The Bishop and the Butterfly: Murder, Politics, and the End of the Jazz Age

    Healthcare San Francisco Style

    By HSG on Mon, 04/20/2009 - 9:40pm | Politics

    I just returned to Carmel after a lovely weekend in the city by the bay.  From a gastronomic standpoint, this may have been the best three days I have spent in San Francisco as meals at Hunan Home in Chinatown and Luna Park in the Mission District were outstanding and very reasonably priced.  Both were identified via patient (but not time-consuming) sifting of online reviews.  Even the brat at AT&T Park as well as (of course) the Anchor Steam on tap there were excellent, although neither was reasonably priced.

    What compelled me to write this entry, however, was not the food but a 4% surcharge on the menu at Luna Park explaining that it was compelled by city hall's decision to guarantee emergency health care for all and to pay for it via a tax on city businesses.

    Now, I love universal health care.  Our country's failure to provide it is shameful and the fault of our corporatist government.  But, I do not think that businesses large and small should pay for our healthcare.  Instead, we should pay for it by dint of a very progressive tax structure and consumption taxes on destructive commodities like carbon-based fuels, tobacco, and alcohol.  Those with high incomes should pay taxes at a high marginal rate and those with very high incomes should pay taxes at a very high marginal rate.

    Think about what that tax on businesses does in San Francisco.  It makes it harder for the small businessperson to make a decent living.  It incentivizes her to set up shop in Oakland or Sausalito or, if she manufactures a product for the international market, in another country.  A restaurant is site-specific and San Francisco (as long as it is beautiful, historic, and cultured) will support many restaurants.  But, it will not support software companies.  It won't even support mattress retailers if they are undercut by businesses in Daly City.

    A 4% surcharge may not seem like a lot and if the dinner costs $100, it isn't significant.  But it quickly gets meaningful. A $1000 bed now costs $1040 - that $40 makes a trip to South San Francisco look worthwhile.  A $25,000 Prius now costs $26,000 - let's drive down to Sunnyvale Toyota for our next car.

    Sales taxes - unless they're designed to reduce consumption of a particular good or service - are the wrong way to go.  We've got to tax those with the money.  And by those with the money, I mean high-income individuals.

    Topics: 
    Politics

    Comments

    While I tend to agree with you about health care and progressive taxation, your argument is a bit perplexing in that it seems to be applicable to sales tax in general.  Are you generally opposed to this type of tax incidence?

    Also, though I don't have the numbers in front of me, I would bet that durable goods like cars aren't primarily being purchased in the city proper at any rate of tax.  On the contrary, nearby dealerships in the East Bay and along the I-80 corridor flourish because the real estate required for a car lot is much cheaper there.  Similarly, SF residents have to travel to either Emeryville or Menlo Park if they require cheap Swedish furnishings and housewares.


    by DF on Mon, 04/20/2009 - 10:58pm

    DF - A google search I just did revealed that there are new car dealers of the following marks in San Francisco proper: BMW, Jaguar, Toyota, Honda, Chrysler/Jeep, Ford, Rolls Royce, and Mercedes-Benz.  There may be some others that I missed.  San Francisco lost its last GM dealer this past November, http://www.gminsidenews.com/forums/f12/san-francisco-loses-its-only-rema..., after Healthy San Francisco took effect.  I do not support using real estate, sales, or corporate taxes or fees to raise money to pay for needed services.  I support high marginal tax rates on people with high income - say 40% on every dollar earned over $250K - and extremely high marginal tax rates on people with extremely high incomes - say 70% on every dollar earned over $1 million.  Maybe, we could go up to 90% on earnings over $10 million.  These rates are high but consistent with those in effect when America's economy was strongest in the 50s and 60s.  I also support very high estate taxes on large estates.

    Consumption taxes should be used to disincentivize the consumption of harmful goods and services.


    by HSG on Mon, 04/20/2009 - 11:20pm

    Sure, there are auto dealers in SF, but your list demonstrates what I've seen there for years, which is that they are primarily high-end and/or specialty outfits.  Also, GM dealers across the nation tanked this fall.  Saying that it happened "after Healthy San Francisco took effect" isn't necessarily any more meaningful than saying it happened after the Big Bang.  In fact, the article you link to points to the long-term trend of American consumer preference for foreign automobiles.

    As I said above, I would generally agree with you about progressive taxation.


    by DF on Mon, 04/20/2009 - 11:45pm

    DF -There are advantages and disadvantages for various businesses to set up shop in San Francisco.  The new Healthy San Francisco tax is an additional cost for businesses located in SF and therefore a disincentive for them to operate there.  Is this anything but obvious?


    by HSG on Tue, 04/21/2009 - 9:29am

    Sure, but California has the highest sales tax in the nation and continues to have a strong economy.  The anti-tax crowd here in California is rather fond of telling us that any increase in taxes will cause business to leave the state.  While it's true that a tax represents a disincentive, the question is to what degree this is true.  Clearly, many individuals and firms still choose California as a place to live and do business despite high tax rates on autos, consumables, real property and other items of real value.

