New Study Confirms How the Welfare State Perpetuates Poverty

Ronald Reagan had an old adage about the nine most terrifying words in the English language: “I’m from the government and I’m here to help.” Recently, a new paper reinforced that truth and adds to the existing literature showing how America’s welfare state often traps generations in a cycle of poverty.

At its core, a complicated set of welfare programs and tax breaks generate sizable incentives for many low-income Americans not to increase their incomes and improve their station in life. This “poverty trap” results in well-intentioned government programs hurting those they were designed to help.

Marginal Tax Rates

The study, published by the National Bureau of Economic Research (NBER), examined marginal net tax rates on American households. Their analysis included the phase-out effects of various government programs and the extent to which those phase-outs discourage work.

For instance, consider the $1,200 payments in March’s coronavirus “stimulus” legislation. Individuals with incomes under $75,000 qualified for the full $1,200 payment, while the payment was reduced by 5 percent for each dollar of income over $75,000. As a result of this phase-out rate, individuals with incomes over $99,000 receive no payment.

For every additional dollar of income a person making $75,000 received, he will lose five cents of his “stimulus” payment, plus have to pay regular federal income taxes (likely at a 22 percent rate), payroll taxes (7.65 percent), and state and local income taxes where applicable.

Put another way, the coronavirus checks gave people making between $75,000-$99,000 added incentive to reduce their income. By working fewer hours, sheltering income from taxes, or both, people could “maximize” their “free” payment from the federal government.

The researchers studied data from 2016, well before this year’s “stimulus” (or the coronavirus). But as the paper’s introduction notes, many other federal programs and laws have similar distortionary effects:

Earn $1 too much two years back and your Medicare Part B premiums will rise by close to $800. Earn $1 too much and, depending on the state, lose thousands of dollars in your own or your family’s Medicaid benefits. Hold $1 too much in assets and forfeit thousands in Supplemental Security Income. Earn an extra dollar and receive thousands of dollars in Obamacare subsidies. Earn $1 beyond Social Security’s earnings ceiling and watch your Social Security payroll tax drop to zero. Earn $1 too much and flip onto the Alternative Minimum Tax (AMT), reducing your marginal income-tax bracket from a rate as high as 37 percent to 28 percent. Earn $1 too much and lose 22 cents, in the Earned Income Tax Credit and the list goes on.

If this appears to look almost like a game, you’re not far off. It’s hard not to view it as the government picking winners and losers through its various program parameters. Made an extra $1 of income? Too bad — now we’re taking your subsidy away. Do not pass go, do not collect $200.

Worst Effects on the Poor

Unfortunately, these distortionary effects hit poor and near-poor households the hardest. As Gene Steuerle of the Urban Institute has documented, phase-outs of programs like cash welfare, food stamps, the Earned Income Tax Credit, and Obamacare subsidies mean households making roughly $10,000-$40,000 can lose almost as much in government benefits as they gain in added income by working additional hours.

The new NBER study further quantifies this phenomenon. It finds that, both over the current year and over their lifetimes, individuals in the lowest income quintile (the bottom 20 percent) face higher marginal tax rates than those in the next three income quintiles (from the 20th percentile of income through the 80th percentile). Essentially, when taking the phase-out of government benefits into account, the poor face more disincentives to work than the middle class.

It gets worse. One in four low-income households (those with income in the bottom 20 percent) face lifetime marginal net tax rates of more than 70 percent. As the authors put it: “One in four of our poorest households, regardless of age, make between two and three times as much for the government than they make for themselves in earning an extra $1,000.” Given the construct of the modern welfare state, it seems less logical to ask why poor people wouldn’t work and instead to ask why they would.

There is, however, one silver lining in the paper: States can help undo the damage caused by poorly crafted federal policy. The NBER researchers found that a “typical household can raise its total remaining lifetime spending by 8.1 percent by moving from a high-tax to a low-tax state.”

