll tax -- or payroll taxes on $15,000 of their income. Single Americans with health insurance will pay no income or payroll taxes on $7,500 of their income. With this reform, more than 100 million men, women, and children who are now covered by employer-provided insurance will benefit from lower tax bills. At the same time, this reform will level the playing field for those who do not get health insurance through their job. For Americans who now purchase health insurance on their own, this proposal would mean a substantial tax savings -- $4,500 for a family of four making $60,000 a year. And for the millions of other Americans who have no health insurance at all, this deduction would help put a basic private health insurance plan within their reach. Changing the tax code is a vital and necessary step to making health care affordable for more Americans. (Applause.)

Says House Ways and Means Committee Chairman Charles Rangel (D-NY),

This is a dangerous policy that ultimately shifts cost and risk from employers to employees and could result in a higher number of uninsured. The new, Democratic majority in Congress is interested in relieving, not increasing, working families' tax burden.

Clearly, two hearts living as just one mind. Now on to the analysis. NYT tackles it here (I know, Stalin I know, but for all your paranoid ramblings, NYT still does the best job - but I have to admit, "With his proposal to uproot a tax break that has been in place for more than 60 years..." is not the most neutral way to start the article).

I agree with W on this one, at least as a start (and I haven't heard him say, "This will fix things all by itself."). However, the tax code is a blunt instrument, mostly helping those who itemize and make enough to pay taxes. For those who don't fall into either category, this is not going to be a big deal. One real issue is that the bulk of people who are uninsured fall into the latter category. So I think its a solid argument to approach the President's bill with some skepticism as far as just how within reach this will put health insurance for the uninsured.

But as one part of a much needed solution, at this point I'm a fan (I'm not hedging here because it comes from W, rather because tax-code cause/effect isn't the easiest thing to work through - but that's why you have me...right...and subscribe to our email feed to the right...right?). Here's what I like. Rep Rangel is correct, this does shift the risk from employer to employee, and that's where it should be (so at least you can say he understands the point). The employee understands their needs better, and is better prepared for the risk/reward decision than an employer who buys a blanket policy for all employees. When the employee takes the personal risk two things happen. They buy the policy they need, and they shop for value, not just from the insurance company but also in treatment. Take into account incentives that will be offered by insurance companies to cover health, home and care in a bundle, and that employees do change jobs, often taking a period of risk without insurance, or even become trapped by one job precisely because of insurance benefits and it seems that attaching insurance to the employee is a much better option. I need someone to explain to me why this scenario is worse than having the employer pay create the system.

From what I gather, W is basically saying that insurance is a perk that has value. His tax cut is really a tax increase, immediately followed by a tax cut. It's a two step process, this is important. Now employees don't pay any tax on the benefit of employer based health insurance even though it is a perk that has definite and quantifiable benefit. What he's immediately proposing however, is to offset this newly created taxable event with a tax break. In my mind, a large part of getting comfortable with this plan is getting comfortable with creating a new tax, one that can be manipulated by later lawmakers, and then cutting it.

According to NYT, W's "economic rationale for Mr. Bush’s proposal is that too many people have “gold-plated, deluxe” health insurance, which encourages them to use excessive amounts of health care, driving up costs for everyone." Really hard to argue with that one too. But some try. Mr Robert D. Reischauer, a former director of the Congressional Budget Office said,

The president’s proposal addresses inequities in the tax code that provide an open-ended subsidy for premiums paid by employers. If your employer does not provide health insurance and you have to buy it on your own, you get no tax benefit at all. The president’s plan would eliminate that distinction.”A glaring problem with the president’s plan is that he did not call for any stronger regulation of the individual insurance market.

And the NYT tacked on,

In that market as it now exists in most states, insurers can deny coverage or charge higher rates to sick people.

I'll take them in order. Notice that Mr Reischauer shifts the focus. In the first part he gets W's goal. In the second, he just tacks on some random criticism. Again, at least as far as I've read, W does not claim that he's "solved the health insurance issue." I see this as one part of the solution. Calling for stronger regulation may be another part, but why join them? Doesn't that risk drowning both of them? Oh well, I guess he had to say something to make the paper.

The second part is a major can of worms. What people don't get is that by forcing insurance companies to cover sick people for the same cost as healthy is that everyone pays. There are no free meals here. If you demand that an insurance company cover a sick person for the same cost as a healthy person, what you're really demanding is that the healthy person pay more for services they won't likely need. If said healthy person is poor, you've just increased the cost of his insurance. I'm not sure this is the goal. I suppose one could make the argument that under the current system all employees get the same coverage, healthy or sick. But the reality is that this means two things, you may not be getting the most insurance you can for the buck (here what the employer pays in your name) because the company's rate is higher with more sick people, and customers are paying more for goods because the company works the cost of insurance into the cost of goods. Again, there are no free meals. You are bearing the cost somewhere. W's plan at least puts it close to home so you can monitor and control it.

This is already a long post so I'll just summarize from here. W's plan definitely shifts the momentum towards employee based insurance. One, I haven't heard why this is bad. Two, employer based insurance is no longer what it was. It's the fastest growing expense line in most businesses and they're cutting back. The momentum is already away from employer based insurance. I like this proposal. It is not the end, there is no "Well, that's that" moment with this, but it is a step in the right direction. Provided, of course, that Congress doesn't get all weird with this new tax class.