European Healthcare – It Is Not Free

Now that the House of Representative has passed the American Health Care Act (AHCA) and sent it to the Senate the American people will start to focus on what type of healthcare they will ultimately end up receiving. You can be sure that the bill passed in the House will be vastly different from the one passed by the Senate. That will set up a conference between the two bodies and then the real debate will begin.

To bring together the two factions in the House there had to be some give and take. The Freedom Caucus and the Tuesday Group had different ideas about how the final bill should look and so both had to compromise to get a final product. In the Senate the rules make it more difficult to get a final bill and the Senate has already made it clear they will tear up the House bill and rewrite their version of a new healthcare legislative product. I have a difficult time seeing anything the Senate produces being acceptable to the Freedom Caucus members and so the odds of a final product remain somewhat daunting.

President Trump weighed in on the House passage by having a victory ceremony at the White House. Then while meeting with the Australian Prime Minister he commented that Australia has better healthcare than the United States. This immediately led the Democrats to jump on this statement. Trump countered by saying most western countries had better healthcare than the United States and again the Democrats pounced on his statement saying we needed to move to the same system in many of these nations, a single payer government run system. What Trump was doing was offering a criticism of our current government system, ObamaCare, and saying other nations had a better system. He was also saying that when we repeal ObamaCare and reform the system out healthcare will be better.

Now all of this political rhetoric is debatable and both sides are more than willing to engage in the debate. Bernie Sanders immediately claimed that Trump must be endorsing a single payer system. After all, this is what ObamaCare was supposed to be the precursor to the United States adopting. But to fully understand this debate you have to understand what each system entails.   This is where most Americans are woefully uneducated. Think different, ask someone who wants a single payer, government-operated system, how it actually works and how it is paid for.   You will get a different answer for every time you ask the question and my guess is they will almost all be wrong.

Lets examine the system, National Health Insurance, that England uses as our example since it is the one most cited. It has been in existence since 1948 and every citizen pays into in the form of a national income tax.   England has a progressive income tax system but one that is not as progressive as the United States.  I say not as progressive in that even the working poor pay into the system.  In England anyone earning between zero and $41,320 (I have converted the amounts to dollars for a better comparison) is considered to be in the basic-rate of 20% their income. Once you exceed that number in the basic rate the tax goes to 40% up to $195,000. Anything over that is taxed at 45%.

Now lets compare that to some basic tax rates and information in the United States. Our progressive rates are much less.   The poor in this country do not pay federal income taxes. The rates are set in such a way that they are exempted from paying taxes on much of their income. Looking at U.S. rates for a married couple filing jointly you find the following:

Table 2. Married Filing Joint Taxable Income Tax Brackets and Rates, 2017
Rate Taxable Income Bracket Tax Owed
10% $0 to $18,650 10% of taxable income
15% $18,650 to $75,900 $1,865 plus 15% of the excess over $18,650
25% $75,900 to $153,100 $10,452.50 plus 25% of the excess over $75,900
28% $153,100 to $233,350 $29,752.50 plus 28% of the excess over $153,100
33% $233,350 to $416,700 $52,222.50 plus 33% of the excess over $233,350
35% $416,700 to $470,700 $112,728 plus 35% of the excess over $416,700
39.60% $470,700+ $131,628 plus 39.6% of the excess over $470,700

Notice the term that is most important: taxable income. This is the amount of income you have after all deductions, including the standard deduction which is $12,600 for married couples filing jointly. Basically what that means is if you made an income of $30,000 that amount would be reduced by the standard deduction and you would owe about $1800 in income taxes. But lets assume that this couple has two children. Then the Earned Income Tax Credit (EITC) kicks in and that tax not only disappears but they are due a refund of a couple of thousand dollars.

So lets look at a middle class family of four earning $50,000. There tax would be just over $6600 but then the EITC kicks in and most of that tax disappears.

To effectively compare both you have to also factor in that the tax rates in England also include the government pension (social security). U.S. workers contribute 6.2% towards social security and another 1.45% for Medicare. If we went to a single payer government health care system Medicare would disappear. To fund this type of health care would mean that everyone would have to pay more taxes on the income they earn. If we keep the Social Security system (which we will) then you eliminate the 1.45% Medicare tax and replace it with something along the lines of 8%. That means a pretty large tax increase on the poor and middle class. And any employer provided health care would also disappear so that benefit to the working middle class will be gone.

The Democrats I am sure will foster some plan that exempts the tax from lower incomes and tries to replace those funds by taxing higher incomes at a higher rate. What they will hide is that this tax will be on “earned income” and not wealth. It would surprise many Americans to learn that most of the wealth in this nation is with Democrats. Wealth is not taxed like income you earn working.

To fund this socialistic dream would mean someone would have to propose a bill that would raise taxes on the poor by about 15%, on the middle class by 30% and the wealthy by another 20%. In total terms that would mean the wealthy would be giving back to the government over half of what they make. But make no mistake, to move to this system would require a hefty tax increase on every American no matter what economic class they might belong.

The real problem is this is another step towards creeping socialism. Democrats like big government and government programs that take care of everyone no matter how hard or how little you work. But I don’t see this as a winning strategy in America. We are not socialist. We are capitalist where innovation and hard work are rewarded.

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