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Aug. 12 2009 - 11:48 am | 146 views | 3 recommendations | 16 comments

Health Care meets Goldman Sachs

The debate over the merits of taxing high-cost, excessively generous insurance plans has highlighted Goldman Sachs’s plan as an example. Goldman’s 400 managing directors reportedly receive an average of $40,543 in employer-provided health insurance annually. What has received less attention is how much of the cost the federal government pays. This compensation is provided tax-free. The same result would occur if the compensation were included as income and the government sent each Goldman managing director a check for $14,777 each year.

via An Excise Tax on Insurers Offering High-Cost Plans Can Help Pay for Health Reform — Center on Budget and Policy Priorities.

I can’t get away from Goldman Sachs even when I try. This is from a report by the Center on Budget and Policy Priorities. It’s an interesting take on the health-care bill. I’m not sure about taxing insurance plans — I’ve seen research that argues somewhat convincingly that it’s a bad idea — but this is also worth pointing out. The report goes on:

For comparison, consider an illustrative family of three in which the father earns $30,000 as an independent contractor for a small plumbing company and the mother earns $25,000 from a small retailer. Neither small business provides health benefits. The couple has a daughter in second grade at the local public school and pays $100 a week for child care after school and during the summer. The family lives in a modest home and pays $1,000 a month in rent and $250 in utilities. It owes $2,312 in federal income taxes, $6,502 in Social Security and Medicare taxes, and $1,350 in state income taxes. It has two cars with payments of $300 a month each, and pays $2,000 a year in car insurance and $1,000 a year for gasoline. It spends $150 a week on groceries. The couple has avoided accruing any credit card debt, but they have no saving for retirement and no life insurance…

Right now, the federal government pays $14,777 to provide health insurance for each of Goldman Sachs’s managing directors and pays nothing to provide health insurance for this middle-income family. The Administration and Congress face a clear choice: can we modestly reduce the extremely generous government subsidies provided to the Goldman bankers and others similarly situated to help pay for a subsidy worth a fraction of that amount to families of modest means?

When you put it like that, it makes sense. But would this also end up taxing companies whose employees have high premiums just because they’re sick? Looking for input here…


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  1. collapse expand

    Matt,

    I agree, when couched in those terms, it sounds very reasonable.

    I think your loop-hole example could be very real. I find the problem with the Health Care Reform Bill is the middling, twisty-turny way legislators have to construct these things so as to appease the worshipers of Free-Market Capitalism. These dizzying attempts sound scary and weird. It’s no wonder the simpletons are screaming bloody murder.

    There are going to be major problems with any program that is so complex and convoluted.

    Not to sound like a simpleton myself, but wouldn’t a simple, single-payer solution be the clear choice? Yahh it’s a pipe-dream, but the migraine-inducing minutia is substantially reduced.

    I don’t understand the “Coke/Pepsi” attitudes in this country… why does a hybrid of disparate ideologies, such as Capitalism with a little Socialism with a little Democracy with a little Oligarchy,etc. seem to be “not an option?” If the 20th century has taught us anything, it’s that no one system is perfect. Let’s mix it up for f*ck’s sake! Take the better ideas from each formula and work with them.

    Why the hell does this sound soooo unreasonable to people? Why does EVERYTHING in this country HAVE to be black or white?

    Off topic, I know… sorry, just tired and ready to hear the fiddle while Rome burns.

  2. collapse expand

    Er, instead of proposing a new tax with which Republicans will surely pummel Democrats relentlessly, how about just ending government subsidies on gold-plated plans? I don’t believe in punishing the rich per se, but it’s absurd to subsidize the health care of those who can most afford it at any level of coverage they choose.

  3. collapse expand

    bigtuna,

    I’d just like to point out the clever way people can semantically steer an argument in their direction. Lot’s of politicians and talking heads like to use the term “punish the rich” in terms of taxing the rich. This is a joke. What is being asked is that people who have become very wealthy in this country, and, in part, because of the climate this country promotes for the accumulation of wealth, give a little more back for the sake of building a better, more civilized society.

    I don’t think it’s too much to ask, and it’s NOT punishment.

    • collapse expand

      I actually agree with that wholeheartedly. In trying to use a tone of dispassionate fairness I inadvertently used a right wing talking point. My ultimate aim was to point out that we shouldn’t give the GOP another chance to reinforce the “Democrats want to tax everything” stereotype when it’s completely unnecessary. I’m sure they would call subsidy cuts a “tax on the rich” regardless but it would be a much farther stretch, and Dems could credibly claim to be the real conservatives by reducing government expenditures.

      In response to another comment. See in context »
  4. collapse expand

    Matt- probably not in the case sited. A particular employee who is part of large employer plan typically do not experience a rise in their premiums because they ill. More typically, the entire plan may see a rise in premium charges due to a serious illness of a participant and this cost increase will be spread among all participants.
    Where the proposed tax could do some harm is in the instance of large employers who self insure. There are some interesting statistics which reveal that large employers who do self-insure and who actively encourage employee wellness, have seen reductions in premium costs, even as others are experiencing increases of 12% each year. If a reader is wondering if they are part of a self-insured program, don’t let your health insurance card throw you off. Typically, self insured companies hire one of the health care providers to administer their program. So you may think you have Aetna health insurance but Aetna is actually just administering, for a fee, for your employer.Self-insurance plans have done well in keeping down costs to both the companies and their employees. If you work for a company with at least 500 employees, there is a good chance your company does self insure. The proposed tax could cause some problems for these companies.

