by Stephen Moore
In many ways, the Affordable Care Act was a massive tax increase masquerading as a health reform plan.
The extreme negative economic effects of these tax hikes have been under-reported by the media. Republicans are right to fight for the hikes’ total repeal, but the left has retaliated, claiming that the GOP plan is a tax cut for the wealthy. That’s the line from Warren Buffett, who says that rich people will reap the benefits.
But Obamacare’s taxes hurt nearly everyone, with new tolls on business investment, drug and vaccine production, payrolls, medical devices, hiring and union health insurance plans. We want more of all of these things, don’t we? So every one of the taxes was counterproductive.
Take the tax on health insurers. The whole objective of Obamacare was to increase the insured population and the affordability of health plans. So why tax them and make them more expensive?
Advanced medical devices and drugs not only save lives; they also save the health care system money by replacing more expensive medical procedures in the hospital. We want to win the race for the cure for cancer, heart disease, multiple sclerosis, epilepsy, Alzheimer’s, Parkinson’s and other terrible diseases. Why put more shackles on the companies that are developing ways to save lives? We want more pharmaceutical spending and more innovation, yet the liberals taxed it all.
To improve health, throw out all of these taxes yesterday.
Then there is the health of the economy. One major reason that Barack Obama gave us the weakest recovery from a recession is that business investment fell dramatically. Larry Kudlow of CNBC discovered that during this recovery, business capital spending for plants, equipment and computers was one-third the rate from 1950-2000.
There are many reasons for businesses turning so gun-shy — including the Obama regulatory assault — but one of them was Obama’s 60 percent hike in capital gains and dividend taxes. The tax rate skyrocketed to 23.8 percent from 15 percent. These are taxes on the return to business investment, so no wonder we fell well below the trend line. Business startups also fell in this recovery. Why invest in a risky new business if the government is going to snatch up to 50 percent of the profits, through income tax and capital gains taxes?
The people who were hurt most by this weren’t the investors themselves. It was the millions of working-class Americans who didn’t get jobs and the millions more who didn’t get a pay raise because businesses weren’t started or expanded. They are the victims of the invisible fist of Obamacare.
What about the myth that cutting the 3.8 percent investment surcharge on those who earn more than $250,000 will create a windfall for the very rich? No, if history is any guide, it’s likely that the rich will pay more taxes, not less, with the lowering of the rate.
For example, after the capital gains tax hike in 1986 from 20 percent to 28 percent, capital gains revenues fell from $44 billion a year to $27 billion a year by 1991. After Bill Clinton cut the capital gains tax down to 20 percent again, capital gains revenues surged from $54 billion in 1996 to $99 billion in 1999. Lower rates, more revenues.
Dan Clifton, an analyst at the investment advisory firm Strategis, finds that the 2003 Bush capital gains tax cut from 20 to 15 percent “increased tax revenues by billions of dollars in the first three years.” He notes, “The tax cut indisputably paid for itself,” because investors bought and sold stock when the tax rate was lowered, thus creating more taxable income.
Buffett says he doesn’t need the tax cut, but he’s welcome not to take it. He’s right that millionaires and billionaires are doing “just fine,” but the repeal of the Obamacare tax hikes is for the rest of us.