How would you pay for Medicare For All?

[DanTex]

109. According to the standard economic theory (which I think is accurate in this case),

it wouldn't matter. If the employer pays the tax directly, then the salaries will be lower. If not, the salaries will be higher.

The other thing is, if it were a payroll or income tax, it would be probably based on a percentage of income, which would have a redistributive effect.

For example, let's say that right now every employer pays $750 for the healthcare of each employee. That $750, although invisible to workers, is part of the total compensation. Which means that, if they didn't have to pay healthcare anymore, they'd have an extra $750 per employee, which assuming competitive markets would result in a raise of $750 per employee.

Then comes the medicare tax. This would average out to $750 per employee across the economy, but higher-paid workers would end up paying more of the tax. So lower paid employees would benefit: they get paid $750 more, and pay some of it back in taxes but not all. And on the higher end, it would be the opposite, a raise of $750, but more than $750 in new taxes.

So that's the general idea. Workers who's current employers don't provide health insurance will see a tax increase with no corresponding increase in wages, but they will also get health insurance rather than having to pay for it themselves.

There will be some people who lose out in the deal, without doubt. If you currently pay for non-employer-based healthcare and you earn enough so that your share of the new tax will be higher than your current rate, then you lose money. Also, people who currently get healthcare from employers, but make large salaries, will lose out because they will be subsidizing lower wage workers.

Of course, there are a lot of assumptions and variables. It would depend largely on how the tax is implemented. If they cap it like SS that could greatly reduce the redistributive effects. I don't know how this works in other countries. Looks like $750 a month per capita would come out to an 18% income tax, and I'm pretty sure people earning $10M a year would cry foul if suddenly they have to pay $1.8M per year for healthcare.


One more thing on edit. $750 seems like a reasonable ballpark for the per-capita cost. According to my brief googling, healthcare costs in the US are about $9000 annually per person, which comes out to exactly $750 per month. This also means that $750 per month is probably a reasonable estimate of what employers pay for healthcare in the status quo on average. Maybe a little lower because of copays and other things, but ballpark.