Break the Cycle of Poverty

Obamacare didn’t create the phenomenon of the welfare state discouraging work, but it did make this worse. The Congressional Budget Office noted repeatedly that the phase-outs in the law’s insurance subsidies penalize individuals who earn more income. Its most recent in-depth analysis, conducted in February 2014, concluded the law would reduce the labor supply by the equivalent of about 2.5 million full-time jobs.

More recently, of course, lawmakers in the CARES Act provided a $600 per week federal supplement to unemployment insurance, further discouraging work. Because more than two-thirds of unemployed individuals can now make more money on unemployment than they did while working, businesses face difficulty recruiting furloughed employees back to their jobs.

At a time our country faces a massive recession brought on by the coronavirus lockdowns, America’s welfare state exacerbates that stagnation. Reforming the system to eliminate work disincentives could save taxpayer funds. More importantly, it would encourage all Americans to embrace the dignity of work.

This post was originally published at The Federalist.

The Sorry Story of Congress’ Latest “Stimulus” Bill

As Yogi Berra’s infamous saying goes, it’s déjà vu all over again—and not in a good way.

I refer not just to the rapid economic slowdown, panicky markets, and multiple Federal Reserve bailouts related to the coronavirus epidemic, all of which echo the financial crisis of 2008. I speak also of Nancy Pelosi’s infamous comments a decade ago this month about Obamacare:

The House of Representatives—both Democrats and most (all but 40) Republicans—went along with legislation that not only wasn’t paid for, and didn’t contain any long-term reforms to programs desperately in need of them. They passed a bill whose cost still remains unknown (the Congressional Budget Office has yet to issue a cost estimate), which none of them had time to read—and might not even accomplish its supposed objectives.

Word emerged over the weekend that flaws in the bill require at least one, and possibly more than one, correction. The Wall Street Journal reported the House will attempt to pass “a technical fix on Monday.” But even as Treasury Secretary Steven Mnuchin, who negotiated the package with Pelosi despite being “relatively green” on such matters, tried to minimize the objections, others weighed in more strongly.

The Capitol Hill publication Roll Call said the bill may need a “do-over” regarding its paid family leave provisions. The National Federation of Independent Business weighed in with objections after the bill’s passage in the House, saying that small firms wouldn’t receive the tax credits quickly enough, and could face cash-flow problems as a result.

A congressional source confirmed to me that concerns about the family leave provisions could prompt a rewrite that’s more than technical in nature. These developments should surprise no one acquainted with prior slapdash attempts to legislate on the fly, but they should force Congress to slow down such a ridiculous process.

TARP and Obamacare

This past weekend, House leaders released the final version of their “stimulus” legislation at 11:45 p.m. Friday night. The House’s vote on the bill ended at 12:51 a.m. Saturday—just more than an hour later. Members of Congress had a whopping 66 minutes to review the 110-page bill before voting on it. Even the Republican Study Committee, a conservative caucus in the House, barely had time to issue a 10-page summary of the bill before the vote gaveled to a close.

That the legislation needs a technical fix (and possibly more than one) merely continues Congress’ practice of passing complicated legislation members do not understand. For instance, in March 2009 Sen. Chris Dodd (D-CT) had to accept responsibility for inserting a provision into the “stimulus” at the behest of Obama administration officials that allowed AIG officials to collect more than $1 billion in bonuses, despite the firm requiring a massive bailout from the federal government via the Troubled Assets Relief Program. The entire controversy demonstrated that no one, not even the lawmakers who drafted the “stimulus” and TARP bills, fully understood the bills or their effects.

Consider too this description of the infamous Obamacare bill:

The Affordable Care Act contains more than a few examples of inartful drafting. (To cite just one, the Act creates three separate Section 1563s.) Several features of the Act’s passage contributed to that unfortunate reality. Congress wrote key parts of the Act behind closed doors, rather than through ‘the traditional legislative process.’…. As a result, the Act does not reflect the type of care and deliberation that one might expect of such significant legislation.