    This particular tax may not be the right choice, but if the numbers that I've seen are at all accurate then I'm not sure it's reasonable to think that we can solve the health care problem merely by placing an additional tax on the wealthiest among us.  It seems more likely that we'll all have to pay for it.  The good news is that it will quite possibly be much cheaper.

    In the case of SF, perhaps they're having a problem with emergency care within the city and they're trying to find a way to pay for it.  Again, perhaps this particular approach isn't the best, but there are few good options with the way the laws around health care are currently structured.


    by DF on Tue, 04/21/2009 - 10:24am

    Our economy is in dire shape.  I don't know where you got the idea that it's strong.  We are one of only four states with an official unemployment rate of over 10%.  Our budget deficit is in excess of $40 billion.  California is falling apart.  The last thing we should do is make life tougher for businesses.  We definitely need single-payer health care of course but paying for it on the backs of small businesses is crazy.


    by HSG on Tue, 04/21/2009 - 11:33pm

    It's true that unemployment is above the national average in CA right now.  However, we are in the midst of a recession and have been hit exceptionally hard by the collapse of the housing bubble.  These things will ease.

    Unless I'm misunderstanding this policy in SF, the tax isn't being paid by businesses.  Rather, it's being passed on to the consumer.  If we're really going to have a health care solution, everyone will have to pay - including businesses.


    by DF on Wed, 04/22/2009 - 12:05am

    Businesses are taxed.  If they can pass the cost on to the consumer, they will.  Some restaurants are in a pretty good position to pass the cost on.  Most mattress retailers are not.  That was the point of my post.  California's economy is floundering right now if not outright collapsing.  The last thing small businesses can handle is one more fee.  The solution to our fiscal crisis is simple - raise the marginal tax rates on those with big incomes.


    by HSG on Wed, 04/22/2009 - 10:00am

    Well, you say that it's simple, but your presentation is entirely ad hoc and without details in this respect.  As I've stated, tackling issues like health care will require more than just raising the top marginal tax rates if the numbers I've seen are to be believed.  Maybe they aren't to be believed, but you haven't given me anything to compare them to.

    It's easy to widely denounce the use of a sales tax.  However, this really doesn't tell us anything about the potential harm being done to businesses in this specific case.  It also doesn't tell us anything about the potential good being done by the initiative.  So, if your main thesis here is that it's all as simple as taxing the wealthy (a prospect that I don't disagree with in principle), then I would have to say that this view does not measure up to what I understand about the economic realities that we face in California or in the nation at large.


    by DF on Wed, 04/22/2009 - 7:25pm

    DF - Is it your belief that the wealthy don't have enough money to pay for our healthcare system?  It is beyond per adventure that they do.  The Forbes 400 averaged just under $4 billion per individual/family in the September 2008 edition.  According to Forbes, "[t]he assembled net worth of America's wealthiest rose by $30 billion--only 2%--to $1.57 trillion."  See http://finance.yahoo.com/banking-budgeting/article/105762/The-Forbes-400....

    According to the National Coalition on Healthcare, Americans spent a whopping 17% of our GDP on healthcare in 2007.  The total bill was $2.4 trillion.  See http://www.nchc.org/facts/cost.shtml.  Most countries spend well under 10% for better care.  Id.

    Now, we've got the richest 400 American families or about .001% of our population controlling just under $1.6 trillion or 2/3 of all expenditures on healthcare in America - the country with the most expensive (though far from the best) healthcare in the world. I would say that we could easily pay for all of our healthcare and much more besides and eliminate the federal deficit - estimated to be north of $1 trillion, merely by raising taxes on the wealthiest 1% of all Americans.


    by HSG on Wed, 04/22/2009 - 9:37pm

    Your calculations only work if we take away everything they currently own.  Not only can we probably agree that the chance of this happening is near zero, but it also has nothing to do with the realities revolving around raising tax revenues on future incomes.

    From the WSJ:

    A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable "dime" of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.

    Even if we assume that national health care will only cost $1T annually, we still cannot raise the necessary revenues "merely by raising taxes on the wealthiest 1% of all Americans."  Everyone will have to pay.  However, it is well worth it for a variety of reasons.

