We are all on the government dole

header-hoover-institution-fellows1-1By Carolyn Long Engelhard

healthinsurance_122313getty_0November 2015 marks the beginning of the third enrollment for the purchase of health coverage under the Affordable Care Act (ACA), or ObamaCare. Many on the right contend that the ACA represents an unacceptable government intrusion into private markets and that the tax credits, or subsidies, under ObamaCare are yet another government welfare program destined to promote learned helplessness and dependency. Although that line of thinking makes for great political fodder, in reality, we are all recipients of government largesse.

Let’s begin with employer-sponsored health insurance, the flagship of our voluntary private health insurance system and where about 150 million of us (including members of Congress) get health coverage. When your employer pays your salary, he or she deducts the cost of your health coverage as a business expense and, therefore, the contributions are not subject to federal or state taxes. Likewise, most employees pay their share of health insurance premiums before their income is taxed, which lowers their tax burden but has many perverse effects like eroding wages (as premiums grow faster than the economy) and disadvantaging lower-paid workers (who are in lower marginal tax brackets). The employer healthcare tax exclusion is the single largest tax break in the United States, costing the federal treasury $250 billion in lost tax revenue in 2013. Although this government subsidy is much more than the $36 billion price tag of the ACA’s coverage provisions last year, it is virtually ignored as a government handout because it inoffensively occurs through the tax system as opposed to a more visible and messy government program like the ACA.

There are many other Americans who receive government support, and not all of the benefits are targeted to those in need. While most of us would gladly route taxes extracted from our hard-earned income to worthy parents and grandparents for healthcare or retirement, we might feel less generous about other uses. For example, the mortgage interest deduction for big houses and second homes (which includes yachts if they have bedrooms and bathrooms) benefits the 5 million households making more than $200,000 a year much more than the 20 million households who survive on less than $20,000. Likewise, if you own expensive rental property and lease it, you may deduct, in addition to the mortgage interest, many other expenses including repairs, association fees and advertising. The same is true for lavish business meals and gambling losses, both of which taxpayers bankroll.

In addition to the more hidden government subsidies received through the tax system, about half of American households receive direct benefits from government programs like Medicare, Social Security, the Supplemental Nutrition Assistance Program (food stamps), nutrition programs for mothers and children, subsidized housing, and unemployment assistance, to name just a few. And that was before the ObamaCare rollout in 2014. The ACA tax credits issued to 9 million Americans this year alongside the almost 12 million individuals covered through the Medicaid expansion programs in 30 states will continue to push the percentage of Americans receiving government benefits even higher. Conservative pundits argue that this phenomenon represents an entitlement “tipping point” that signals a growing dependency on government programs and the end of individual responsibility. Others who are more politically left-leaning defend the tax-supported government safety net as part of a social contract that ensures essential programs for vulnerable children and adults.

As Americans, we can respectfully agree or disagree about who among our family, friends and neighbors deserves our tax dollars and whether we should restructure our burgeoning government programs. We can advocate changing the tax code to erase loopholes for wealthy individuals and corporations. We can even campaign for and elect individuals who promise to change the status quo and advance our particular interests. However, what we cannot do is deny the plain truth that most of us enjoy, in some form, the bounty of government handouts. In truth, we are all on the government dole.

Engelhard is the director of the Health Policy Program at the University of Virginia School of Medicine’s Department of Public Health Sciences.

Be the first to comment

Leave a Reply

Your email address will not be published.