    • collapse expand

      Thanks for this comment. I am incapable of posting a rational response, as this quotation just boggles my mind: “Goldman’s 400 managing directors reportedly receive an average of $40,543 in employer-provided health insurance annually.”

      As someone who has lived without health insurance during 2 periods of my life – and there are plenty who are currently doing the same – I’m still somewhat amazed that there haven’t been mass demonstrations outside the offices on Wall Street. Then again, those with such low incomes are too busy working for a living, or looking for a job.

      In response to another comment. See in context »
  5. collapse expand

    My understanding is that CEO types who have gold plated health insurance plans, which someone else pays for, would have a “luxury tax” on their lastest squeeze’s new boobs.

    Like the “yippies” jokingly said “Eat The Rich!”

  6. collapse expand

    Matt,

    Even though I hate seeing another perk for the managing directors at Goldman Sachs, I think it would be a step in the wrong direction to generically tax all health care plans provided by employeers. Although, I think it is reasonable to qualify what should be tax exempt and want should not. In the case of my family, we have Kaiser in CA, we are in same lines and get the same care as other people from all walks in life. If these guys are spending their health care benefit with trip to a spa, massages, special private rooms, or if it is elected stuff it should be taxed as income.

  7. collapse expand

    Look Matt here is the deal. The only thing that would work is to spread the risk among a large population. This would occur in a public option medicare type program. Lots of people sharing the risk.
    I have to laugh or cry when I hear people crying and complaining about having to take care of others’health issues. No one thinks he or she is going to get sick or have a major health issue in the prime of life but tomorrow you could, God forbid, be in an accident or be diagnosed w/ testicular cancer or lymphoma or suffer some other major health issue and than see, if you have insurance, how your private carrier will do everything to deny, delay, obfuscate etc.
    And it is fiction that private carriers are efficient and effective. I work for a company that does review for MRIs,CTs, etc and effieciency is not the word of the day.
    Something like France has where MDs, RNs, Pharmacists, etc are in private corporations but the government funds it. Excellent, and cheaper than our patchwork,crazy quilt,chaotic system that is bankrupting this country with our inefficiencies,profit over caring, and poor outcomes.
    Getting out of Iraq could help fund this as is taxing the top income earners who benefitted so handsomely under the policies of the prior administration.

  8. collapse expand

    The health care system can’t be fixed because there is no way to do it from Washington. The only thing Washington politicians can do is pass a one size fits all law. But one size does not fit all. It won’t work no matter what they put in the bill. After they pass a bill the result will be a health care system that is even more dysfunctional than the one we have now. It will cost way more, drive up deficits and force the economy deeper into the depression because the government won’t be able to fund it with more borrowing. The tipping point has already been reached. This will push the government and the economy over the edge.

  9. collapse expand

    I’ve been administering benefits for nonprofits for quite a few years.

    Apparently, the insurance companies do a yearly review of costs for the area your business is in (might be a city, might be the mid-atlantic region or something like that). Then they set an across the board increase for everyone in that region. After that, they look at each individual company and, if there are too many old people or if people have been sick, they raise the groups rates in addition to the across the board increase for the region.

    I’m no tax expert, but I do know that the employer share of federal payroll tax runs at about 8%. We’ve been paying almost $400 per month per employee, so it could add up to quite a bit if employers had to pay as though it was compensation. Of course, our rates from the insurance companies go up 10 – 40 percent each year, so…

    I can tell you that a tax on health benefits would kill a lot of nonprofit workers. Nonprofits (unfortunately) don’t pay much, but they do give good benefits. Paying tax on another four of five grand in income when you make 30 – 40 grand a year (city salary) would hurt.

  10. collapse expand

    Looks likes Sens Bingaman and Hatch want to address the issue by allowing health insurance costs to be deducted.

    S. 725
    To amend the Internal Revenue Code of 1986 to allow self-employed individuals to deduct health insurance costs in computing self- employment taxes.

  11. collapse expand

    Your are missing a couple of very important points in this convoluted example.

    1) The Goldman Exec. you are portraying paid many times more in taxes to the federal government than the family earned in a year. Likely hundreds of thousands of dollars more. She likely consumed far fewer government resources, on a dollar basis, than she contributed.

    2) The Goldman Exec. very likely followed the path of the American dream when she got educated, and worked her way up the ladder. Her parents and their parents likely worked hard to get to the top as well. My Goldman friend worked very hard and many hours for a long time to get to his successful position in the company.

    3) The family you portray very likely uses more federally and state funded services, on a dollar value basis, than the amount they pay in taxes.

    Why can’t we stop attacking successful Americans who have, for the most part, worked hard to get where they are in life and who consistently pay many times more than their fair share in taxes? The rest of America should be looking to them as shining examples of success as defined by the American Dream.

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