A Correction

In a previous post, I offered my impressions on the Coburn-Burr-Ryan-Nunes health care reform bill, based on my reading of the bill summary prepared by their staff.  The very next day, I had a friendly discussion with those staffers about the legislation.  (They were most gracious; many thanks to them.)  It turns out some of the things I wrote were inaccurate.  So I’d like to make the following corrections.

Based on my reading of the bill summary and my discussions with staff, my previous post ought to have read that the Coburn et al. bill would:

  • Mandate that Offer federal subsidies to states that create a new regulatory bureaucracy called a “State Health Insurance Exchange,”
  • Mandate Require that all plans offered through those exchanges meet federal regulatory standards,
  • Mandate Require “guaranteed issue” in those exchanges,
  • Mandate Create “uniform and reliable measures by which to report quality and price information,”
  • Impose price controls on those plans by prohibiting risk-rating,
  • Launch a government takeover of the “insurance” part of health insurance, by means of a “risk-adjustment” program intended to cope with the problems created by price controls, and Require that states creating an exchange also create some mechanism for providing coverage to people with high-cost illnesses, including but not limited to risk-adjustment, risk pools, or reinsurance, and
  • Fall just short of an individual mandate by setting up (mandating?) Require that states creating an exchange take steps to facilitate enrollment, which may include automatic enrollment in exchange plans at “places of employment, emergency rooms, the DMV, etc.” — essentially, trying to achieve universal coverage by nagging Americans their residents to death.

My description of the legislation as a “Mandate-Price-Control Bill”?  Not accurate.  My claim that the bill involves tax increases?  Based on my erroneous impression that the bill would impose price controls on insurance premiums.  The bill may lead to some tax increases (it proposes new categories of federal spending after all), but for the moment I take staff at their word that on net the bill would not increase taxes or government spending.

Why the errors?  Suppose a bill summary says that federal legislation would “ensure” the creation of state-based exchanges and that individuals “would get” access to an exchange.  Does that mean the bill would mandate the creation of exchanges, or that states could choose to create them or not?  What if that’s the only language, and there is no mention of states having an option?  (What does this guy think?)  Suppose the bill summary promises, “Guaranteed access to care…regardless of patient age or health history,” by virtue of the rules it would impose on insurers within the exchange.  Does that spell rating restrictions (i.e., price controls)?  What if the bill summary then promotes a tool (i.e., risk-adjustment) commonly used by European systems to cope with the adverse consequences of price controls?  Reasonable people can disagree, I suppose.

Rather than spend any more time on what I don’t like about the bill and the bill summary (and there is more), let me emphasize what I do like.  The authors understand the need to reform the tax treatment of health insurance.  And they understand that leveling the playing field between job-based and “individual-market” insurance amounts to a huge tax cut — even when revenue-neutral.  They propose to block-grant part of Medicaid, and would further means-test Medicare premiums.

Not my ideal bill, or even the best I can hope for under the circumstances.  But it would do much good and is a far cry better than anything we’re likely to see from the other side of the aisle.

The Laffer Curve in Action

Tom Golisano, one of the richest men in New York, has decided to escape the state’s greedy politicians by moving to Florida. This is another example of why higher tax rates are so destructive. When people are tired of being fleeced, they can move their labor and/or capital. They can choose to be less productive. And they can hire lobbyists, lawyers, and accountants to find creative loopholes.

Writing for the New York Post, Mr. Golisano is very happy that his money no longer will be funding tax-and-spend politicians in Albany:

Politicians like to talk about incentives — for businesses to relocate, for example, or to get folks to buy local. After reviewing the new budget, I have identified the most compelling incentive of all: a major tax break immediately available to all New Yorkers. To be eligible, you need do only one thing: move out of New York state. Last week I spent 90 minutes doing a couple of simple things — registering to vote, changing my driver’s license, filling out a domicile certificate and signing a homestead certificate — in Florida. Combined with spending 184 days a year outside New York, these simple procedures will save me over $5 million in New York taxes annually. 

One thing’s certain: That money won’t continue to fund Albany’s bloated bureaucracy, corrupt politicians and regular special-interest handouts. How did the state get to this point? By spending, spending and spending some more. New York’s budget was $72.7 billion in 1999. Ten years later it ballooned to $131.8 billion. Each year, on average, the budget has risen at an astounding 6 percent compounded annual rate – more than double inflation (2.8 percent).

