A common argument for “doing something” about rising health care costs is that high health costs impose a huge burden on American firms as compared to their international competition. The story goes that, since firms must pay higher and higher costs to “provide” health care to their employees, it must therefore cost US firms more to produce the goods they produce on world markets, so prices are higher, profits are lower, and foreign firms have an advantage due to the government “provision” of health care in those countries vis-a-vis ours.
Now, that argument is absolute economic baloney. I’ll post on that in a day or so. But suppose it were true. If the justification for a government program is to improve the international competitiveness of businesses, allowing them to lower prices and raise profits, then shouldn’t proponents of health care reform also be strong advocates of abolishing the corporate income tax? The U.S. corporate income tax rate ranks among the largest in the world, and U.S. corporate income taxes generate a surprisingly small share of the total tax revenues for the federal government. The existence of this tax is indeed a pure cost to firms – it comes right out of their gross income – income that would otherwise be used to reward stockholders, to reinvest into the business to accumulate more capital, to invest in more R&D, or heck, to pay in workers in the form of profit-sharing bonuses. And with U.S. taxes so high, American firms are at a distinct disadvantage to foreign firms who operate with the “luxury” of lower taxes than U.S. firms are asked to bear.
Indeed, is it not plausible that the tax burden on U.S. corporations is a far more serious issue than the health care issue? And if it is, how come I see so few supporters of ObamaCare and nationalized health care jumping on the “tax cuts are good for U.S. firms” bandwagon? Indeed, once we open that can of worms, imagine the other things supporters of ObamaCare would have to support: suppression of wages by firms in order to remain globally competitive, ignorance of environmental externalities in order to remain globally competitive, reductions in safety in order to remain globally competitive, etc. I’ll be a died-in-the-wool Che wearing hippie before I ever live to see that day. I’m not arguing that we want firms to reduce safety, trash the environment, etc. but those are no less ways of remaining globally competitive because of costs than getting rid of taxes or getting rid of health care obligations. It’s just that there’s one teeny, tiny problem – getting health care costs off the firms’ books will not do one single thing to lower their costs! Tune in to see how.
