Three Ways Pete Buttigieg Is No Moderate

In recent weeks, former South Bend Mayor Pete Buttigieg has enjoyed a boomlet in polls for the Democratic presidential nomination, helped in no small part by fawning press coverage. Politico and others have examined the candidate and his supposedly “moderate” message.

Rhetoric aside, however, the substance of Buttigieg’s policy plans seem anything but moderate. On multiple issues, Pete has embraced positions far to the left of anything Hillary Clinton dared endorse in her campaign four years ago, and which seem “moderate” only in comparison to the socialist delusions of candidates like Sen. Bernie Sanders (I-Vt.).

1. Big Tax Increases on the Middle Class

As I first noted last month, Buttigieg has supported at least one, and quite possibly several, tax increases on the middle class. His retirement security plan included one explicit tax increase on working families, endorsing legislation that would raise payroll taxes as part of a new regime of paid family leave.

The retirement white paper, released just before Thanksgiving, implicitly endorsed a second tax increase on the middle class as well. The plan proposed a new entitlement program, Long-Term Care for America, designed to replace the CLASS Act included in Obamacare, but which Congress repealed prior to its implementation due to solvency concerns. Buttigieg’s paper didn’t say how it would pay for the new spending created by the program, but other studies cited by the campaign did: They proposed another increase in the payroll tax, which would also fall on middle-class families.

I wrote about Buttigieg’s tax plans in the Wall Street Journal last month. Yet following that article, no one from the Buttigieg campaign bothered to refute, smack down, or otherwise correct my assertion that their candidate wants to tax middle-class families.

The deafening silence from the Buttigieg campaign regarding my op-ed suggests the candidate does indeed want to raise taxes on the middle class—he just hopes that no one will notice that fact. It seems like an ironic bit of silence, given that Buttigieg attacked Sen. Elizabeth Warren (D-MA) for being “extremely evasive” on the issue of middle-class tax increases last fall.

2. ‘Insurance, Whether You Want It or Not’

Buttigieg likes to advertise his health care plan as “Medicare for All Who Want It,” but as several stories over the holiday revealed, it comes with an intrusive twist. While his plan says that “individuals could opt out of public coverage,” they could do so only “if they choose to enroll in another insurance plan.”

In other words, Buttigieg would compel people to buy insurance—whether they want to or not, enforcing this revived individual mandate through the tax code. On April 15, individuals who didn’t enroll in health insurance the previous year would get a bill for coverage, which could total $5,000 or more, whether they wanted that coverage or not, and whether they knew they had that coverage or not.

It’s far from clear that this new “mandate on steroids” would pass constitutional muster. In 2012, the Supreme Court under Chief Justice Roberts blessed Obamacare’s mandate as a tax in part because “for most Americans the amount due will be far less than the price of insurance…It may often be a reasonable financial decision to make the payment rather than purchase insurance.”

Roberts justified Obamacare’s mandate as a tax because it gave the public a genuine choice: Buy insurance, or pay the IRS a tax. Buttigieg’s plan would give the public a Hobson’s choice: Buy insurance, or have insurance bought for you. It represents a significant increase in federal powers—one courts could (and should) strike down.

3. ‘Glide Path’ to Socialized Medicine

Notwithstanding his use of a strengthened individual mandate, Buttigieg ultimately wants to end up with a single-payer system of socialized medicine. He has made no bones about his objective, claiming that his health-care plan would provide a “glide path” to socialism.

As with most of the 2020 Democratic candidates who haven’t endorsed single payer explicitly, Buttigieg’s plan contains several characteristics designed to promote the growth of government-run health care. For instance, he would automatically enroll millions of individuals into the government-run health plan. (He claims Americans could opt out of the government plan, but if he wants the system to end in single payer, how easy would he make it for them to do so?) And he has proposed capping the amount that both private and public insurers can pay physicians and hospitals for health treatments, another way to funnel Americans into the government-run system.

Buttigieg’s plan would create the architecture to create a government-run system of socialized medicine. He just would build that edifice slightly more slowly than Sanders would. It represents but one of the big-government dreams of a candidate who, despite soothing rhetoric, has little in the way of policies to justify the term “moderate.”

