Taxes Matter

MPS17 gave an answer to the tax question that I have some sympathy for: “The right question is what policies / programs do you think the state should provide. Then you tax at a level appropriate to cover the costs.”

If you look at, for example, the evidence of the long-term benefits of lead paint abatement it’s clear that this is just something we should be doing. To say “but we’d have to raise taxes” is genuinely no kind of objection to doing something with massive concrete benefits.

But I do think that some kind of rough and ready account of sustainable tax burdens is important. “Pay for old people’s health care” is something that was cheap to undertake in 1961. But by 1981 it was more expensive. By 2001 it was even more expensive. Today it’s more expensive still. And it’s something that will keep getting more expensive forever absent some kind of change in our understanding of what a policy of “pay for old people’s health care” means. For example, the National Health Service in the UK does give health care services to elderly people. But the UK doesn’t have a policy commitment reading “pay for old people’s health care.” It has a policy commitment to the NHS, and the NHS is an institution that like the NYPD or the Fairfax County Public Library has a specific budget that it’s supposed to do its best with. The United States, while being unusually stingy in our provision of health care for the non-elderly, has a uniquely open-ended commitment to just pay whatever health care bills arise for senior citizens. And while helping retired people maintain a high standard of living is a perfectly reasonable thing to undertake, it’s not something like lead abatement that “pays off” as an investment in the future. So the cost to the economy of the taxes here is a very real cost.

I often see people writing around this issue by saying that the real problem with an open-ended commitment to pay for old people’s health care is that health care costs are rising. That’s true, but of course health care costs are rising in the context of an open-ended commitment to have the taxpayers finance anything that qualifies as a health care cost. What else is supposed to happen?