…This problem didn’t begin with the current recession. New York faced a $6 billion shortfall before the economic downturn. However, in the face of economic turmoil, Gov. Paterson, Assembly Speaker Sheldon Silver and Senate Majority Leader Malcolm Smith looked to the unions and special interests, who answered with one voice: raise taxes. That was irresponsible – and may just prove to be counterproductive, since the top 1 percent of earners account for about 50 percent of state revenue and are the ones who can and will leave.

Among other hikes in taxes and fees, they raised the marginal tax rate on the most successful (and most mobile) New Yorkers to 8.97 percent, the second-highest rate in the nation. Bottom line? By domiciling in Florida, which has no personal-income tax, I will save $13,800 every day. That’s a pretty strong incentive. Like I said, I love New York. But I’m not going to pay any more for the waste, corruption and inefficiency that is New York state government.

Tax Bureaucrats Take the Fun out of Everything

The Daily Mail reports that a Romanian student who sold her virginity to the highest bidder as part of an online auction may wind up keeping less than half of her earnings thanks to Germany’s oppressive tax system:

Tax authorities in Germany are poised to claim 50 per cent of the money that a teenage student earned for ‘auctioning’ her virginity… Romanian-born Alina Percea, who is a student in Germany, was paid £8,800 in cash for a weekend of sex with the Italian businessman after she auctioned her virginity online. But tax officials in Berlin regard the 18-year-old’s act as ‘nothing more than prostitution’. Prostitution is legal in Germany – but it is heavily taxed. …It also emerged that, because Alina earned so much in such a short time, she may even be liable for a hefty VAT bill too. VAT in Germany works out to 19 per cent, meaning the sale of her virginity could land her with just over £3,000 in the end.

“They Don’t Have the Money to Pay Us Back”

When they let their guard down, politians can say the most revealing things.  In today’s Wall Street Journal, representatives of local governments in California attacked Governor Schwarnenegger’s plan to borrow $2 billion from local property tax revenues to cover some of the state’s budget shortfalls.  In response, Don Knabe, chairman of the Los Angeles County Board of Supervisiors said, “They’re hijacking our dollars.  They don’t have the money to pay us back.  It’s a joke.” 

Given that California doesn’t have the money to pay back borrowing from its local government, it’s likely they might not be able to pay back borrowing from private investors either.  To solve this problem, we have the Municipal Bond Insurance Enhancement Act, on which the House Financial Services Committee held a hearing this week.  To encourage investors to buy California’s risky debt, the federal government would cover any losses to the investor.  We’re told that the federal government would charge bond-issuing governments insurance premiums to cover any losses, but the federal government’s history of setting rates based on politics rather than risk (have you looked at the health of the National Flood Insurance Program lately?) guarantees that the taxpayer would likely have to cover billions in losses on any guarantee of California’s debt.

E-Verify: The Surveillance Solution

The federal government will keep data about every person submitted to the “E-Verify” background check system for 10 years.

At least that’s my read of the slightly unclear notice describing the “United States Citizenship Immigration Services 009 Compliance Tracking and Monitoring System” in today’s Federal Register. (A second notice exempts this data from many protections of the Privacy Act.)

To make sure that people aren’t abusing E-Verify, the United States Citizenship and Immigration Services Verification Division, Monitoring and Compliance Branch will watch how the system is used. It will look for misuse, such as when a single Social Security Number is submitted to the system many times, which suggests that it is being used fraudulently.

How do you look for this kind of misuse (and others, more clever)? You collect all the data that goes into the system and mine it for patterns consistent with misuse.

The notice purports to limit the range of people whose data will be held in the system, listing “Individuals who are the subject of E-Verify or SAVE verifications and whose employer is subject to compliance activities.” But if the Monitoring Compliance Branch is going to find what it’s looking for, it’s going to look at data about all individuals submitted to E-Verify. “Employer subject to compliance activities” is not a limitation because all employers will be subject to “compliance activities” simply for using the system.

In my paper on electronic employment eligibility verification systems like E-Verify, I wrote how such systems “would add to the data stores throughout the federal government that continually amass information about the lives, livelihoods, activities, and interests of everyone—especially law-abiding citizens.”

It’s in the DNA of E-Verify to facilitate surveillance of every American worker. Today’s Federal Register notice is confirmation of that.