When Is a Tax Not a Tax?

When is a tax not a tax? That question has the White House public relations team tied up in knots. The administration task force is putting the final touches on its health care reform package, and officials know that people are worried about how much it's going to cost in new taxes. So the latest tactic is to deny that it's going to cost any new taxes at all! Task force officials say the new health care program will be funded by a payroll deduction-and that it will be paid primarily by employers. But let's examine each of these claims. A payroll tax would be something like Medicare and Social Security. But a lot of citizens think they already pay too much in payroll taxes, so officials are being careful not to call the new deduction a tax; instead, they're calling it a "wage-based premium." The difference, they say, is that the money will not go into the U.S. Treasury. Instead, it will be channeled to new, nonprofit cooperatives, which will use the money to buy medical insurance on behalf of large groups of companies and individuals. Well, as Sheldon Richman of the Cato Institute says, "Nice try, but no cigar." What makes a payment a tax, Richman explains, is not where the money goes or what it's spent on. What makes it a tax is that the government compels us to pay it by penalty of law. Today the purchase of medical insurance is voluntary. But under the Clinton plan, it will not be voluntary: You will be insured and you will pay for it. Those who refuse are liable to punishment by fine or imprisonment. Yes, this has all the earmarks of a real tax. What about the second claim-that the deduction will be paid by employers? That, too, is nothing but sleight of hand. Noncash benefits are always taken out of workers' earnings as part of an overall compensation package. Where else would the money come from? A company has a only certain amount of funds available for hiring workers. Any expense connected with hiring workers comes out of those funds. So if the government mandates that a certain percentage of payrolls be deducted for medical insurance, that leaves less money to give workers as wages. Employers will either have to freeze wages or reduce them, or even lay off some workers. In any case, these benefits are not pulled out of a magic hat, they're taken out of our pockets. The glib assurances that only the bosses will pay is sheer demagoguery: an appeal to class envy. So don't let yourself be taken in by accounting tricks performed on your check stub. This is precisely the kind of legerdemain that makes Americans so cynical of our political leaders. If administration officials envision a great leap forward in health care, they ought to give us enough information to look before we leap.   When is a tax not a tax? Apparently whenever political officials are too timid to face voters with honesty and integrity.

07/6/93