That description comes from Supreme Court Chief Justice John Roberts’s 2015 ruling in King v. Burwell, a case about whether individuals purchasing coverage from the federal exchange qualified for subsidies. Roberts’s ruling called the language a drafting error, and permitted individuals in all states to receive the subsidies. But if an innocent drafting error, the mistake had potentially far-reaching implications, which few if any members of Congress realized when they voted for the bill—without reading it, of course.

Rushing for the Exits

To call the nascent controversy surrounding the “stimulus” legislation a fiasco would put it mildly. Worse yet, much of the controversy seems unnecessary and entirely self-inflicted.

Congress had absolutely no reason to pass the bill just before 1 a.m. on Saturday. Financial markets had closed for the weekend, and the Senate had adjourned until Monday afternoon. Voting early Saturday morning, as opposed to later in the day on Saturday, or even on Sunday, didn’t accelerate passage of the bill one bit. However, it did allow members of Congress to leave Washington more quickly.

In other words, the leaders of both parties—who agreed to the rushed process leading up to the vote—made getting members out of town a bigger priority than giving members the time to do their due diligence as lawmakers. It’s an understandable instinct, given the serious consequences of the coronavirus on all Americans, particularly the older profile of many legislators. But it’s also an abdication of Pelosi’s own claim last week that “we’re the captains of this ship.”

This post was originally published at The Federalist.

Michael Bloomberg: Against Obamacare Before He Was For It

Last week, old footage emerged of former New York City mayor, and current Democratic presidential candidate, Michael Bloomberg talking about health care rationing. In his comments from 2011, he advocated denying costly care to older patients:

If you’re bleeding, they’ll stop the bleeding—if you need an X-ray, you’re going to have to wait. That’s just…All of these costs keep going up, nobody wants to pay any more money, and at the rate we’re going, health care is going to bankrupt us….You know, if you show up with prostate cancer, you’re 95 years old, we should say, ‘Go and enjoy. Have a nice life. Live a long life. There’s no cure, and we can’t do anything.’ If you’re a young person, we should do something about it.

Perhaps more important is why Bloomberg made those particular comments. At the time, in February 2011, he was paying condolences to a Jewish family that had lost a loved one. One of the deceased man’s family noted that the man “was in the emergency room for 73 hours before he died and…that overcrowding in emergency rooms in New York had become out of control.”

This entire episode undermines the message of Bloomberg’s current ad blitz claiming that as mayor, he expanded access to health care in New York City. Plus, what did the mayor say about ER overcrowding back in 2011? “It’s going to get worse with the health care bill [i.e., Obamacare].” He also predicted that hospitals would close as a result.

Obamacare a ‘Disgrace’

During last week’s Democrat primary debate in Las Vegas, former Vice President Joe Biden brought up some of Bloomberg’s other comments about Obamacare. Biden correctly noted that Bloomberg had called Obamacare a “disgrace.” In a June 2010 speech at Dartmouth University just after the law’s enactment, Bloomberg said “We passed a health care bill that does absolutely nothing to fix the big health care problems in this country. It is just a disgrace.”

Reporters in the past several days have highlighted some of Bloomberg’s prior comments about the law:

  • In his Dartmouth speech, Bloomberg also pointed out that Democrats “say they’ve insured or provided coverage for another 45 million people…except there’s no more doctors for 45 million people.”
  • In a 2011 radio appearance, Bloomberg said that Obamacare “did not solve the basic problems, two basic problems with health care, which…got lost in all of the negotiations as every special interest in Congress got a piece or lost a piece or negotiated about a piece.”
  • In a December 2009 appearance on “Meet the Press,” Bloomberg criticized Democrats for not reading or understanding the legislation: “I have asked congressperson after congressperson, not one can explain to me what’s in the bill, even in the House version, certainly not in the other version. And so for them to vote on a bill that they don’t understand whatsoever, really, you’ve got to question the kind of government we have.”

