Who should pay for health care reform?
The role of redistribution
As the health care reform debate heats up in both houses of Congress, the question of who will foot the bill for the current $1 trillion package has taken center stage. The House draft of the bill is expected to finance the proposal with a 3 percent surtax on households with incomes topping $250,000. The Senate has gone back and forth on a few different options, but is apparently still considering a surcharge on health benefits to the highest earners and a Medicaid capital gains tax. The Obama administration has proposed scaling back tax deductions offered to the wealthiest Americans.
Although legislators will endure tough negotiations to actually craft a revenue-neutral health care package, all of the proposals on the table will ultimately have little impact on the vast majority of Americans. Households that earn higher than $250,000 make up less than 2 percent of the population (about 2.5 million total households). Because the new health plan is expected to cover up to 50 million uninsured Americans, it would be wealth redistribution on a massive scale.
For all the furor redistribution seems to occasion (recall the Joe the Plumber moment in the 2008 election), it has become a relatively well-accepted part of society. America has long had a progressive tax code and even gradual reductions to benefit and entitlement programs have left their basic structure intact.
Although politicians rarely use them, what are some of the arguments in favor of redistribution?
In John Rawls’s landmark A Theory of Justice, one of the two basic principles of justice is that any inequalities must be to the benefit of the least well-off. The rationale behind this principle has to do with the arbitrariness of inequality. We’re all equal as human beings, and the factors that determine our success in life have no moral relevance and should therefore not dictate our fates. The instinct in play here is that even native talents do not make one person more deserving of a quality life than another.
The kind of redistribution in play in the health care debate mimics the Rawlsian approach. Tax increases to the wealthiest will have a minimal effect in leveling off society, but they do at least insure that vast inequalities in wealth do redound to the millions of Americans who cannot afford health care.
Many of the arguments for redistribution share something in common with Rawls’s overall intuition that we should try and ameliorate hardships stemming from morally irrelvant factors.
The arguments against redistribution tend to take a more libertarian bent. The material possessions people command are their property. To deny someone rightly earned property is to deny his or her personhood. On this account, redistribution is an unlawful encroachment on individual rights to ownership.
The complexities of this back and forth are many and varied, but what’s odd is how little relationship they bear to the public justifications (or condemnations) of redistribution.
Politicians who advocate tax increases to the wealthiest Americans rarely justify them. Instead, they seek to minimize the perceived damage (“We’ll only raise taxes to those who make $250,000 or more).
The reality is that as much as Americans tolerate and even support policies that promote economic equality and redistribute wealth, they tend to oppose redistribution in the abstract.
A Gallup poll from last summer found that only 13 percent of Americans favor government taking steps to distribute wealth more evenly among Americans to fix the economy, as opposed to 84 percent who favor improving overall economic conditions and the jobs situation.
Of course, where redistribution fails rhetorically, it succeeds substantively. In a June Quinnipiac poll, nearly half (49 percent) say they would be willing to pay more in taxes for a health care plan that reduces costs and covers the uninsured.
Americans seem to have difficulty reconciling the highly prized values of liberty and individual ownership with a strong social safety net that requires income redistribution. They want people to earn their own success, but they recognize that redistribution provides necessary opportunities to achieve that success.
For the foreseeable future, it seems that redistribution will continue to enjoy a stealth popularity. Rejected in name, but embraced in principle.