    Furthermore, I don't know of a single serious economist, no matter how liberal, who thinks that it can it be accomplished only by increasing the top marginal tax rate.  It just doesn't add up.  Again, I'm not saying that the rates should not be raised.  There's still an argument for doing it, but it's not a panacea for the massive expenditures we've got on the agenda.


    by DF on Wed, 04/22/2009 - 10:01pm

    DF - You're right,  I overestimated the total income of the wealthiest Americans.   I should have added that besides raising marginal tax rates on incomes over $1 million to 70%, we also need equally high taxes on estates over $10 million.  While this still might not pay off the debt and buy us healthcare, it would get us pretty close.  Moreover, cutting sales taxes and other business fees and eliminating the healthcare burden on both individuals and corporations would result in higher taxable income for many Americans and therefore increase tax receipts.  We also need tariffs as well of course to protect what little American manufacturing remains in this country and to make investing in American manufacturing more attractive to entrepeneurs and venture capitalists.  Plus, I do support some sales taxes, for example, I would tax carbon-based fuels at very high levels, e.g., $5 per gallon of gasoline, which would also increase government revenues.


    by HSG on Wed, 04/22/2009 - 11:45pm

    man, i can't say i agree with much of this - it sounds good on paper, and certainly i agree that the wealthiest of Americans will likely have to burden more of the cost of fixing our health care system, but you conveniently neglect the negative behavioral ramifications of higher taxes.

    reducing taxes on businesses is great but if you make the highest marginal income tax rate so punitive and increase estate taxes to such an extent, who's to say entrepreneurs are going to have the same incentive to start/grow their businesses.

    same goes with tariffs. i think we've battled this battle in the past, and i will admit free and fair trade is somewhat of a canard, but protectionism is a very dangerous path.  in general, if your goal is to promote American manufacturing, I'd much rather pursue tax and other incentives designed to boost new business creation in industries deemed important rather than heavily taxing imports - it would be less harmful to economic efficiency (though still harmful) and more importantly, less likely to start a trade war, which is most certainly not in our interest.


    by Deadman on Thu, 04/23/2009 - 2:47am

    You guys are right.  Let's not go in a different direction. Things are working so well for us right now.  Tariffs and high marginal tax rates on wealthy individuals and estates only brought us the economy of the 50s and 60s.  If we make changes, let's make them on the margins and use complex incentives and caps that beg for both clarification and MIT grad students who can game them


    by HSG on Thu, 04/23/2009 - 9:49am

    The economy of the 50s and 60s was brought to us by ridiculously cheap petroleum energy.  High marginal tax rates do not make an economy.  The economy has to be fundamentally strong in order for there to be incomes to tax.

    See this recent editorial by Jeff Sachs for a description of what these changes may actually look like.


    by DF on Thu, 04/23/2009 - 6:36pm

    The relative price of energy has not fundamentally changed in 50 years.  http://www.frbsf.org/publications/economics/letter/2005/el2005-28.html


    by HSG on Thu, 04/23/2009 - 11:14pm

    I am puzzled as to why you think this information demonstrates your claim.  Surely you can see the recent disparity on the very first graph on this page.

    Aside from that, your ridiculous claim that high tax rates made for the arguably desirable economic circumstances of the 50s and 60s is still nonetheless ridiculous.  Not only did I make no claim about the relative price of oil in the last five decades, whether the relative price of oil has changed in that time frame does nothing to validate your claim.

    Furthermore, my comment about petroleum energy had to do with the contrast in economic outcomes before that time frame and those that we've enjoyed in the post-war era.  If you don't think that the cost and availability of energy inputs are fundamental to sustained periods of economic growth, then I really can't take your positions seriously.  Subtracting cheap oil from 20th century America would be like subtracting coal from the British or wind from the Dutch.

    You should also consider that if you find it so difficult to forward such an argument with people like myself and Deadman, who are more inclined to agree with you than many others would be, that there may be something wrong with your argument if the intent of it is to convince people of high-level changes to policy.


    by DF on Fri, 04/24/2009 - 2:48pm

    Aren't you the guy who tried to defend current economic policy by citing the healthy California economy?


    by HSG on Fri, 04/24/2009 - 9:22pm

    Moreover, not one argument that you have made or factual claim fundamentally alters my analysis.  Do you seriously doubt that enacting tariffs would promote domestic manufacuring?  Do you really think that anything short of raising the price of carbon-based fuels will reduce the consumption of them?  Do you think we don't need to reduce the consumption of such fuels to save the planet?  This whole thread is so stupid.  It pisses me off.  It reminds me of bull sessions in college when the point was to nit pick each other to death not to address problems in a serious manner.  The bottom line is you guys got sold a bill of goods about the need to have "free trade" and that low taxes on the wealthy are efficient.  That's all bs and there's nothing I could say that could convince you otherwise.


    by HSG on Fri, 04/24/2009 - 9:30pm

    Back off, guys. You're getting too close to the edge.


    by Michael Wolraich on Fri, 04/24/2009 - 11:25pm

    I'm trying

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    by elliottness on Sat, 04/25/2009 - 1:36am

    I'm trying

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    ha

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    by elliottness on Sat, 04/25/2009 - 1:37am