Which part of the federal bureaucracy would you like to see eliminated? The part that is supposed to protect mine workers from mine operators who put profit first and safety second, or the part that investigates violations of federal law, whether committed by private or public organizations? Or would both the FBI and the Mine Safety and Health Administration still be around in your ideal scenario?

Consequently, I think reports of what the median-income family of four pays in taxes now compared to years past have little impact. People like stories with characters they can relate to, and how many people live next to a family that has been making the median income for the last sixty years?

So with the help of the awesome tax and spending calculator from USA Today, I’ve put together a few stories about “real” taxpayers and how they’ve fared since the Reagan era. Each of these taxpayers files individually, uses the standard deduction instead of itemizing, and has one exemption.

Paula Pooriskova. Paula has spent her entire adult life earning the federal minimum wage, working 2,080 hours a year. Paula earned $6,448 in 1980 and $15,080 in 2010. Her tax rates have gone up as well, from a total (income + payroll) tax of 8% thirty years ago to 11.5% today. She was hit hardest by the Reagan-Bush years. By 1992, her total tax rate had jumped to 12.64%, and at the end of the Clinton administration it was essentially unchanged. Since then, it’s fallen by about one percentage point, with her marginal tax rate – the tax rate on the last dollar earned — dropping from 15% to 10%. (Note: the calculator does NOT factor in the Earned Income Tax Credit, so her actual tax bill may be overstated.)

Mandy Mediate. Mandy has been doing average, which is to say better than Paula. She was making the median family-of-four income when Reagan was elected: $24,332. She’s gotten raises every year since then, but only three percent each year – less than the average rate of inflation over that time. (Her income climbed to $59,000 in 2010, but to keep pace with inflation, she would have had to reach $64,000.) Unlike Paula, Mandy has seen a slight but steady decline in her tax rates. She went from an effective rate of 24.74% in 1980, with a marginal rate of 34%, to an effective rate in 2010 of 22.26%, with a marginal rate of 25%. As a percentage of income, Mandy’s payroll tax rate has been the same as Paula’s: 6.14% in 1980, and 7.65% today. Mandy’s total tax rates went down by two percentage points under Reagan-Bush, up a hair under Clinton, and down another percentage point under Bush II.

Tim Toomedian. Tim is probably a typical Tea Party member. His income in 1980 was $48,664 – twice the median income for a family of four that year. Since 1980, his income has kept pace with inflation, so he now makes $127,908. Paul’s tax burden, however, is much lower now than it was thirty years ago. His federal taxes have gone down from over 35% to less than 28%. And the marginal rate fell from 55% to 28%. Paul’s income tax went way down, from 32% to 21%, but that cut was offset slightly by an increase in payroll tax for Social Security and Medicare, which went from 3.26% to 6.63% – which is still less in percentage terms than Paula’s and Mandy’s. (Social Security taxes apply only to the first $106,800 earned.) The decline in Paul’s tax rate has been pretty steady. During the Reagan-Bush years, his rate dropped from 35% to 29.15%. During the eight years of the Clinton administration, the rate stayed nearly constant, going up to 29.67%. They came down again under Bush II, although they actually went up by hair between 2004 and 2008.

Ricky Richardson. Ricky is living the life. He was making $100K way back in 1980, and his income has grown at a steady 10% clip ever since, far outpacing inflation. Today, Ricky makes a cool $1,744,940. While Paula, Mandy, and Tim have seen mild to moderate changes over time in their tax rates, Ricky’s rates have shifted wildly along with the political winds. When Reagan took office, Ricky was paying nearly 50% of his income in federal taxes and the marginal rate was a whopping 68%. Eight years later, Ricky’s tax rate was all the way down to 29% and the  marginal rate had been cut by forty percentage points. Under George H. W. “Read My Lips” Bush, Ricky suffered a setback and his effective and marginal rates went up to 31%. Then Clinton came along and Ricky’s marginal rate shot up to 39.6%, with his effective tax rate close behind (38%). Next came the “Bush Tax Cuts” and Ricky’s marginal and effective rates went back down to about 35%. One thing that hasn’t changed much is Ricky’s payroll tax burden. That’s because of the cap on wages that are subject to Social Security tax. Ricky paid 1.59% of income to payroll taxes in 1980, and pays 1.83% today. (Of course, few people in Ricky’s tax bracket are taking the standard deduction, so Ricky’s tax liability is likely overstated here.)

In brief: Only one of our four taxpayers has seen an increase in federal tax rates since 1980, and that’s poor Paula on minimum wage. The Clinton era helped her with her income tax rate, but since her payroll taxes are higher than her income taxes the relief was moderated. During those Clinton years, only one taxpayer saw more than a one percentage point increase in tax rates, and that was Ricky the millionaire.

