Senator Elizabeth Warren hasn’t quite managed to cough up specifics on financing Medicare for All, but a group called Committee for a Responsible Federal Budget has.

Yikes! That's all I can say after reading the report.

And it’s easy to understand why Senator Warren might be hesitant to talk about where the $30 trillion required over ten years will come from (short answer: probably you).  

The Committee for a Responsible Federal Budget is bipartisan—the first two names on its list of board members are Republican Mitch Daniels and Democrat Leon Panetta.

Here is their breakdown on ways Medicare for All might be financed:

  • A 32 percent payroll tax
  • A 25 percent income surtax
  • A 42 percent value-added tax (VAT)
  • A mandatory public premium averaging $7,500 per capita – the equivalent of $12,000 per individual not otherwise on public insurance
  • More than doubling all individual and corporate income tax rates
  • An 80 percent reduction in non-health federal spending
  • A 108 percent of Gross Domestic Product (GDP) increase in the national debt
  • Impossibly high taxes on high earners, corporations, and the financial sector
  • A combination of approaches

 

None of these options is appealing, and all would slow economic growth. The report’s synopsis is more anodyne:

Each of these choices would have consequences for the distribution of income, growth in the economy, and ability to raise new revenue. Some of these consequences could be balanced against each other by adopting a combination approach that includes smaller versions of several of the options as well as additional policies.

Consequences could also be mitigated through aggressive efforts to lower per-person health care costs and/or by substantially scaling back the generosity or comprehensiveness of Medicare for All.

So we’re already talking about cutting medical services.

How would the tax hike affect you? Here's how:

Currently, most wage income is subject to a 15.3 percent payroll tax divided evenly between workers and employers to fund Social Security and Medicare. Wages above $133,000 are subject to either a 2.9 percent or 3.8 percent payroll tax to fund Medicare. We estimate a new 32 percent payroll tax, divided evenly between workers and employers, would raise roughly $30 trillion over a decade.

This tax would apply to all wages, not just those below a taxable maximum. An equivalent amount of revenue could be raised with a 23 percent payroll tax on the employee side only or a 48 percent tax on the employer side.2 A 32 percent payroll tax would raise the total payroll tax rate on most wage income to above 47 percent and the rate for high-wage earners to nearly 36 percent. It would apply to all earned income.

And how about that VAT—I mean you could just cut down on consumption and not be affected very much, right? Not so fast:

Whereas most developed countries raise a substantial share of their revenue through a tax on consumption – known as a VAT – the United States only taxes consumption broadly through state and local sales taxes. A VAT could be introduced at the federal level to finance Medicare for All. Based on estimates from the Congressional Budget Office (CBO), we project a broad-based VAT of 42 percent would raise about $30 trillion over a decade.

The first-order effect of this VAT would be to increase the prices of most goods and services by 42 percent; the VAT would thus represent 30 percent of costs on a tax-inclusive basis, which is more comparable to an equivalent income or payroll tax rate increase. Importantly, a VAT can be designed in a number of different ways, and a different tax base would change the required tax rate.

Medicare for All sounds free, doesn’t it? But you might have to spend a considerable portion of your income on premiums to support this “free” system:

Currently, most Americans are charged health insurance premiums – the majority of which are paid by employers on their behalf. Though current Medicare for All proposals call for ending premiums, policymakers could consider financing Medicare for All through mandatory fixed-dollar payments to the federal government. These payments would be a form of head tax but could resemble premiums in a number of ways. For example, they could vary based on household size and could be paid in part or in whole by employers. They could also be reduced or waived for some individuals, perhaps based on income. In 2021, we estimate those premiums would need to average about $7,500 per capita or $20,000 per household (including single-person households) and is the average applied to all individuals, including retirees, children, and low-income individuals. As an illustrative example, fully exempting everyone who would otherwise be on Medicare, Medicaid, or CHIP would increase the premiums by over 60 percent to more than $12,000 per individual.

According to the report, most of these options would raise costs for low-income families on Medicaid and the economy would shrink.

I read NBC’s story on the report before I read the report itself. NBC says:

But the report, released Monday by the Committee for a Responsible Federal Budget, also suggested that middle class families could save money overall, even with significantly higher taxes.

I'm still looking for those “overall” savings, but perhaps you are a closer reader than I am.

The current study provides “preliminary estimates of the magnitude of each potential change and a brief discussion of the types of trade-offs policymakers will need to consider,” and will be followed by more detailed analysis.  

Meanwhile, we anticipate Senator Warren’s promised plan any minute now.