Pelosi's New Payroll Tax: A Whip for Socialized Medicine

Pelosi's New Payroll Tax: A Whip for Socialized Medicine
Terry Jeffrey
Wednesday, November 11, 2009

Rep. Joe Barton of Texas, ranking Republican on the Energy and Commerce Committee, set out a startling scenario in floor debate Saturday before the House approved the health care bill pushed by Speaker Nancy Pelosi.

The bill would slap an 8 percent tax on the payrolls of employers who do not provide health insurance to their workers and pay at least 65 percent of the premiums for an employee who has a family insurance plan and 72.5 percent of the premiums for an employee who has an individual insurance plan. Barton spelled out what he believes will happen if this provision becomes law.

Many Americans might be tempted to casually conclude that the purpose of Pelosi's new payroll tax is to force employers to buy health insurance for their workers and that the parties hurt most by the tax would be the employers who pay it.

This is wrong on both counts. The Pelosi tax will not force employers to buy insurance for their workers, it will give them an incentive not buy insurance. The parties most hurt by the Pelosi tax will not be the employers who pay it but the workers dumped into the government-run health care system Pelosi's plan creates.

This will happen when employers discover that paying Pelosi's tax is cheaper than buying health insurance. The Pelosi payroll tax will be a whip wielded by the state to drive Americans into a socialized health care system from which there will be no escape.

In 2016, when the Pelosi plan would be in full force, the average employer-provided health insurance plan will cost $11,000 for a family and $6,000 for an individual, according to the Congressional Budget Office. Barton based his analysis on a family plan that cost only $10,000.

"The employee pays $3,500 and the employer pays $6,500," said Barton. "Since there's an 8 percent payroll tax on the (employer's) average (wage) of $40,000, that would be about $3,200. Most employers, when this plan is implemented, can pay the 8 percent tax, which is $3,200, or the $6,500 premium that they pay for their employees.

"They're going to stop providing health care ... and they're just going to put them in the public option," said Barton. "The employee is going to take that $3,500 that he or she was paying for their premium for a $10,000 plan and they're going to find out that when they go into the health care exchange, their $3,500 doesn't buy a $10,000 policy. It buys a $3,500 policy. It's a bad deal."

The deal looks even worse when you consider some of its technicalities -- which are also designed to drive Americans into government-run health care.

The bill that passed the House sets up a national "health insurance exchange" run by the government. Families earning up to 400 percent of the poverty level ($88,200 for a family of four) will qualify for a federal insurance subsidy that attenuates as family income rises. But families will not get this subsidy if their employer provides them with insurance, or if they buy their insurance anywhere but in the government exchange. One of the plans in the exchange will be the "public option" run by the government itself.

The Pelosi payroll tax will be phased in for companies with annual payrolls between $500,000 and $750,000. Employers with payrolls less than $500,000 will not pay it at all. Employers with payrolls between $500,000 and $585,000 will pay 2 percent of payroll if they don't provide health insurance. Employers with payrolls between $585,000 and $670,000 will pay 4 percent. Employers with payrolls between $670,000 and $750,000 will pay 6 percent. And employers with payrolls over $750,000 will pay the full 8 percent.

An employer who has 10 employees and an annual payroll of $499,000 (or an average of $49,900 per worker) will not pay a penny of Pelosi tax if he cancels his private health insurance program and dumps his workers into the government health care system. He will also have an incentive not to give his workers a raise or to risk his own money trying to grow his business.

But assume he does give each worker a $1,000 raise at the end of the year, bringing his payroll to $509,000. In that case, he faces a choice: Either pay 65 percent of the $11,000 annual insurance premium for every one of his workers who has a family and 72.5 percent of the $6,000 premium for every worker who does not have a family -- or pay the 2 percent Pelosi tax.

The Pelosi tax would only charge him a flat fee of $10,180 (2 percent of his $509,000 payroll) to offload all his workers into the government system.

Because the government-run public option would be able to undersell the government-approved private plans in the government-run insurance exchange, the government-run option would soon be the only option.

Government would control our health care from womb to tomb, a time span likely to be shortened by government care.