In 1980, when middle-class folks were paying 35% of their income in federal taxes and the wealthiest were subject to a 68% marginal tax rate, tax revolts and cries of “socialism” might have been justified. But it’s much harder to make that same case today. The Tea Partiers might have a better case if they warned that unless we cut spending, the only way we’ll be able to service our debts is to raise tax rates all the way back to those 1980 levels. There may be some merit to that argument and I’ll take a look at spending in another post.

I said the Tea response to this is that a) it’s unfair for "working people" to be paying the lion’s share of the nation’s income taxes in order to subsidize people who "choose" low-income lifestyles, and b) earning whatever amount of money it takes to put you into one of the higher tax brackets doesn’t actually make you "rich." (In other words, the average Tea Partiers probably think their incomes are higher than average and that therefore they pay more than the average federal tax.)

The analysis I’d like to see is this: Take a two-income family of four making the median income in 1980. (For sake of argument, call it $35K.) How much would they have paid in federal taxes — including Medicare and Social Security — assuming the standard deductions? Now follow that same family, assuming their wages rise with the CPI. What would their taxes have been over the last 30 years? Now follow a second family who started in the same place in 1980 but whose incomes went up a constant 5% per year every year (ignoring CPI). How much would they have paid in taxes over time?

Any idea how I could get those numbers? Is there an on-line historical tax calculator somewhere?

As usual, I should have Googled before I asked the question. Of course there’s an on-line historical tax calculator somewhere, and here it is. This calculator, from USA Today, shows not only how much a household’s tax burden would have been, but what the money would have been spent on. It doesn’t do the analysis exactly as I proposed above, but it’s pretty close. I think I’m going to have a little fun with this tool … results in another post.

By the way … another Tea response would be that even if taxes are at historic lows, they’re still too high. If we could get rid of all that “wasteful government spending,” they’d be even lower. Rebutting that argument requires an entirely different approach.

A second by the way … I put “average federal income tax for a median-income family of four” in quotations because I don’t really understand this concept. Where does “average” come in? The graph shows what that hypothetical family would have paid each year, so it’s not averaged over time. And I can’t imagine they’ve taken a sample of median-income families in all 50 states and averaged each family’s federal tax burden. I think I’ll have to ask the CBPP about that one.

As I pointed out recently, small businesses do have alternatives to paying ever-increasing health insurance premiums. I chose a lower-premium plan that offers a narrower choice of providers.

Fair market competition is the key to cost control in the long run. Last-minute government-imposed price freezes, especially those that seem arbitrary and perhaps politically motivated, introduce dangerous uncertainty for providers and a false sense of security for consumers.

As Atul Gawande just wrote in the New Yorker, controlling health care costs is a necessary but extremely complicated proposition. Governor Patrick’s “just say no” approach won’t cut it.

March 16, 2010
Dear Friends,
Health Care reform is as important an issue as I have dealt with in my life and it is of great interest to many people. 

In my last communication I shared a detailed letter expressing some concerns and seeking input. Since that time, I have received many calls, emails and letters.  Most calls merely express support or opposition to the proposal.  Others have more detailed points to make.  I value this input and I thank you.  I am still weighing my vote.

I decided long ago that this is one of the few issues I will decide without regard for political impact – it is too important.  I will cast my vote on the basis of what I think is in the best interest of our country, state and district; if there is a political price to pay for that vote, so be it.

So, as of this writing, here is the status of the issues I raised:

1. Pundit views to the contrary – I have NOT decided how to vote.  I want to vote YES, but I am still not certain that this SPECIFIC bill deserves my support.

2. One reason for this hesitancy is that we still do NOT have a final draft of the reconciliation bill.  No one can or should make a final decision before they read, consider and discuss the final product.  We are so far beyond generalities and rhetoric that decisions made before the actual language of the bill is available are irresponsible.

3. Early Expansion States – This is our effort to make sure Massachusetts is not punished because we have already taken action to expand health care coverage.  I have received clarifying information on some details.  I am informed that the monies involved would not be CUT from current state receipts, but Massachusetts COULD nonetheless be treated unfairly in the future if we are not grandfathered somehow.  In the House, we addressed the matter in a general manner and would have brought the state about $1.3 billion for the three years FY 2013 – 2015.  The Senate specifically granted Massachusetts an exemption totaling $165 million for the three years FY 2014 – 2016.  Every informed observer would accept the Senate protection even though it is less generous than the House’s version.  However, everyone also emphasizes how critically important it is that Massachusetts receive some protection from unfair treatment.