This post was originally published at The Federalist.

Pete Buttigieg’s Plan to Tax the Middle Class

Democratic presidential candidate Pete Buttigieg claimed last month that “everything that we have proposed has been paid for, and we have proposed no tax increase on the middle class.” The South Bend, Indiana mayor is incorrect on both counts: He hasn’t said how he’d pay for all his proposed spending. He has endorsed one explicit tax increase on the middle class, and his recent retirement plan provides an outline for another. Add it up, and middle-class workers could face a trillion dollars in new taxes.

To support family caregivers, Mr. Buttigieg’s retirement plan restated his prior commitment to enact “an enhanced version of the Family Act,” which would provide 12 weeks of subsidized family leave. The candidate has yet to specify how exactly he would “enhance” the Family Act. But that legislation, introduced by Rep. Rosa DeLauro (D., Conn.) and Sen. Kirsten Gillibrand (D., N.Y.), pays for its new benefit by raising payroll taxes by 0.2% of income.

Mr. Buttigieg’s retirement plan also contains several new spending proposals, including a long-term care entitlement. He says the program would make benefits available to people over 65 and would “kick in after an income-related waiting period.” His plan cites two white papers as examples of “similar programs” proposed by scholars.

Mr. Buttigieg fails to note how both white papers propose to pay for the new benefits. In the first paper, the Long-Term Care Financing Collaborative envisions a program “fully financed by a dedicated revenue source,” including a payroll tax, “an explicit income tax surcharge, or other dedicated tax.”

The second paper, written by researchers affiliated with the Urban Institute, contains several policy details Mr. Buttigieg adopted, including waiting periods for wealthier people to qualify. That paper also proposes a specific funding source: “an additional tax of about 1.0 percent of earned Medicare-covered income.” In other words, an increase in the payroll tax—a tax increase on the middle class.

The Congressional Budget Office estimated last December that a one percentage point increase in the Medicare tax rate would raise $898.3 billion over a decade. If Mr. Buttigieg intends to fund his new long-term care program via the payroll tax, that tax increase, coupled with the 0.2% payroll tax hike in the Family Act he has already endorsed, would bring total payroll-tax increases to more than $1 trillion.

If Mr. Buttigieg doesn’t want to fund his long-term-care entitlement with the payroll-tax increase proposed in a paper his campaign cited, he should explain where that money will come from. His own claims notwithstanding, Mr. Buttigieg’s candidacy has lacked fiscal candor. His campaign told the Indianapolis Star last month that it had proposed $5.7 trillion in spending to that point, but cited a total of only $5.1 trillion in tax increases and savings.

Mr. Buttigieg’s retirement-security plan has since added other spending proposals with no mention of a funding source. There’s his plan to make those receiving Social Security disability benefits immediately eligible for Medicare, which will likely cost more than $100 billion. There’s his new requirement for state Medicaid programs to cover community-based services as a mandatory benefit, along with mandates on nursing homes—including a $15 minimum wage and higher staffing ratios—which will raise Medicaid spending.

Mr. Buttigieg called Elizabeth Warren “extremely evasive” for her answers on single-payer health care, saying, “I think that if you are proud of your plan and it’s the right plan, you should defend it in straightforward terms. And I think it’s puzzling that when everybody knows the answer to that question of whether her plan . . . will raise middle class taxes is ‘Yes.’ Why wouldn’t you just say so, and then explain why you think that’s the better way forward?” He should follow his own advice.

This post was originally published at The Wall Street Journal.

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.

Warren’s Prescription the Wrong One

In an October analysis the Urban Institute concluded that a single-payer plan, similar to Sen. Warren’s, which eliminates virtually all patient cost-sharing, would raise national health spending by more than 20%, or $719.7 billion a year. In the researchers’ view, the additional demand stimulated by making health care “free” to consumers would overwhelm any potential savings from paying doctors and hospitals government-dictated rates. This higher demand would also raise the cost of single-payer well beyond Sen. Warren’s estimates, meaning middle-class families would face massive tax increases to pay for this spending.

