Medicare for All: The Democrats Plan for a 42 National Sales Tax

If paid for with new taxes Federal Taxation would have to roughly double

By Rick Newman

If youre a Democrat who supports Medicare for All" pick your poison. You can ruin your political career and immolate your party by imposing a either a ruinous new Sales Tax a gargantuan Income Tax hike or a surtax on Corporate Income that would wreck thousands of businesses. This is the cost of bold plans.

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Supporters of Medicare for All the huge single-payer government health plan backed by Bernie Sanders Elizabeth Warren and several other Democratic presidential candidates say its time to think big and move to a health plan that covers everyone.

Getting there is a bit tricky however.

  • A variety of analyses estimate that Medicare for All would require at least $3 trillion in new spending.
  • Thats about as much tax revenue as the government brings in now.
  • So if paid for through new taxes federal taxation would have to roughly double.

The Committee for a Responsible Federal Budget (CRFB) has done voters a favor by spelling out what kinds of new taxes it would take to come up with that much money. Warren justifies many of her programs by saying all it would take is two cents" from the wealthy. Thats a reference to her 2 wealth tax on ultra-millionaires.

But Medicare for All would be so expensive that if you taxed top earners at 100 thats right if you took all the income of couples earning more than $408000 per year youd still fall far short.

And everybody getting taxed at 100 would obviously stop working.

Okay that wont do it. So what will?

CRFB outlined a variety of options.

A 42 National Sales Tax (known as a valued-added tax) would generate about $3 trillion in revenue. But it would destroy the consumer spending thats the backbone of the U.S. economy. A tax of that magnitude would be like 42 inflation wrecking consumer budgets and the many companies that depend on them from Walmart and Amazon to your local car dealer.

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Other options include:

  • A 32 Payroll Tax split between employers and workers or a 25 income surtax on everybody.
  • Or the government could cut 80 of spending on everything but health care which would include highways airports and the Pentagon.
  • Or heres a good one: Just borrow the money and quadruple Washingtons annual deficits.

The best idea might be charging every enrollee in the new program $7500 per year so theyd be paying directly for the coverage theyre getting. Some people pay more than that now for health care by purchasing insurance outright or sacrificing pay raises in exchange for employer coverage.

It would still be a nifty trick to propose that to voters.

The upside to these impossiblE scenarios is that nobody would pay anything for health care except in the $7500 example. And its possible that Medicare for All would cover health care for more people at a lower total cost than we spend now meaning the average cost per person would go down. The problem is transitioning from what we have now to whatever Medicare for all would be.

  • Warren Sanders and others tout the virtues of this magical health care program without explaining what it would cost.
  • Sanders has at least suggested some possible ways to pay for it including premiums paid by enrollees a wealth tax on millionaires and income tax rates as high as 52.
  • Warren has been cagier saying only that under her plan costs" would go down for middle-class families.
  • Under pressure to explain Warren has pledged to come up with a financing plan soon.

Its a giant problem like crossing the Mississippi River without a bridge or a boat. The other side might look great but youll die before you get there.

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Now maybe she doesnt have to.

Rick Newman the author of four books including Rebounders: How Winners Pivot from Setback to Success" is a columnist for Yahoo Finance. He previously served as Chief Business Correspondent and prior to that as Pentagon Correspondent for U.S. News & World Report. Follow him on Twitter  @rickjnewman.

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