The President seems to have backed away from his broad threat to strip all state-specific language because he realizes they are not all “give aways”.  At the moment, I expect this concern to be addressed, but won’t know until the reconciliation bill is finalized.

4. Area Wage Index – This is an issue I did not include in the original letter, but it has been raised by so many commentators that I feel compelled to add it now.  It is another immensely complex Medicare reimbursement issue.  The House did not address it.  The Senate did include corrective language that would allow Massachusetts to regain about $300 million.  Here too I will need to see the text of the reconciliation measure to ensure that language remains intact. 

5. DSH Cuts – These are the payments made to hospitals that provide services to a larger than average number of uninsured people, like Boston Medical Center and Cambridge Health Alliance.  I am informed that Massachusetts will not be as adversely affected as I feared because we have expanded coverage to more people.  Although the national cuts may be troubling to some, Massachusetts’ early expansion will save us from much of this specific cut.

6. Value Index – This is the Senate proposal that could reward so-called “low cost areas” simply because they do not bear the burdens of a costly patient pool, medical education, a high cost-of-living region, significant research overhead, or other factors beyond merely the cost of direct service. Furthermore, this proposed index has never even been tested to determine its true impact.

Although this proposal causes everyone in Massachusetts some degree of concern, no one has yet suggested I vote against the overall package simply due to this provision. A few commentators have suggested that it would be acceptable for Massachusetts to lose money and others to gain if it helped the nation – although I respect that view, I do not share it.  Some observers have also pointed out that the Senate language has some possible protections.

7. Super IMAC – This is the proposal to strip Congress of oversight of Medicare and vest virtually all decision authority in the hands of the presidential appointees not subject to confirmation.

Again, virtually every commentator has shared my concern but not suggested I vote against the overall proposal for this reason.  One reason is that there is a ten year exemption for our major hospitals.  I cannot say that I am as trusting yet – ten years is not that long.

8. Process – Some opponents of the underlying proposal are focusing on the process for passage.  While I don’t like the convoluted process we will be following, it will not deter me from a thorough analysis of the proposal.  I would ask if anyone remembers the process that was used for Medicare, Civil Rights or any other important legislation.  Furthermore, I can assure you that convoluted processes have been used many times by Republicans and Democrats.  In fact, process is only a means to an end – the real issue is the product.  If the product is good, I will vote yes – if it is bad, I will vote no.  Following the process may be an interesting sidelight, but the important factors are decided in the substance of the bill.

Like others, I wait anxiously for the text of the reconciliation bill.  When it is public, I will ask again for comment from informed observers.

I realize that many people are tired of this debate – so am I.  But it is important and complicated.  It took years to enact Medicare, Medicaid and Social Security – and I argue that it was worth the time and trouble.

I realize that some just want us to vote yes or no based on a few talking points.  I will not succumb to that suggestion.  Health care is a serious and complicated matter.  I do not believe that the vast majority of people really want me to vote on the basis of rhetoric.

I also realize that some see this as a political tug-of-war between the right and the left or between Democrats and Republicans.  I do not see it that way at all.  I see it as the implementation of basic values:

First – Do you believe that every American should have health care coverage?  I do.

Second – If you do not, the answer is easy, vote no.  But then you should also think we should repeal Medicare and Medicaid.

Third – If you agree with me that the goal is to expand coverage, the next questions are whether THIS actual proposal gets us closer to that goal, does it do it in a fiscally responsible manner, and does it harm the programs we already have in place?  The answers are never as clean and neat as the first two questions and this is what I am trying to decide now.

For those who have contacted me, I appreciate your input.  For those who wish to do so, we are happy to hear from you.

I was just notified that the 2010-2011 rate for this same plan was going up to $410 a month – a 14% increase. I wasn’t thrilled about that, of course, given that the overall annual rate of inflation these days is close to zero. But I figured it was better than the 39% increase facing some folks this year. So I was going to put my head down and pay the bills.

Then I got a letter from Commonwealth Health Insurance Connector Authority. This is the kind of government-organized exchange that is one of the core components of the President’s health care plan. It was created as part of Massachusetts’ universal health care system.

The letter told me about Business Express, a new way for small businesses like mine to purchase insurance for employees. (Before this, we had to shop directly with insurers or – as I did — join an organization like the Small Business Service Bureau.) I went to the Business Express web site, answered three or four basic questions about my business, and then got taken to this grid:

What’s on this grid? A choice between 35 private health insurance plans. That’s right. That’s how a health insurance exchange works. You go to a government-run web site and you get to choose between several competing private plans with a wide range of costs and benefits.