That Prof. Johnson would cite the Urban Institute to argue that Sen. Warren’s plan would lower health-care costs, while ignoring the fact that the institute itself reached the opposite conclusion, speaks to the cherry-picked nature of the proposal, which has drawn derision from liberals and conservatives alike.

This post was originally published at the Wall Street Journal.

Indian Health Service Scandal Shows Problems of Government-Run Care

As if voters didn’t have enough reasons to question government-run health care, the Wall Street Journal provided yet another last week. The paper ran a lengthy expose highlighting numerous cases of doctors previously accused of negligence receiving “second chances” in the government-run Indian Health Service (IHS), resulting in incidents wherein at least 66 patients died in IHS care.

Earlier this year, the Journal ran a separate investigative article explaining how the Indian Health Service repeatedly ignored warnings about a physician accused of sexually abusing patients, moving him from hospital to hospital. Together, these articles describe a broken culture within the Indian Health Service, demonstrating how government-run health systems provide poor-quality care, often harming rather than helping vulnerable patients.

Examples of Negligent Physicians Harming Patients

The Journal examined records from the Treasury’s Judgment Fund, which pays awards in malpractice cases wherein the federal government — in this case, the Indian Health Service — functions as the defendant. The reporters then cross-referenced the physicians involved in those cases with prior malpractice cases and disciplinary actions taken prior to the doctors joining the IHS. The results should shock patients:

  • A doctor “thrust into medical exile” after five medical malpractice settlements in five years, including a rejection by a Nevada licensing board, ended up finding work in the Indian Health Service, where the federal government had to pay an additional five malpractice claims on his behalf. The physician, who had previously left a sponge inside a patient’s breast (among other incidents) before going to work with the Indian Health Service, gashed an IHS patient’s bile duct, causing four liters of digestive fluid to leak into her abdomen and sending her into septic shock.
  • An obstetrician with a history of five malpractice settlements totaling $2.7 million, and sanctions from the California medical board stemming from a patient who bled to death following a caesarean section, found employment in the Indian Health Service. A year after his hire, a baby died in the womb because this doctor failed to treat his mother’s high blood pressure. IHS officials later concluded that the doctor’s history “forshadow[ed] the tragic events that transpired in October 2017.” The physician admitted to the Journal, “I just did not address patients’ primary medical needs in a satisfactory way.” But he still applied for and received a position with the IHS.
  • A surgeon sued for malpractice 11 times over an eight-year period while living in Pennsylvania later got a job with the Indian Health Service in New Mexico. There he “allegedly cut a tube connecting a patient’s liver to his stomach and punctured the man’s intestines during a 2008 gallbladder surgery.” The patient later died.
  • A physician disciplined in both Florida and New York for prescribing pain pills for her boyfriend — up to 1,350 oxycodone pills in a single day — was hired by the Indian Health Service because she had a “clean” medical license in Pennsylvania. While working for the IHS, she sent a patient complaining of dizziness home with a diagnosis of pink-eye. Days later, the patient suffered a stroke that has left him confined to a wheelchair and unable to speak. The federal government settled the subsequent malpractice case for $1 million because “hospital officials said in interviews that the doctor’s background made the case hard to defend.”
  • Another surgeon with nearly a dozen malpractice suits and a suspension for sexually abusing a patient during an exam received a job with the Indian Health Service. During his time as an IHS employee, the federal government paid a judgment exceeding $600,000 “over a colostomy the doctor performed that spilled fecal matter under a patient’s skin” and a $500,000 settlement for a botched hernia repair.
  • An obstetrician with at least seven reports in the National Practitioner Data Bank, including North Carolina sanctions over a potential sexual relationship with a patient, got a job with the Indian Health Service. In 2013, the doctor “struggled to deliver a baby” at an IHS facility. The baby developed an irregular heartbeat and died. The federal government paid a $900,000 malpractice claim because “a medical board reprimand later said [the doctor] should have resorted to a [caesarean] section ‘hours earlier.’”
  • A surgeon who lost his medical license in Illinois for “gross negligence” got another chance at a New Mexico IHS facility. “Two months after he arrived as the [IHS] hospital’s chief of surgery, he allegedly punctured a patient’s intestines during a surgery.” The patient ended up needing a dozen surgeries — which she wisely obtained outside the Indian Health Service — and a four-month hospital stay to recover.

