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The problem is not with millionaires, who are rather few, but with middle-to-upper middle class people, who make up bulk of taxpayers and the revenue. If you ru
by xyzzyz 5y ago
The problem is not with millionaires, who are rather few, but with middle-to-upper middle class people, who make up bulk of taxpayers and the revenue. If you run the numbers, your scheme ends up being rather unworkable.
To put in concrete terms: if you tried to give every household $7000 of ACA subsidy, that would cost you $900B a year. That’s more than US military spending. Where you would get extra taxes from to cover that? There aren’t enough millionaires to pay for it (do the numbers here too, to see), so what you’d need to do is to get back $7000 from household that make “mere” $150-200k. You don’t want to slap extra $7k tax, because that would just be a cliff like the one you tried to avoid in the first place. Once you figure out how to set up your taxation to do that, you’ll find that it conceptually and practically much simpler to just do phaseouts.
- amluto 5y agoWe, conceptually and practically, _already_ have a way to collect extra taxes from people with higher income — it’s called tax brackets. Adjusting the brackets a bit to collect that extra $7k (or more) from people who earn a few hundred K per year is straightforward, and it more easily preserves the nice property of having net taxes paid (tax minus subsidies) being convex as a function of income. I realize that health care in particular is a horrible mess due to most higher income people getting insurance through employer group policies. That, in and of itself, is a problem, and fixing would have the added benefit of removing a large disincentive to changing jobs or leaving a bad job.
- xyzzyz 5y ago> Adjusting the brackets a bit to collect that extra $7k (or more) from people who earn a few hundred K per year is straightforward, It’s less straightforward than you think. Please, show me how to modify the current brackets to collect extra $7k from households making >$200k (but not more than $7k), and do slow phaseout starting from above $100k. Then, do the same also for TANF, SNAP, SSI etc, all at the same time, and all at different thresholds. After doing this exercise, you’ll find that it’s much easier to think about it in terms of keeping brackets the same for all, and having separate, phased out deductions, rather to fiddle with the brackets.