I noticed that the prices for the Tufts plans started a lot lower than the prices for the plans offered by my current insurer, Harvard Pilgrim. So I checked out some of the details of the Tufts plan options. The one for $280 a month has a $2,000 annual deductible, a $5,000 out-of-pocket maximum, and no co-insurance.  Co-pays for things like doctors visits, prescription drugs, and emergency room services might be a bit different, but essentially it’s the same plan as I have now … for 20% less than I pay now and 32% less than next year’s rate for my current plan.

Let me repeat that … because of my state’s version of the “government takeover of healthcare” I will be saving $1,600 in health care premiums next year. Same doctor (I checked – he’s on the plan.) Same drugs. Same hospitals. Even if I end up getting sick and paying the difference between the out-of-pocket cost maximums, I still come out $600 ahead. I’ll also save the $85 a year it cost me to join the Small Business Service Bureau.

Hmm, you say … maybe I’m getting screwed. Maybe there is fine print somewhere that I haven’t noticed and the Tufts plan excludes coverage for some things I’ll end up needing. I suppose that’s possible, but at least I have the assurance that every plan offered through the connector meets the State’s Minimum Creditable Coverage standards.

Oh, and if I hadn’t been a small business owner … if I’d just been some poor schmuck on his own trying to get coverage … I could buy the same plan for $307 a month. And if my income were less than $32,496 as an individual I’d be eligible for subsidized insurance through the Commonwealth Care program.

Ah, but what this chart doesn’t show is the hidden costs of all the new government mandates and regulations, right? How much would I have been paying if all this health care reform had never been put in place? Well, in 2008 I was paying $486 a month (albeit for a plan with a much smaller deductible and out-of-pocket maximum, but also for one that had no prescription drug coverage at all). So the idea that more government action in the health care market inevitably leads to higher premiums is simply a canard.

OK, you Obamacare opponents … tell me which part of this you don’t like.