Bureaucratic Nightmares

The Journal article also explained the circumstances by which all these physicians with histories of multiple malpractice claims or disciplinary actions came to work in the Indian Health Service. First, while the agency’s policies require hiring managers to consult the National Practitioner Data Bank for a physician’s history of malpractice claims or sanctions, the IHS does not monitor compliance with that requirement.

In one case, the CEO of a hospital who fired a surgeon for negligence said she “encourag[ed] him to consider another field of medicine than surgery.” However, the CEO didn’t know the surgeon had ended up practicing at an IHS facility until the Journal contacted her — because IHS apparently failed to investigate the surgeon’s history before hiring him.

Second, the federal government covers physicians’ malpractice claims through the Treasury’s Judgment Fund (the way the Journal reporters researched the hysicians’ history). Because IHS doctors don’t need to pay for malpractice insurance themselves — what one survey of IHS physicians considered the top benefit of working at the agency — it has become an effective “dumping ground” for physicians whose history of prior malpractice claims means they cannot obtain insurance on their own. IHS patients and federal taxpayers often end up paying the price, both literally and figuratively.

Poor Reimbursements Equal Poor Care

One former IHS official admitted that hiring managers have to make compromises when hiring physicians: “You get three candidates who come through and they all seem not great. But what you do is choose the lesser of three evils.” Hiring those “lesser evils” led to disastrous and often fatal consequences for dozens upon dozens of Indian Health Service patients.

Sen. Elizabeth Warren, D-Mass., says she wants to extend government-run health care to the rest of the United States. But rather than apologizing to Native Americans for DNA tests, she should instead apologize for the horrid conditions within the Indian Health Service, promise to replace that broken system with something that works, and vow not to wreak on the rest of the American health-care system the kind of havoc Native populations have faced for years.

This post was originally published at The Federalist.

Warren Asks What the Country Can Do for You

Elizabeth Warren’s release Friday of a more specific health-care platform only raised more questions about Medicare for All and its effects on the middle class. Conservatives as well as Ms. Warren’s Democratic opponents questioned the assumptions behind her claim that she can enact a single-payer plan without raising taxes on the middle class. Yet the harshest critic may be Ms. Warren herself. “Ask not what your country can do for you—ask what you can do for your country,” John F. Kennedy, who once held Ms. Warren’s Senate seat, urged. She refuses to ask the middle class to pay a dime for her costly proposal.

Take Ms. Warren’s assumptions at face value, even if doing so requires a knowing suspension of disbelief. Assume she can reduce the 10-year cost of a single-payer system from the $34 trillion in new federal spending estimated by the liberal Urban Institute to a mere $20.5 trillion. Assume her program would reduce administrative costs without encouraging fraud. Assume also that her proposed wealth tax won’t generate massive tax evasion—she claims a Warren administration would generate $2.3 trillion in new revenue by cracking down on tax avoidance—and that not a penny of her $9 trillion in assessments on employers will end up being paid by workers.

Ms. Warren envisions a $20 trillion expansion of government—the largest in American history—paid for by a fraction of the population. She foresees unlimited “free” health care for millions of families, without so much as a $100 copayment, premium, assessment, tax or other fee.

Sure, the earned entitlement always had an element of fiction. Social Security and Medicare pay benefits based on current cash flows, with their respective trust funds containing little more than promises to pay future benefits. Urban Institute estimates show that even wealthy seniors will receive more in Social Security and Medicare benefits than they paid in taxes. But Ms. Warren’s plan would dispense with the pretense of social insurance, instead creating a crass form of political plunder that uses federal largess to buy votes.

In turning government programs into a version of “Oprah’s Favorite Things”—everyone gets a free car, paid for by somebody else—Ms. Warren follows the example of President Obama. He talked of social solidarity, saying “we’re all in this together,” but shied away from asking anyone other than “the rich” to pay for his new government programs. In 2008 candidate Obama made a “firm pledge” not to raise taxes on families making less than $250,000 a year, “not your income tax, not your payroll tax, not your capital-gains taxes, not any of your taxes.”

