No, Health Care Reform is Not Raising Taxes Now

By Derek Thompson

If you watched the health care debate on TV last night, you probably caught one or one hundred Republicans arguing now is the wrong time to raise taxes. Let's evaluate. It's true that health care reform will raise some people's taxes. It is also true that now is the wrong time to raise taxes. But it is not true that health care reform is raising taxes now.

Here's the health care tax situation in a nutshell. For two-plus years, nothing. Richer Americans families will have to pay higher Medicare taxes in 2013. The individual mandate to buy insurance (which some would argue is a tax) hits in 2014, the same year the government expands Medicaid and enacts federal subsidies to help poorer Americans bear the insurance burden. The 40 percent excise tax on expensive insurance plans debuts in 2018. For better or worse, the revenue-generating portions of the health care bill are scheduled to go into effect years after the recession is over.

And yet, the Republicans' critique, misleading as it is, provides a useful reminder that the recession has a way of creating excuses for all sorts of otherwise reasonable reforms. We might want a value-added tax to generate more government revenue or to offset reductions to corporate and income taxes, but a VAT taxes and discourages spending, and now is the wrong time to reduce consumption. Eliminating the mortgage interest deduction would be a smart way to stop incentivizing Americans to take on unaffordable debt or artificially inflating the housing market, but now is the wrong time to discourage home buying. Eliminating the state and local tax deduction is a smart way to simplify the tax code, but it allows states to keep taxes higher when they're running enormous deficits. Non-entitlement government spending is unsustainable, but you can't cut spending this soon after a recession.

Health care reform is just about sealed, but our nation's problems go beyond expanding coverage and bending down medical inflation. Many of those problems live in a bloated and byzantine tax code that hasn't seen a proper spring cleaning since 1986. And yet the argument against addressing them for the next six months to year will be "now is the wrong time."

This article available online at:

http://www.theatlantic.com/business/archive/2010/03/no-health-care-reform-is-not-raising-taxes-now/37827/