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Why won't the rising cost of labor for the employers that currently pay less be offset by the falling cost of labor for the employers that currently pay more?

dcolkitt 7y ago
To a certain extent that would have an effect. However there are strong asymmetries between the two countervailing forces. First labor isn't perfectly fungible between sectors and firms. Moving workers will result in significant productivity lowering frictions. The clearest example of this is that the group most likely to have low insurance outlays relative to wages are high income workers. When the denominator's larger, the fraction's smaller For example a worker making $500,000 a year, even with a platinum plan $25,000 a year plan is only outlaying the equivalent of a 5% payroll tax. They'd get hit very hard under single-player payroll tax. In contrast a worker making $25,000 with a $6000 employer-insurance is paying 20%. Unfortunately the typical $500k/year high skilled job can't easily be replaced with twenty $25k/year workers. Second, you have to consider not just the reshuffling of demand between employers. You all also have to consider the tradeoffs potential workers make between paid labor and leisure. Universal single-payer will cause some workers to drop out of the labor force, scale back their hours worked, or take less stressful but lower productivity jobs. When everyone has access to the same healthcare regardless, the incentives between those options becomes less differentiated. People retiring early or spending more time as homemakers could be a good thing or a bad thing. But without a doubt it lowers economic output, and therefore the tax base. Finally raising payroll taxes creates incentives for workers to reclassify in a way that shields their income. One form is outright evasion. More jobs will pay cash under the table, more "employee leasing" schemes, or just simply not declaring income. The higher taxes are the more incentive there is to take the risk. But there's also many perfectly legal ways to dodge payroll taxes. Cash compensation can be shifted to exempt benefits like life insurance, employee discounts, and meals. Employee compensation can be reclassified as director fees. American Workers can relocated to foreign offices, where they're exempt from payroll taxes. Self-employed people can re-incorporate as an S-corp. This just scratches the surface. Once you double the effective payroll tax, expect a lot more effort and money invested in strategies to evade it. This not only means the proposed payroll tax rate captures less revenue than projected. It also means the pre-existing payroll tax now collects less revenue.

dcolkitt 7y ago

To a certain extent that would have an effect. However there are strong asymmetries between the two countervailing forces. First labor isn't perfectly fungible between sectors and firms. Moving workers will result in significant productivity lowering frictions. The clearest example of this is that the group most likely to have low insurance outlays relative to wages are high income workers. When the denominator's larger, the fraction's smaller For example a worker making $500,000 a year, even with a platinum plan $25,000 a year plan is only outlaying the equivalent of a 5% payroll tax. They'd get hit very hard under single-player payroll tax. In contrast a worker making $25,000 with a $6000 employer-insurance is paying 20%. Unfortunately the typical $500k/year high skilled job can't easily be replaced with twenty $25k/year workers. Second, you have to consider not just the reshuffling of demand between employers. You all also have to consider the tradeoffs potential workers make between paid labor and leisure. Universal single-payer will cause some workers to drop out of the labor force, scale back their hours worked, or take less stressful but lower productivity jobs. When everyone has access to the same healthcare regardless, the incentives between those options becomes less differentiated. People retiring early or spending more time as homemakers could be a good thing or a bad thing. But without a doubt it lowers economic output, and therefore the tax base. Finally raising payroll taxes creates incentives for workers to reclassify in a way that shields their income. One form is outright evasion. More jobs will pay cash under the table, more "employee leasing" schemes, or just simply not declaring income. The higher taxes are the more incentive there is to take the risk. But there's also many perfectly legal ways to dodge payroll taxes. Cash compensation can be shifted to exempt benefits like life insurance, employee discounts, and meals. Employee compensation can be reclassified as director fees. American Workers can relocated to foreign offices, where they're exempt from payroll taxes. Self-employed people can re-incorporate as an S-corp. This just scratches the surface. Once you double the effective payroll tax, expect a lot more effort and money invested in strategies to evade it. This not only means the proposed payroll tax rate captures less revenue than projected. It also means the pre-existing payroll tax now collects less revenue.