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The Revenue Thing

By Matthew Yglesias  

"The Revenue Thing"

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Internal Revenue Service headquarters, Washington DC (cc photo by cliff1066)

Internal Revenue Service headquarters, Washington DC (cc photo by cliff1066)

Ezra Klein reminds us that regardless of how the question of the public option gets resolved, health reform proponents are still going to be stuck with the question of how to pay for reform. Before the public option debate really heated up this was the main thing being argued about. And if one side or the other ever wins the public option debate, the revenue debate will still be with us.

Two major approaches to this seem to have support in congress. On the one hand, some members want to try to finance reform through the mechanism of a “surtax” on wealthy tax payers. This is consistent with the President’s campaign promises. On the other hand, some members want to try to finance reform through curbing the current practice of excluding employer provided health benefits from taxation. This is not consistent with the President’s campaign promises, but it achieves the President’s goal of “bending the curve” over the long run since the government will no longer be encouraging people at the margin to consume health services rather than other goods. The problem is that though both approaches have some support, neither has majority support. And the problem is re-inscribed within the framework of the administration’s statements—on the one hand, Obama’s promised to bend the curve, which implies taxing benefits, but on the other hand Obama’s promised not to tax the middle class, which implies going with the surtax.

As a matter of logic and policy design, you can easily enough solve this problem by opting to do “some of both.” But whether that logic carries over into congress is another question.

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