It’s notable that Biden didn’t mention Bloomberg’s last quote—about members of Congress not reading or understanding the legislation—in Wednesday’s debate. Of course, that might have something to do with Biden’s own recent admission that “no one did understand Obamacare”—presumably including himself, at the time the vice president of the United States.

Changing His Tune

Now that Bloomberg is running for the Democratic nomination, he’s come around to supporting Obamacare. When asked about his prior comments, a Bloomberg campaign spokesman told CNN Obamacare’s only flaw lay in the fact that it didn’t go far enough. As a result, Bloomberg’s health plan proposes more government spending, funded by higher taxes, and—in a first—price controls on the entire health-care sector, including what you can and cannot pay your doctors.

On the merits of his policy platform, I’ll give the last word to Bloomberg himself, in his June 2010 speech at Dartmouth University. While Bloomberg said President Obama started out with good intentions, he said Congress “didn’t pay attention to any of those big problems and just created another program that’s going to cost a lot of money.”

It’s an apt description of Bloomberg’s own health care plan—to say nothing of his competitors for the Democratic presidential nomination.

This post was originally published at The Federalist.

The Tax Increase Joe Biden’s Tax Plan “Forgot” to Mention Affects His Pocketbook

The details of Joe Biden’s tax plan emerged on Thursday—“emerged” because the campaign has yet to release a plan on its website. Instead, Bloomberg News obtained and published details of the tax proposal.

Most news coverage of the plan has to date focused on two issues. First, Biden’s plan proposes raising a relatively modest amount of revenue—“only” $3.2 trillion over a decade, compared to $20-30 trillion for the likes of Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT). As an additional point of comparison, the 2017 tax cut, which Biden called “the dumbest thing in the world,” reduced revenues by $1.46 trillion over 10 years—less than half the fiscal impact of Biden’s tax increase. (Biden has said he wants to repeal those tax cuts, most of which are not included in his $3.2 trillion tax increase proposal.)

Second, stories have centered around the fact that Biden’s proposed revenue raisers would hit corporations and the affluent, while sparing the middle class. But few if any stories on Biden’s tax plan have mentioned one tax he has not proposed increasing—the one he failed to pay himself.

The List of Tax Increases

The Bloomberg story listed ten tax increases included in Biden’s $3.2 trillion plan:

  1. Taxing capital gains as ordinary income for individuals making more than $1 million ($800 billion revenue increase over ten years);
  2. Increasing the corporate income tax rate back up to 28% ($730 billion);
  3. Ending the “stepped-up basis” of taxation, under which the cost basis of inherited property (e.g., stocks, real estate, etc.) for determining capital gains tax liability is the value of the property at the time of the inheritance, rather than the value of the property when the deceased individual purchased the asset ($440 billion);
  4. Imposing a 15% minimum tax on all corporations with net income over $100 million, but who paid no federal income taxes ($400 billion);
  5. Doubling the rate of tax on profits generated overseas to 21% ($340 billion);
  6. Limiting the value of deductions for the wealthy to 28%, a proposal included in several Obama administration budgets ($310 billion);
  7. Raising the top rate of tax back up to 39.6% ($90 billion);
  8. Imposing sanctions on countries that “facilitate illegal corporate tax avoidance” ($200 billion);
  9. Eliminating real estate tax loopholes ($70 billion); and
  10. Ending fossil fuel subsidies ($40 billion).

Among that list of revenue raises, Biden did not incorporate a proposal submitted by the Obama administration in its budgets. That proposal, which would have raised taxes by an estimated $271.7 billion as of February 2016, attempted to end the practice of individuals funneling their profits through S corporations, to avoid paying self-employment taxes on their earnings.

