Taxing Billionaires Won’t Cut It

This post is a grievance about the way certain campaign slogans are being used.

Locally we are being deluged with campaign ads from people running for Congress. Several of them have a couple of things in common:

• They advocate “Medicare for All”
• They advocate “making billionaires pay their fair share

The form I’m hearing is “X supports ‘Medicare for All’. X supports ‘making billionaires pay their fair share.'” The pairing invites the inference that the first can be funded by the second: we can pay everybody’s healthcare costs without most people paying any more than they are are now simply by taxing billionaires.

The problem with that is we can’t. There aren’t enough billionaires and they don’t have enough income to pay for “Medicare for All”. The estimated cost of “Medicare for All” is $3-4 trillion per year. The estimated aggregate income of all of the billionaires in the U. S. isn’t actually known but it’s estimated as between $300 and $400 billion per year. Even confiscating 100% of billionaire income wouldn’t fund even 15% of the program.

Any serious version of “Medicare for All” necessarily implies large tax increases on the middle and upper-middle class, whether politicians admit it or not.

In addition the ultra-rich are more able than the rest of us to structure their incomes in a way as to avoid paying additional tax. Or they can move. The strategies for accomplishing this are numerous including relocating to low-tax jurisdictions like Ireland or Singapore, exploiting carried interest rules, or using complex trust structures.

At present the effective tax rate paid by the richest people in the country is estimated to be around 24%. I have no objection to its being higher. I think it would be interesting to learn the ways and means those advertising for higher taxes for billionaires plan to accomplish it or what they would deem a “fair share”.

There is also a deeper structural problem, but it is out of scope for this post: in the absence of strong Congressional will to limit the growth of healthcare costs, the very existence of “Medicare for All” would tend to raise those costs. Spoiler alert: not even the most progressive state in the Union has “Medicare for All” which provides some clues on its workability. Vermont tried but ultimately rejected it.