This exercise is especially instructive, because it reveals where the "single-payer," universal coverage folks end up. Democrats who run the Wisconsin Senate have dropped the Washington pretense of incremental health-care reform and moved directly to passing a plan to insure every resident under the age of 65 in the state. And, wow, is "free" health care expensive. The plan would cost an estimated $15.2 billion, or $3 billion more than the state currently collects in all income, sales and corporate income taxes. It represents an average of $510 a month in higher taxes for every Wisconsin worker.
Right off the top, it hits the taxpayer right in the wallet. And those are with just the up front tax increases.
Employees and businesses would pay for the plan by sharing the cost of a new 14.5% employment tax on wages. Wisconsin businesses would have to compete with out-of-state businesses and foreign rivals while shouldering a 29.8% combined federal-state payroll tax, nearly double the 15.3% payroll tax paid by non-Wisconsin firms for Social Security and Medicare combined.
OK, now lets hit the businesses in the state by increasing the payroll taxes, which of course adds to their costs and makes them less competitive. They might lay off some of their employees to try to bring that back into balance. That always helps the local economy.
This employment tax is on top of the $1 billion grab bag of other levies that Democratic Governor Jim Doyle proposed and the tax-happy Senate has also approved, including a $1.25 a pack increase in the cigarette tax, a 10% hike in the corporate tax, and new fees on cars, trucks, hospitals, real estate transactions, oil companies and dry cleaners. In all, the tax burden in the Badger State could rise to 20% of family income, which is slightly more than the average federal tax burden. "At least federal taxes pay for an Army and Navy," quips R.J. Pirlot of the Wisconsin Manufacturers and Commerce business lobby.
So now they're going to try to outdo the Feds when it comes to taxes, meaning that over 35% of Wisconsin's workers income will be taken away, meaning they will have less to spend on things like food, clothing, durable goods. That also helps the local economy.
As if that's not enough, the health plan includes a tax escalator clause allowing an additional 1.5 percentage point payroll tax to finance higher outlays in the future. This could bring the payroll tax to 16%. One reason to expect costs to soar is that the state may become a mecca for the unemployed, uninsured and sick from all over North America. The legislation doesn't require that you have a job in Wisconsin to qualify, merely that you live in the state for at least 12 months. Cheesehead nation could expect to attract health-care free-riders while losing productive workers who leave for less-taxing climes.
Oh, yeah! Build in automatic rate hikes to suck even more out of the state's economy. And I doubt very much that the governor and the state legislature have taken into account that the bureaucracy that will run this train wreck will take up more and more of the revenues collected in “administrative costs”, meaning that the old saw about a bureaucracy's only function is to increase its size and decrease its efficiency in an effort to perpetuate itself. The health care system itself will get less and less of the funds as administrative costs rise. That ought to help grow Wisconsin's economy.
I've seen this phenomenon before.
Back in the mid 1970's Massachusetts wasn't trying to run a universal health care system. But the governor and legislature was doing its darnedest to destroy the state's economy by making welfare more generous and far easier to obtain than previously, and they damn near succeeded. Income and sales taxes soared. Property taxes did likewise. Corporate taxes went through the roof. All any of this did was drive businesses out of business our out of state. Many companies pulled up stakes and moved to Maine, New Hampshire, Vermont, anywhere they could escape the ever more onerous taxes and fees being placed upon them by the state. At one point Massachusetts' unemployment rate was almost 14%. The one thing that finally made the state government wake up was when the largest private employer in the state (Digital Corporation) announced it was pulling out and moving all of its operations to New Hampshire and Vermont. Fortunately the governor was not re-elected and a number of voter initiatives took back some control over state and local spending. But Massachusetts suffered the aftereffects of the profligate spending and taxation for years afterwards.
I see it being little different in Wisconsin. The main difference is that the taxpayer's money will be dumped down the black hole of universal “free” health care rather than the incredibly generous welfare system that Massachusetts had back when. But Wisconsin will suffer and its health care system will fail, leaving everybody worse off than before the “free” health care became available.