Sen. Elizabeth Warren has proposed a “Medicare for All” plan that she says has a $52 trillion price tag. That’s bigger than the entire federal budget for a decade. Warren’s plan would also eliminate the employer-provided health insurance relied upon by 155 million Americans. She has also proposed tax increases to pay for her plan, but not enough to pay for it.
Warren has come up with $20 trillion in proposed new taxes to try to pay for her plan — taxes on individuals, financial firms, large corporations. For example, she proposes an $8.8 trillion payroll tax increase, which would be borne by the middle class.
She also proposes a massive new 50% capital gains tax on the top 1% of households — a tax they will be forced to pay even before reaping such gains. It is a tax on “unrealized” gains, meaning that if your home’s value goes up, and you are subject to the tax, you have to pay the IRS half the value by which your home has risen. If you don’t have the money to pay this new tax, you may have to sell your home. As the Washington Post’s Megan McArdle notes, “almost none” of the people subject to this new tax “have a billion dollars.” Yet Warren falsely claims only billionaires, not middle class people, will have their taxes raised under her plan — a claim that is “flatly untrue,” notes McArdle.
But her proposed tax increases wouldn’t raise anywhere near the amount of money needed for Medicare for All.
To fill the gap, she relies on things such as phantom savings from administrative costs. The savings in administrative costs she cites are largely imaginary, and more than offset by people increasing their number of trips to the doctor (including unnecessary visits) when Medicare pays for them. The progressive Urban Institute found that “the increase in spending for people with this new generous coverage would outweigh the savings from lower prices for health care providers and lower administrative costs.”
And many of Warren’s tax increases would raise less and less money over time, making her healthcare plan financially unsustainable over the long run.
For example, her 6% wealth tax on the very wealthy isn’t a viable long-term source of funding, because after a decade or two, people subjected to the tax would lose most of their wealth and pay only a tiny fraction of what they once did in wealth and income taxes. (If you get 2% interest on your savings, and the government taxes 6% of your savings account every year, your savings account will shrink by 4% every year, and after 20 years, almost nothing will be left in your savings account to tax.)
Warren’s 50% tax on unrealized capital gains would also yield less and less revenue over time. To pay that tax, many people would have to sell stock or real estate. The flood of people attempting to sell stocks would result in a glut of stocks for sale. That would cause the value of stocks to fall, reducing the value of people’s mutual funds and retirement plans (such as 401(k) plans). Once the value of stock falls far enough, there will be no gains to tax, and thus, no more tax revenue from the tax. Warren’s tax on financial transactions would also reduce the value of people’s retirement plans and their stock and mutual fund holdings, and thus result in diminishing tax revenue over time.
As the Washington Post’s Megan McArdle notes, Warren’s wealth tax “can’t possibly raise revenue commensurate with the cost of M4A, or even contribute more than a trivial sum, even before you account for avoidance, effects on capital formation, etc.”
Critics argue that Warren’s healthcare plan would wipe out 2 million jobs, reducing income tax revenue and thus requiring additional tax increases.
Indeed, all of Warren’s proposed tax increases wouldn’t even pay for Warren’s past spending proposals. Those spending proposals vastly exceed $52 trillion.
Warren has previously endorsed the Green New Deal, which would cost at least $50 trillion and possibly over $90 trillion.
Not only has Warren failed to explain how to finance these costly programs, she has taken positions that would further increase their costs. For example, she has pledged to shut down America’s nuclear plants, which would increase the cost of the Green New Deal and make it radically harder to achieve reductions in greenhouse gas emissions.
In taking that position, she chose to ignore the advice of the experts. The International Energy Agency concluded that limiting global warming to no greater than 2 degrees Celsius would require doubling nuclear energy production by 2050. The Intergovernmental Panel on Climate Change, which is often cited as the leading authority on climate change, reached a similar conclusion.
(Hans Bader practices law in Washington, D.C. After studying economics and history at the University of Virginia and law at Harvard, he practiced civil-rights, international-trade, and constitutional law. He also once worked in the Education Department.)