• Someone needs to take a poll of the American public: “Do you support the idea of having the Federal government create minimum standards for private health insurance policies?” I’m betting at least 60% say yes, and probably a lot more if you point out that the Federal government already does this for things like food safety, workplace safety, auto safety, and so forth.
• Funny to hear Republican Mike Enzi advocating so strongly for keeping Medicare (i.e. socialized medicine) intact.
• Enzi: “I like the exchanges.” Is he going to catch hell for that?
• Just for the record, I own a small business and I provide health insurance for all my employees. (I’m the only employee.) I pay $360 a month ($4,320 a year) for an HMO plan with a $2,000 deductible for hospitalization and other secondary services. I would pay this same rate regardless of my medical condition. I purchase this insurance through the Small Business Service Bureau, which is essentially an exchange. I’m given an option each year to change plans, and I can change between insurance companies or between plans offered by my existing insurance company. I think this is a perfectly acceptable solution and I’m not sure why it’s so hard to replicate this model across the nation.
• Tom Harkin is the first to address the problem of the incremental approach: It’s like seeing someone who’s drowning 50 feet off-shore and you throw them a 10-foot rope.
• Tom Harkin compares pooling to segregation. Yes, that is the only way to make a profit in insurance.
• Odd to hear Boehner referred to as “Leader.” Sounds like we’re in North Korea.
• Republicans’ reliance on state-by-state approaches sounds wrong. People are mobile, and in many cases families cross state lines. We need a national approach.
• Jay Rockefeller: “The health insurance industry is the shark that swims just beneath the water.” Ouch!
• Damn, just missed 10 minutes. What happened?
• “If Jay’s son got hit by a bus … and his father wasn’t Jay Rockefeller …” LOL!
• Obama: We want competition, but we want some minimum standards. Wait … isn’t that managed competition?
• Memo to Biden: Stop talking. Although your point about making Social Security mandated is well-taken.
• Memo to Biden ten minutes later: Seriously, stop talking.
• I hope someone does a fact check on Ryan’s budget stats, and if he’s right, the Dems need to take this seriously and get it fixed. On the other hand, it’s not clear how Ryan’s approach would make the situation any better.
• Obama trying hard to introduce “Medicare Advantage” into common parlance, since that’s the part of Medicare he wants to cut. If he can sell the idea that the cuts in Medicare he proposes are actually cuts in payments to insurance companies, he’s got a winning argument. Grassley has a rebuttal for this. Fact check time!
• Obama to McCain: “I think you make a legitimate point.” McCain is speechless. Nice moment.
• God help us if the CBO is a bunch of idiots.
• Grassley says this would be first time government requires people to buy something. Not really, since our tax dollars are used all the time to buy things that we as individuals don’t necessarily want bought.
• Conrad: Medicare is going to go broke in eight years. Doing nothing guarantees this. Right on.
• Conrad: Five percent of Medicare beneficiaries – the chronically ill – use fifty percent of all the money. Wow. Says solution for this is coordination of care. How much of the problem can be solved this way?
• Boehner thinks his job is to listen. That’s only part of it. The Congress also needs to educate and lead.
• Missed another half hour or so. Drat.
• It seems to me that both parties in both houses select the dumbest and most reactionary among them as their leaders.
• Barrasso talks about how scared people are about what will happen if the bill passes. But he neglects to mention that they’re primarily scared because they’ve been fed lies by opponents of the bill.
• Barrasso points out that people who have to pay out of pocket are best consumers of health care, because they are sensitive to cost. He’s right about this, and a fundamental weakness of the Democrats’ approach is a failure to make people more aware of what their own health care costs.
• Barrasso also right to point out need to eat less, exercise more, and stop smoking. (So will the GOP support tougher FDA regulations on cigarettes? Doubt it.)
• Obama rebuts Barrasso, pointing out that high deductible, low premium plans don’t work all that well for folks making $40,000. So true.
• Everything I’ve heard today just confirms what I think – and what others have suggested: We need a system that makes basic, no-frills care available to everyone regardless of income, employment, residence, etc., and then let the market take care of the extras like brand name prescriptions, treatments that extend life for less than three months, and all the other nice things that our “best in the world” health care providers can offer.
• Roskam makes same point about public reaction to the bill – they don’t like it – but the public thinks the bill contained death panels.
• Republicans probably make a good point that expanding Medicaid is not a great idea. But it may be the best bad idea we’ve got. What’s their alternative? As has been pointing out, you can’t help someone living at the poverty line with HSAs and tort reform.
• Obama: “Neither of these proposals are radical, the question is which one works best.” Yup.
• Obama FINALLY – at 4:35 – points out that the individual elements of the bill are popular even when the overall bill isn’t. Thank you!
• Republicans need to remember that we DID start with a blank piece of paper at the beginning of the administration. What’s the point of starting again … we’d just waste another year. Oh, and they don’t really want to start with a blank piece of paper. At least some of them want to start with the Boehner plan. (Obama made this point at the very end.)
• Again, enough with the anecdotes! We get it.
• Coburn is absolutely right that we need to reconnect the system of payment with the system of purchase. But to a great extent it’s the private health insurance system that inserts the disconnect. Why can’t he see that?
• Pelosi wraps up by saying the key thing is to eliminate discrimination against people with pre-existing conditions. But that’s at the foundation of the insurance model. You try to estimate how likely something is to happen and you charge accordingly so you can make a profit.
• Overall I thought Obama came across as someone who takes this very seriously and listens to both sides but is not receptive to bull. Many (but not all) Republicans came across as simply whining and refusing to play.
• And I really hope this kind of summit happens again and again. Having these people make their cases without filtering them through talking heads. And it makes them do their homework. I loved it.

OK, time to break for lunch.

Some three-and-a-half hours later, I posted my creation:

I put a link to the video in my Facebook status update and in a tweet with the #MASen hashtag, and went to bed.

This morning I was very happy to see that a handful of people had already watched it. Some of my Facebook friends shared it, and some of their friends watched it, too. It wasn’t too long before the video had over 100 views. I was pretty psyched. People were paying attention.

Then around 1:00 this afternoon I saw myself mentioned in a tweet. It said “@universalhub Local playwright Dave Schrag’s video @dvschrag is a better take: http://bit.ly/7iOtjH.” OK, I thought, that’s good news. One of my friends is spreading the word. But then I thought … Wait a minute. A “better take” than what?

I looked at @universalhub’s earlier tweets and found “Hitler is stunned by Coakley’s defeat. http://bit.ly/6pRqzt.” Someone else had come up with exactly the same idea. And this other video was getting picked up all over the place, including big-name sites like Comedy Central. It was no contest. By early evening, my video had been watched almost 350 times, a number that I would have been awfully pleased with twelve hours prior. But this other video – which is funny but, IMHO, not as funny as mine – had almost 75,000 views. Seventy-five-THOUSAND views in a day. It was the 55th most viewed video today on ALL OF YOUTUBE!

So I ask those of you who know this stuff better than I, what did I do wrong? Why did this other guy go viral and not me? Did I fail to plant some seeds in the most obvious places? Or did this DrRonPaul2012 fellow have a huge head start on me? (He’s only got 61 YouTube subscribers, so I don’t think that alone could account for the rapid spread.)

Any ideas?