The “firm pledge” lasted two weeks. In February 2009 Mr. Obama raised tobacco taxes to fund an expansion of children’s health insurance. Then, after ObamaCare took effect in 2013, the law led at least 4.7 million Americans to receive insurance-cancellation notices. In the years since, the health-insurance market has shrunk by four million people, because those who don’t qualify for subsidies can’t afford coverage—what Bill Clinton called “the craziest thing in the world.” Working families ended up bearing the burden of Mr. Obama’s new programs.

Therein lies the true lesson for the American people. Elizabeth Warren may not ask the middle class to fund Medicare for All—at least not until she’s safely in office—but one can rest assured that, should she succeed in enacting her scheme, all American families will pay.

This post was originally published at The Wall Street Journal.

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.

California Is What’s Wrong with Obamacare

In recent days, California lawmakers have finalized their budget. The legislation includes several choices regarding health care and Obamacare, most of them incorrect ones. Doling out more government largesse won’t solve rising health costs, and it will cause more unintended consequences in the process.

Health Coverage for Individuals Unlawfully Present

This move has drawn the most attention, as the budget bill expands Medicaid coverage to illegally present adults aged 19-26. California will pay the full share of this Medicaid spending, as the federal government will not subsidize health coverage for foreign citizens illegally present in the United States.

As to those who disagree with this move, one can study the words of none other than Hillary Clinton. In 1993, she testified before Congress in opposition to giving illegal residents full health benefits, because “illegal aliens” were coming to the United States for health care even then:

We do not think the comprehensive health care benefits should be extended to those who are undocumented workers and illegal aliens. We do not want to do anything to encourage more illegal immigration into this country. We know now that too many people come in for medical care, as it is. We certainly don’t want them having the same benefits that American citizens are entitled to have.

If Clinton’s words don’t sound compelling enough, consider one way that California may finance these new benefits: By reinstating Obamacare’s individual mandate. To put it another way, people who obey the law (i.e., the mandate) will fund free health coverage for people who by definition have broken the law by coming to, or remaining in, the United States unlawfully.

A Questionable Individual Mandate

This issue faces multiple questions on both process and substance. First, the budget bill includes about $8 million for the state’s Franchise Tax Board to implement an individual mandate, but doesn’t actually contain language imposing the mandate. The bill that would reimpose the mandate, using definitions originally included in the federal law, passed the Assembly late last month, but faces opposition in the Senate.

Third, implementing the mandate imposes legal and logistical challenges. I argued in the Wall Street Journal last fall that states cannot require employers who self-fund health coverage to report their employees’ insurance coverage to state authorities. The mandate bill the Assembly passed does not include such a requirement.

Without a reporting requirement on employers, a mandate could become toothless, because the state would have difficulty verifying coverage to ensure compliance—people could lie on their tax forms and likely would not get caught. However, imposing a reporting regime, either through the mandate bill or regulations, would invite an employer to claim that federal labor law (namely, the Employee Retirement Income Security Act) prohibits such a state-based requirement.

More Spending on Subsidies

While the budget bill does not include an explicit insurance mandate, it does include more than $295 million to “provide advanceable premium assistance subsidies during the 2020 coverage year to individuals with projected and actual household incomes at or below 600 percent of the federal poverty level.”

Obamacare epitomized the problems that policy-makers face in subsidizing health insurance. The federal law includes a subsidy “cliff” at 400 percent of the poverty level. Households making just under that threshold can receive federal subsidies that could total as much as $5,000-$10,000 for a family, but if their income rises even one dollar above that “cliff,” they lose all eligibility for those subsidies.

By penalizing individuals whose incomes rise even marginally, the subsidy “cliff” discourages work. That’s one of the main reasons the Congressional Budget Office said Obamacare would reduce the labor supply by the equivalent of 2.5 million full-time jobs.

California decided to replace these work disincentives with yet more spending on subsidies. This year, the federal poverty level stands at $25,750 for a family of four—which makes 600 percent of poverty equal to $154,500. In other words, a family making more than $150,000 will now classify as “low-income” for purposes of the new subsidy regime.

