Community Rating

by John McClaughry

If there’s anything that is dear to the modern liberal, it’s the principle of progressive taxation – increasingly high tax rates on people as they rise up the income scale.

We’ve always done that with the income tax. In Vermont, we do it with the income sensitivity option to pay school property taxes and the circuit breaker for town property taxes.

Bernie Sanders has always wanted to levy the Medicare payroll tax on all income, instead of cutting the tax base off around the $110,000 level.

So, one would expect liberals to say, why don’t we require health insurance companies to charge premiums based on family income? People making $250,000 a year would pay maybe three times as much as a twenty something making $40,000 a year, for the same health care coverage?

But they don’t, and I figured out why. The first reason is that liberals haven’t really thought of it. But more importantly, some perceptive liberals must have figured out that since income rises with age, and older people have more need for health insurance, they would face very high premiums based on their incomes.

And they vote, so progressively higher premiums will be politically unpopular. The far better liberal idea is to throw old and young voters into the same rating pool, where the wealth transfer from low to high income doesn’t require any declaration of income.

That’s called community rating, or Robin Hood in Reverse.

– John McClaughry is Vice President of the Ethan Allen Institute. 

 

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The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.
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