The omission might come because, as previously reported, Biden and his wife used this loophole Obama wanted to close. In taking more than $13 million in book and speech earnings as income from their corporation, rather than wages, Joe and Jill Biden avoided paying as much as $500,000 in taxes—taxes used to fund Obamacare and Medicare. Experts interviewed by the Wall Street Journal over the summer called the maneuver “pretty aggressive” and a “pretty cut and dried” abuse of the system, because the Bidens’ speech and book income clearly came from their own intellectual property, rather than as a result of a corporate creation (e.g., profits from a restaurant, a car business, etc.).

Colluding Reporters?

As noted above, Bloomberg News broke the story of Biden’s tax plan. Its story mentioned not a word about how Biden’s plan omitted the Obama proposal on self-employment taxes, or Biden’s history of questionable tax maneuvers. The silence comes as Bloomberg said it would not conduct investigative reporting into declared candidate, and Bloomberg News owner, Michael Bloomberg’s rivals for the Democratic presidential nomination—but would continue to investigate President Trump.

At some point, reporters should stop colluding with each other to avoid investigations into Joe Biden’s sordid tax history. And they should start asking why a candidate who has campaigned on preserving and building upon Obamacare didn’t want to pay the taxes that fund it.

This post was originally published at The Federalist.

Rant by Congressional Spouse Illustrates the Problem Facing American Health Care

Last week, the wife of Rep. Joe Cunningham (D-S.C.) went on a self-described “rant on social media” about her health coverage.

Amanda Cunningham’s comments echo claims by Democratic lawmakers like Reps. Alexandria Ocasio-Cortez (D-N.Y.) and Rep. Cindy Axne (D-Iowa) about the problems with their health coverage. For many members of Congress that comes via Obamacare-compliant policies sold on health insurance exchanges.

The comments raise one obvious question: If Democrats don’t like Obamacare plans for themselves, then why did they force all Americans to buy this insurance under penalty of taxation? But beyond demonstrating the bipartisan dissatisfaction with Obamacare, Amanda Cunningham’s story illustrates the larger problems plaguing the American health care system.

Mental Health Parity

In her Instagram post, Cunningham complained that under her Blue Cross Blue Shield policy, “all of my mental health therapy sessions are denied, in addition to all of our marriage counseling sessions.” She continued: “It’s just mind-blowing to me that these basic well-known needs, that mental health is health care, are still being denied, that we’re still fighting for these absolutely basic things—it’s unbelievable to me.”

Cunningham didn’t go into many specifics about her case, but on one level, her argument sounds compelling. The opioid crisis has shone a brighter spotlight on the people who need treatment to cover mental illness or substance use disorders. Congress passed mental health parity legislation (as part of the TARP bill, of all things) in 2008, and Section 1311(j) of Obamacare extended these provisions to exchange plans.

Other People’s Money

On the other hand, consider that members of Congress receive a salary of $174,000 annually—more than most Americans (myself included). Consider also that unlike all other Americans purchasing coverage on Obamacare exchanges (myself included), Cunningham, other members of Congress, and their staff receive (likely illegal) subsidies offsetting much of the cost of their health insurance premiums.

More importantly, consider that each coverage requirement on insurers—whether to cover a certain type of treatment (e.g., mental health, in-vitro fertilization, etc.) or treatments provided by a certain type of provider (e.g., marriage counselor, podiatrist, etc.)—raise the price of health insurance each month. Collectively, the thousands of mandates imposed nationwide increase premiums by hundreds of dollars per year.

They also send a paternalistic message to Americans: The policy-makers who impose these coverage requirements would rather individuals go uninsured, because their premiums have become unaffordable, than purchase a plan without the covered benefit or treatment in question.

She didn’t say it outright, but in her “rant,” Cunningham wanted to raise premiums on other Americans—most of whom earn far less than her family—so she would receive “free” therapy. Viewed from this perspective, her objections seem somewhat self-serving from a family in the upper tier of the income spectrum.