Hypocrisy by Officials

The individual mandate bill gives a significant amount of authority for its implementation to Covered California, the state’s insurance exchange. The bill says the exchange will determine the amount of the mandate penalty, and determine who receives exemptions from the mandate.

Who runs California’s exchange? None other than Peter Lee, the man I previously profiled as someone who earns $436,800 per year, yet refuses to buy the exchange coverage he sells. Or, to put it another way, if the mandate passes, Lee will be standing in judgment of individuals who refuse to do what he will not—buy an Obamacare plan.

If you think that seems a bit rich, you would be correct. But it epitomizes the poor policy choices and hypocritical actions taken by officials to prop up Obamacare in California.

This post was originally published at The Federalist.

Medicaid Expansion Has Louisianans Dropping Their Private Plans

If any state can serve as the poster child for the problems associated with ObamaCare’s Medicaid expansion, it’s Louisiana, which joined the expansion in 2016, after Democrat John Bel Edwards became governor. An audit released last year exposed ineligible Medicaid beneficiaries, including at least 1,672 people who made more than $100,000. But Louisiana’s Medicaid expansion has revealed another waste of taxpayer funds, both in the Pelican State and nationwide: the money spent providing coverage to people who already had health insurance.

Via a public-records request, the Pelican Institute obtained data demonstrating that thousands of Louisiana residents dropped their private coverage to enroll in Medicaid under the expansion. A spreadsheet compiled by the Louisiana Department of Health put the count between 3,000 and 5,000 people a month, and that doesn’t count those who enrolled in Medicaid first, then dropped private coverage.

When asked about the spreadsheet, Medicaid officials stated in an email that the Health Department “stopped producing” the data in late 2017 when it discovered its vendor’s information “was limited to [third-party liability] during the period of Medicaid enrollment.” Because the vendor couldn’t track beneficiaries before or after their Medicaid enrollment, the spreadsheet arguably underestimated the number of people dropping private coverage to enroll in Medicaid.

The Health Department’s internal spreadsheet information comports with other coverage estimates. A survey by Louisiana State University researchers found that, from 2015-17, enrollment in private insurance fell precipitously among low-income Louisiana residents eligible for Medicaid under the expansion. The number of people covered by private health insurance declined by tens of thousands, even as Medicaid enrollment skyrocketed by more than 141,000.

That masses of Louisiana residents canceled their private coverage to enroll in “free” Medicaid should surprise no one. In 2007 Massachusetts Institute of Technology economist Jonathan Gruber, who later became an architect of ObamaCare, concluded that some coverage expansions would see rates of “crowd-out”—government programs squeezing out private insurance—approaching 60%. Eight years later, Louisiana’s Legislative Fiscal Office estimated that crowd-out would cost taxpayers between $900 million and $1.3 billion over five years. Because enrollment in Medicaid expansion vastly exceeded initial projections, the true cost may rise far higher.

Federal budget analysts have yet to quantify the effect of crowd-out on Medicaid expansion—but they should, because estimates suggest that Washington is spending billions annually funding Medicaid for people with prior health coverage. Montana officials recently released a study boasting of 8,700 workers who would have employer-sponsored coverage but for Medicaid expansion, claiming that expansion provided “cost savings to businesses” of up to $114 million. Only in a bureaucrat’s mind would more government spending, taxes and government dependency represent “cost savings.”

In response to the Louisiana audit, the state recently purged more than 30,000 ineligible people from the rolls. Health Secretary Rebekah Gee claimed the action demonstrated how she and Gov. Edwards “want to make sure that only those that need Medicaid have Medicaid.” But good stewards of taxpayer dollars, upon receiving preliminary reports of people dropping coverage to enroll in Medicaid, would have demanded better data and fashioned policy solutions to address the problem. The Louisiana Department of Health did neither and stopped compiling the data.

Generations of Louisiana politicians, since Gov. Huey Long in the 1930s, have claimed that fostering an economy rooted in government dependence will lead to prosperity. But the more than 67,000 residents who have left the state in the past three years alone see a stagnant economy and a slowly sinking state. Louisiana can do better, and other states thinking about Medicaid expansion should think again.

This post was originally published at The Wall Street Journal.