Myth #13

National Health Insurance Would Be Good For Members Of Organized Labor.

Table 15a

Many leaders of America's largest labor unions advocate national health insurance, believing that they can turn over employee health care costs to the taxpayer. What they forget is that union members also pay taxes. Under national health insurance, the employees of the nation's largest companies would pay more in national health insurance taxes than they currently pay for private health insurance. For example, in manufacturing they would pay 50 percent more. [133]

Table 15b

A national health insurance program similar to Canada's would require at least $339 billion in new taxes: [134]

  • If the program were funded by a payroll tax, the payroll tax rate would rise from its current level of 15 percent to at least 30 percent.

  • If it were funded by an income tax, the current income tax rate would increase by 16 percentage points, pushing a middle-income worker from a 28 percent to a 44 percent income tax bracket.

  • If it were funded by a consumption tax, the price of everything we buy would increase by almost 10 percent, relative to our income.

These are the tax rates needed to pay for national health insurance for workers and their families. If new health benefits were created for the elderly or for low-income people now covered by Medicaid, tax rates would be even higher. These estimates also assume health care costs remain at their current level. Any rise in health care spending – which is virtually inevitable – would require even more tax revenue.

Note that under each of the broad-based taxes above, the amount paid rises with income. Thus, under national health insurance, the high-wage industries would pay above-average taxes, even though the workers would receive the average benefit. For example : [135]

  • On the average, the auto industry would pay about $5,641 per employee under a national health insurance payroll tax.

  • Add the loss of the current deduction for private health insurance and the total cost rises to $6,824 per auto worker.

  • Since the industry now pays only $3,055 for private health insurance, under national health insurance the cost of health care for auto workers would more than double.

Those industries with below-average wages would pay below-average national health insurance taxes and would experience a financial gain under national health insurance. (See Table XV.) Ironically, some of the latter industries are in the distribution chain of direct competitors to the manufacturing industries. Other things equal, for example, foreign auto dealers would gain a substantial cost advantage over domestic auto producers.