The Metaphysics of Taxes 'n' Stuff

December 09, 1993|By TRB

Washington. -- Washington is mired in a metaphysical argument. Is the ''employer mandate'' in President Clinton's health-reform plan -- requiring employers to pay 80 percent of employee's health insurance costs -- a ''tax?''

Critics say ''yes,'' on the grounds that this money will be paid on orders from the government. The Clintonites say ''no,'' on the grounds that the money benefits individuals via health care ''alliances,'' and doesn't go to the government itself.

What turns on this distinction? Technically, nothing. The mandate works the same way whether it is labeled a ''tax'' or a ''xylophone.'' Politically, everything. If it's a tax, it becomes ''the largest tax increase in history,'' a huge increase in government's putative share of GDP, a ''socializing'' of one-seventh of the economy, and so on. American political debate often gets stuck on categories and labels like this -- as if, to take a weightier example, the abortion issue can be solved by a clear-cut answer to the question ''when human life begins.''

So, OK, call it a tax if you want. But why stop there? Most states require drivers to carry auto insurance. Is that a ''tax?'' Most employers already carry health insurance for employees, often paying more than 80 percent. For them, is the Clinton plan a ''tax cut?''

All the rival health-reform plans, including the most conservative, would force healthy people to pool their insurance costs with the unhealthy, thus raising their rates by government fiat. Is that a ''tax?''

What the government should do and what it should leave to private actors is one of the great questions of public policy. Metaphysical disputation about whether something is or is not a ''tax'' sheds no light on it. Examples abound.

Last spring, two ways were considered to prune Social Security benefits. One was to restrict cost-of-living adjustments. The other was to make a larger share of benefits subject to tax. You can argue the merits of these two alternatives all day long, but the fact that one can be labeled a ''spending cut'' and the other a ''tax increase'' is not helpful. President Clinton chose the second way, and had to endure taunts that he was engaged in a ''tax increase'' -- although it was a tax increase on money received from the government.

Another budget battle was over grazing rights on federal land in the west. The government leases these rights to private ranchers for something like one fifth of their true market value. Over the summer Interior Secretary Bruce Babbitt proposed tripling the price of grazing rights -- which would still leave them a steal. In negotiations with both houses of Congress, he settled on doubling them. But even this was too much for western Republican senators, who killed the deal with a filibuster.

Is the grazing fee a ''tax?'' The current CQ Weekly quotes the late Republican Commerce Secretary Malcolm Baldridge on the general question of what is a tax: ''I think it is simple. If it is a Democratic proposal, it is a tax; if it is Republican, it is a user fee.'' In last year's Republican election game of counting Bill Clinton's tax increases as governor, user fees were included in ,, the list. Whether called a ''tax'' or a ''fee,'' higher user charges increase the government's apparent share of GDP -- a popular measure of how ''socialized'' the economy is. And yet what is more ''socialist'': charging a market price for the use of a government-owned resource, or a welfare program for ranchers through covertly subsidized grazing rights?

Under the Guaranteed Student Loan program, banks lend money to students; the government guarantees the loans and pays the interest while the students are in school. It's a great deal for the banks. It's a lousy deal for the government, which pays the banks an interest rate three points higher than its own direct borrowing costs. The Clinton administration proposed eliminating the middleman, lending the money directly, and saving about a billion dollars a year. But opponents argued that this was ''big government,'' and ultimately got the reform whittled down to a small pilot program.

It's true that putting all these loans on the books of the government rather than private banks would increase the putative size of the government in general and the national debt in particular. But obviously that's not a sensible basis for judging whether reforming the student-loan program is a good idea. The ''big government'' obsession obscures more than it clarifies.

The taxophobia that infects American public debate is almost clinical. How much time, energy and emotion were spent last summer debating Mr. Clinton's ''middle-class tax increase'' -- which consisted of 4.3 cents a gallon on gasoline? Yet the gas tax came in October 1, and how many people even noticed it much?

As it happens, gasoline is in the process of going down more than four cents a gallon, thanks to chaos in OPEC. Gas prices fluctuate more than four cents a gallon all the time, and little attention is paid. Americans don't seem to mind sending their money to the government in Riyadh nearly as much as they mind sending it to the government in Washington. That's nutty.

TRB is a column of The New Republic, written by Michael Kinsley.

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