Therein lies the problem of American health care: Everyone wants to spend everyone else’s money rather than their own. Everyone wants “their” treatments—in this case, Cunningham’s counseling sessions—covered, even if others pay more. And if their chosen therapies are covered by insurance, with little to no cost-sharing, patients will consume more health care, because they believe they are spending their insurer’s money rather than their own.

Obamacare Made It Worse

The 2010 health care law didn’t cause this problem. However, as the Congressional Budget Office (CBO) noted in its November 2009 analysis of the legislation’s premium impacts, the federal benefit requirements included in the measure raised insurance rates significantly:

Because of the greater actuarial value and broader scope of benefits that would be covered by new nongroup policies sold under the legislation, the average premium per person for those policies would be an estimated 27 percent to 30 percent higher than the average premium for nongroup policies under current law (with other factors held constant). The increase in actuarial value would push the average premium per person about 18 percent to 21 percent above its level under current law, before the increase in enrollees’ use of medical care resulting from lower cost sharing is considered; that induced increase, along with the greater scope of benefits, would account for the remainder of the overall difference.

In CBO’s view, the law required people to buy richer insurance policies, and those richer policies encouraged people to consume more health care, both of which led to a rise in premiums. Unfortunately, that rise in premiums over the past several years has led millions of individuals who do not qualify for insurance subsidies (unlike Amanda Cunningham) to drop their coverage.

Get the Incentives Right

Sooner or later, our country will run out of other people’s money to spend on health care. Despite her impassioned plea, only a movement away from the solutions Cunningham advocated for can prevent that day from coming sooner rather than later.

This post was originally published at The Federalist.

Democrats’ Taxing Health Care Promises

July’s Democratic presidential debates left seasoned health policy professionals confused, struggling to understand both the candidates’ policies and the differences among them. But working families should find Democrats’ health care debate taxing for another reason. For all their vows that Americans can obtain unlimited “free” health care while only “the rich” will pay, the major candidates are writing out checks that will end up on middle class families’ tab.

In this debate, Bernie Sanders wins credit for candor, in the sense that he has dissembled less than his opponents. Admitting that his single-payer plan will require tax hikes, in April Sanders proposed a 4% income tax, along with a 7.5% payroll tax, among other revenue increases to fund his system.

Unfortunately for Sanders, however, the Committee for a Responsible Federal Budget believes the tax increases he has proposed to date will pay for only about half of the more than $30 trillion cost of his single-payer scheme. In that, the organization echoes experience from Sanders’ home state of Vermont. In 2014, Gov. Peter Shumlin abandoned efforts to enact a state-based single payer system, because the accompanying tax increases created “a risk of an economic shock.” Shumlin said single payer in Vermont would have required a 9.5% income tax, and an 11.5% payroll tax—far higher levels than Sanders has proposed.

While Sanders admits that the middle class will pay more taxes to fund single payer, both he and Elizabeth Warren argue that families will save overall, because the program would eliminate premiums, deductibles, and other forms of cost-sharing. Unfortunately, studies from across the political spectrum—from the conservative Heartland Institute to former Clinton Administration official Kenneth Thorpe—disagree.

In 2016, Thorpe concluded that 71% of households would pay more under a Sanders plan fully funded by tax increases. Low-income households would get hit even worse, with 85% of families on Medicaid paying more. Since then, Sanders has only increased the generosity of his single-payer proposal, meaning taxes on the middle class could rise even more than Thorpe originally estimated.

Perhaps to elide the tax landmines, Kamala Harris’ plan breaks with Warren and Sanders, delaying the move to a single payer system for a decade. She claims the delay “will lower the overall cost of the program”—but only until the program phases in fully. At that point, her pledge not to raise taxes on families making under $100,000 will prove unsustainable. But if Harris has her way, a 10-year delay until full implementation of single-payer could punt the tax problem to her successor.

As for Joe Biden, he has tried to portray himself as protecting middle class families from the tax hikes he calls inevitable under the other major contenders’ plans. But Biden has two problems.

