[Congressional Record Volume 140, Number 36 (Friday, March 25, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 25, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
              COST OF PRESIDENT CLINTON'S HEALTH CARE PLAN

 Mr. MACK. Mr. President, a major element of the debate over 
President Clinton's health care plan is its cost. The Congressional 
Budget Office identified the compulsory payments by individuals and 
businesses to health alliances as taxes.
  Along with the other elements of the President's plan, this will add 
over half a trillion dollars to Federal revenues. According to Bruce 
Barlett of the Alexis de Tocqueville Institution, this would be a 
massive 27-percent incerase in Federal revenues--a tax increase over 
four times greater than any tax increase Congress has passed in recent 
years.
  As we know all too well, taxes matter, and tax increase have damaging 
effects on working, saving, and investing. Moreover, those damaging 
effects are almost always underestimated.
  Before we move forward on this massive tax increase, we must consider 
the effects of those taxes very carefully. The following article by 
Bruce Bartlett--and I ask that his analysis be inserted into the Record 
in its entirety--is well worth examining in this light.
  The article follows:

               [From the Washington Times, Mar. 7, 1994]

The Devil of the Clinton Health Plan Is In the Detail--How to Quadruple 
                            Federal Revenue

                          (By Bruce Bartlett)

       According to the Congressional Budget Office (CBO), by the 
     year 2004, when the Clinton health plan is fully phased-in, 
     its effect will be to increase federal taxes by over 27 
     percent. Without the health plan, total federal receipts are 
     estimated to be $2,054 trillion, and the health plan would 
     increase this figure by $566 billion, raising the revenue 
     total to $2.62 trillion.
       The vast bulk of these new revenues, $513 billion, will 
     come from compulsory payments by individuals and businesses 
     to health alliances. The CBO correctly concluded that these 
     payments are, in fact, taxes, because they involve exercise 
     of the federal government's sovereign power and because the 
     health alliances are governmental institutions.
       Addtional revenues will come from three main sources. First 
     is the increase in ordinary federal income and payroll taxes 
     arising from higher wages. Wages are expected to rise because 
     for most employers the cost of providing health benefits to 
     their employees is expected to fall. The savings are assumed 
     to be given to employees in the form of higher wages. By 
     2004, these higher wage levels would increase federal 
     revenues by $34 billion.
       The second major source of new revenue is from higher 
     tobacco taxes. These taxes would roughly quadruple the tax on 
     cigarettes and other tobacco products. The federal tax on 
     cigarettes, for example, would rise from 24 cents per pack to 
     99 cents. Federal revenues, however, would not quadruple 
     because the higher taxes will significantly reduce smoking 
     and perhaps increase smuggling of cigarettes, as now happens 
     along the U.S.-Canadian border as the result of an increase 
     in Canadian cigarette taxes. Thus, according to CBO, federal 
     revenue would only triple, from $5.6 billion to $16.6 
     billion. This is a smaller increase than projected by the 
     Clinton administration, although many private economists 
     believe that even the lower CBO figure is unlikely to be 
     achieved given the Canadian experience.
       The last major revenue increase will come from excluding 
     health insurance from cafeteria plans offered by employers. 
     (Cafeteria compensation plans allow workers to choose an 
     individual package of benefits from a menu, so that some 
     workers might choose higher pension benefits in lieu of 
     health benefits, for example.) This would raise $7 billion by 
     2004. A 1 percent assessment on corporate health alliances 
     would raise another $1 billion, as would extension of the 
     current health insurance tax to presently uncovered state and 
     local government employees. There are also a few other minor 
     tax changes.
       A tax increase of this magnitude during peacetime is 
     unprecedented in American history. The largest tax increase 
     in recent years, the Tax Equity and Fiscal Responsibility Act 
     of 1982, for example, only increased revenues by less than 6 
     percent, whereas the Clinton plan proposes to increase 
     revenues by more than 27 percent.
       Although it is difficult to isolate the effects of the 
     increased taxes from the overall economic impact of the 
     Clinton health plan, the CBO admits that the overall effect 
     would be to reduce employment and real output in the economy. 
     This fact is confirmed by a recent study from DRI/McGraw-
     Hill, commissioned by the Citizens for a Sound Economy 
     Foundation, which estimates that the combination of universal 
     health coverage, employer mandate, corporate assessment and 
     taxes would, by the year 2000, reduce real GDP by $75 
     billion, increase unemployment by 900,000, raise the 
     inflation rate by 0.3 percent, and increase the federal 
     budget deficit by $115 billion.
       To be sure, such estimates must be treated as tentative. As 
     the CBO points out, there is just no precedent for estimating 
     the effects of changes of this magnitude on the economy. 
     Prudence, therefore, suggests that we at least try to find 
     out more about these possible effects before moving forward 
     with the largest domestic tax and spending program in 
     history.

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