Opinion

WILFORD: Gimmicks, ‘Contributions’ And Confiscation — Warren’s Tax Plan Would Hit Every American

JOSEPH PREZIOSO/AFP/Getty Images

Andrew Wilford National Taxpayers' Union Foundation

Massachusetts Sen. Elizabeth Warren promised for weeks to release a tax plan showing how she would raise tens of trillions of dollars to pay for “Medicare-for-all” without raising taxes on the middle class. The day after Halloween, she finally obliged, releasing a plan that names all the new taxes and reforms she would use that (she claims) would do it. Unfortunately for American taxpayers, it was full of more tricks than treats.

For one, Warren proposed a new “employee Medicare contribution.” (“Contributions” aren’t taxes.) It would essentially require businesses to pay a per-employee tax to the federal government roughly equal to the amount they would have spent on employee health insurance.

This functions essentially as a federal-level employee head tax (EHT), taxing businesses a flat rate per employee. Some cities have experimented with EHTs, but EHTs are bad policy for a simple reason — if you want less of something, you tax it. EHTs tax businesses based on the number of employees they have, providing a strong incentive to hire fewer. Though Warren can claim this is not a middle-class tax hike, the middle class is the group that will be harmed by this tax. Even Medicare-for-all advocates on the left have called this plan “unworkable and bad.”

Warren then uses gimmicks to come up with some more revenue. She claims she can raise $2.3 trillion by cracking down on tax evasion. This is a laughably high estimate, given that the Congressional Budget Office has estimated that a 35 percent increase in tax enforcement funding would result in a net revenue increase of $35 billion — just over 1 percent of what Warren claims she can raise. Warren’s plan for “super duper enforcement” is similar to the “reducing waste, fraud and abuse” line that many politicians have trotted out for years as the pot of gold at the end of the rainbow.

Other gimmicks are even more harmful. Warren claims that ending full expensing for capital investments, which allows businesses to deduct the cost of investments immediately on their taxes instead of amortizing them over the course of many years, would save the federal government $1.25 trillion.

But this is misdirection. Ending full expensing would only save the government money in the short term, as businesses would still be able to deduct the value of their asset eventually. Full expensing is also good policy, incentivizing economy-boosting investment and making tax filing simpler for businesses, that should not be set aside for the sake of politically-motivated number fudging.

Warren also proposes a minimum 35 percent corporate tax rate, which, combined with her previous “real corporate profits” surtax proposal would raise the minimum tax rate for businesses to 42 percent. That would be dramatically higher than the average rate for the rest of the developed world, placing the United States at a severe competitive disadvantage.

Warren’s explanation of how she makes the numbers work fails to level with American voters about what paying for Medicare-for-all will cost. Even before she begins to discuss potential revenue-raisers, Warren is obfuscating the picture. The senator claims that a few reforms will reduce administrative costs and prices to the point that Medicare-for-all’s price tag will drop nearly 40 percent.

The left-leaning Urban Institute estimated Warren’s plan will add $34 trillion in spending over 10 years. Warren is counting on a government monopoly being so efficient that new costs will drop to $20.5 trillion over that same time period. That’s a recipe for disaster.

Even credulously accepting her proposed revenue-raisers, Warren’s plan is well off the mark for the amount of revenue needed to fund her Medicare-for-all plan. Unfortunately, through her huge proposed tax increases on the wealthy and big businesses, there’s only one revenue source left to make up the difference — middle-class wallets. So don’t be fooled, there’s no Medicare-for-all without substantial middle-class tax hikes, whatever Warren says.

Andrew Wilford (@PolicyWilford) is a policy analyst with the National Taxpayers Union Foundation, a nonprofit dedicated to fiscal policy analysis and education at all levels of government.


The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.