First, Biden supports restoring Obamacare’s individual mandate penalty, which Republicans eliminated in 2017. The Supreme Court in 2012 dubbed the mandate a tax—and that tax happens to hit the middle class hard. The most recent IRS data show that in 2016, of the $3.6 billion in mandate penalties paid by American households, nearly 63% came from households with incomes of under $50,000, and more than 88% came from households with incomes below $100,000.

Second, as the Wall Street Journal reported back in July, Biden over the past two years deliberately utilized tax loopholes to avoid paying Obamacare taxes. By classifying more than $13 million in proceeds from books and speeches as profits from his corporations, rather than wage income, Joe and Jill Biden circumvented nearly $500,000 in self-employment taxes—taxes that fund Obamacare and Medicare.

Biden’s behavior, which multiple experts interviewed by the Journal called legally questionable, belies both his “Middle Class Joe” reputation and his support for Obamacare. Apparently, Biden supports Obamacare only if someone else will pay for it. But if a one-percenter like Joe Biden finds paying for the Affordable Care Act unaffordable for him, then whom would Biden hit to pay the $750 billion price tag of his Obamacare expansion efforts? Why, the middle class, of course.

Biden’s unwillingness to pay the taxes associated with an Obamacare law he purportedly wants to protect epitomizes Margaret Thatcher’s axiom that socialists eventually run out of other people’s money. At the rate he and his fellow candidates are racking up costly health care promises, that moment seems very near at hand.

This post was originally published at The Daily Wire.

How Joe Biden Deliberately Avoided Paying Obamacare Taxes

In the campaign for the 2020 Democratic presidential nomination, Joe Biden has portrayed himself as Obamacare’s biggest defender. His health care plan, released this month, pledges to “protect the Affordable Care Act” and states that he “opposes every effort to get rid of this historic law.”

However, his campaign rhetoric in support of Obamacare overlooks one key fact: For the past two years, Joe Biden structured his financial dealings specifically to avoid paying a tax that funds “this historic law,” along with the Medicare program.

While the Bidens paid federal income taxes on all their income, they did not have to pay self-employment taxes on these millions of dollars in profits. The Bidens saved as much as $500,000 in self-employment taxes by taking most of their compensation as profits from the corporation, as opposed to salary.

The Journal cited multiple tax experts who called the Bidens’ move “pretty aggressive,” and a “pretty cut and dried” abuse of the system. Given that most of their income came from writing and speaking engagements, one expert called that income “all attributable to [their] efforts” as individuals and thus wage income, rather than a broader effort by any corporation resulting in profits.

Most important to Biden’s political future is what that foregone self-employment tax revenue would have funded. Section 9015 of Obamacare increased the tax’s rate from 2.9 percent to 3.8 percent for all income above $200,000 for an individual, and $250,000 for a family. By taking comparatively small salaries from their S corporations and receiving most of their income as profits from those corporations, the Bidens avoided paying a tax that funds an Obamacare law Joe Biden claims he wants to defend.

Moreover, the other 2.9 percent in self-employment tax helps finance the Medicare program, which faces its own bleak fiscal future. According to the program trustees, the program will become insolvent by 2026, just seven years from now. If people like Joe Biden use tax strategies to avoid paying self-employment taxes, Medicare’s date of insolvency will only accelerate.

During the last presidential election cycle, Sen. Bernie Sanders repeatedly returned to Hillary Clinton’s paid speeches before companies like Goldman Sachs. Both the more than $100 million in income Bill and Hillary Clinton generated from their speeches, and Hillary Clinton’s insouciance at the vast sums she received—“That’s what they offered,” she said of the $675,000 sum Goldman Sachs paid her to give three speeches—made her look out-of-touch with the concerns of families struggling to make ends meet.

Likewise, Biden’s 2020 competitors almost certainly will use the questions about his taxes to undermine his image as “Middle Class Joe.” Few middle-class families will make in a lifetime the $15.6 million in income that the Bidens received in but two years. Moreover, how can Joe Biden claim to defend Obamacare—let alone Medicare—when he created a tax strategy specifically to avoid paying taxes that fund those two programs?

In 2014, Barack Obama, whose administration proposed ending the loophole the Bidens used to avoid self-employment taxes, attacked corporations for seeking to migrate to lower-tax jurisdictions overseas: “It is true that there are a lot of things that are legal that probably aren’t the right thing to do by the country.” In Joe Biden’s case, his tax behavior probably wasn’t the right thing to help his political future either.

This post was originally published at The Federalist.

Nancy Pelosi and Entitlement “Reform”

This afternoon, USA Today published an op-ed from former Speaker Pelosi expressing her opposition to an increase in the Medicare retirement age.  Pelosi claimed that “We can do better – and we have.  Democrats are the only ones who have enacted a plan that extends the solvency of Medicare without cutting benefits through [Obamacare].”

Pelosi’s claims are particularly ironic, because last November, one leading Democrat admitted that the party “took a half a trillion dollars out of Medicare in [Obamacare], the health care bill” to pay for Obamacare’s new programs.  That speaker?  Nancy Pelosi.

Pelosi is right about one thing: We CAN do better – better than Obamacare.  And we should take no lessons on entitlement “reform” from someone who by her own admission “took half a trillion dollars out of Medicare” to pay for more new unsustainable federal programs.

The Left Defends an Inefficient Medicare System

One well-hidden fact in yesterday’s Kaiser Family Foundation report regarding premium support is this – even the Kaiser Foundation admits that in half the country, private Medicare Advantage plans are more efficient than government-run Medicare.  Take a look at the summary on page 4:

Among beneficiaries in the traditional Medicare program [under a premium support proposal], about half (53%) – 18.5 million beneficiaries – would be expected to pay higher Medicare premiums for coverage under the traditional Medicare program, because about half of beneficiaries in the traditional Medicare program live in counties where traditional Medicare costs were higher than the benchmark.

What that sentence means is that, in about half of the country, seniors private Medicare Advantage plans are cheaper than government-run Medicare.  Under premium support, these seniors would not have to pay more to afford coverage – they could switch to a cheaper private plan, or pay more to maintain their more expensive coverage.

The Kaiser report is far from the only study finding that private plans are more efficient than Medicare in many, if not most, areas of the country.  Whereas the Kaiser report said that Medicare Advantage plans are less costly in about half the country, former Congressional Budget Office Director Alice Rivlin found an even higher number.  Rivlin testified before the Ways and Means Committee in April that “88 percent of Medicare beneficiaries live in areas in which a bidding process [for premium support] would produce a second-lowest bid below the current cost of FFS [traditional] Medicare.”  And a recent article in the Journal of the American Medical Association found that private plans would be 9% cheaper than traditional Medicare under a premium support proposal.  So there is much evidence to suggest that Medicare Advantage plans can provide health care for seniors at lower costs – which would help make Medicare more sustainable over the long term.

Of course, the Left wants nothing to do with such facts, preferring instead to cling to the shibboleth of government-run Medicare as a first step towards socialized medicine for all.  As we noted yesterday, the Kaiser report obscures the reasons for its findings – it trumpets the talking point of higher costs for seniors under premium support, but fails to highlight the fact that in many cases, those higher costs are because government-run Medicare is less efficient than private plans.  Likewise, the Commonwealth Fund, in releasing a study on Medicare Advantage today, claimed that “the Medicare Advantage program must work just as well as traditional Medicare” and that Obamacare “will make that possible.”

The facts suggest that the Medicare Advantage program can actually work better than traditional Medicare – and at lower costs.  The only problem is that the Commonwealth Fund, the Obama Administration, and the “professional left” don’t want to make that possible.  And so the same crowd that complained so loudly about “wasteful overpayments” to private Medicare Advantage plans now wants to keep making wasteful overpayments to government-run Medicare – merely to satisfy their government-centric ideology.