Why the Excise Tax Sucks

~Why the Excise Tax Sucks~

In the current Senate version of the Health Insurance Reform Bill, the funding mechanism is being called an “excise tax,”   and it is currently designed to be applied to HEALTH INSURANCE BENEFITS

There’s  4 major things wrong with the Senate version of the bill:

1.  This so called excise tax, which is regressive, hurting lower wage workers more than higher wage earners.

2.  The lack of a public option to provide a guaranteed alternative to the vampire blood sucking of private for profit insurance , and therefore, the lack of universal coverage-   this means insurers are guaranteed to have a rotating pool of “excludables,” perpetrating the caste system and the medical access lottery of the damned.

3.  The lack of universal health care coverage for all, which, aside from the moral implications, therefore still provides a mechanism for all the things wrong with the current cannibalistic system to continue.

4.  The Democrats in the Senate being unable, so far, to be willing to change the suckitudinalness and go for some serious reconciliation with the House.

Today, we’ll look at reasons to get rid of the excise tax.

Can this bill be fixed ?  Of course, if we are willing to ignore the negative messaging from the White House and the Water Bearers.  

So what is going to happen come January, 2011 ? The makeup of Congress will look very different, re the majority.   Many Democrats are going to lose their seats, because they listened to the White House and not to their constituents.

What should be the primary motivation right now to fix this bill ?   Because the things that are currently WRONG with the bill are the things that the Republican Party is hammering the Democrats with, and yet the White House is saying leave those aspects of the bill as is.

Political suicide.   Some would call it hubris.  It matters not.  Will the Democrats listen and take action, or merely mouth the words and fold again ?


What is an excise tax ?

The old definition is that it is a tax on a thing made in this country, or the production of said thing.  

wikipedia ~

An excise tax is an indirect tax, meaning that the producer or seller who pays the tax to the government, is expected to try to recover the tax by raising the price paid by the buyer (that is, to shift or pass on the tax.)

Typical examples of excise duties (taxes) are taxes on gasoline and other fuels, and taxes on tobacco and alcohol.   aka “sin taxes.”

purpose (historical) :

to protect people from harming their health by abusing substances such as tobacco and alcohol.   This is also known as a Pigovian tax, which is levied on something to “correct the market outcome” to lead to less consumption of the product.   Sometimes Pigovian taxes are levied to attempt to push the market to do more of some activity which is thought to have public benefit.

ie, if consumption of less health care was thought to be a good thing, because people were “using” too much of it because it was cheap, this excise tax is being applied to bring the consumer’s price up on the theory that they would consume LESS because it would cost them more.

There is a lot of flapdoodle going on about the purpose of the Senate Finance Committee’s invention of an excise tax in the health care bill, the financial impact on the individual consumer, and who would be paying for it.  Let’s cut thru that here and now.

Remember, first and foremost, the Senate Good Ol’ Boy’s Club doesn’t want to tax themselves nor their millionaire and billionaire donors.

•The purpose of the excise tax is to decrease consumption of health insurance benefits, using the theory that if the consumer has to pay more out of pocket, they will use insurance benefits less.

The argument is made by its advocates that it will only impact those with “gold plated Cadillac Plans.”   This is bullshit.  This is CLASSIC REAGAN REPUBLICAN FRAMING RIGHT OUT OF THE THE 1980’s.    You know, how the WELFARE QUEENS ON FOOD STAMPS  get FREE MEDICAID.   That’s why they used the word “Cadillac” when Baucus’ Senate Finance Committee came up with this scheme in the spring of 2009.    

With private Health Insurance Companies now merrily jacking their rates up by 25% or more (!) just this year, while laying off employees and shedding customers, soon everybody who still has insurance is going to be falling in the category of having a Gold Plated Cadillac Health Insurance Plan.  Congratulations !    Smaller pool of customers, much higher rates, paying more in taxes just on their insurance benefits, not their overall wages, and now you, the lucky consumer, are driving a General Motors product down the freeway exit ramp.

Hypothetical situation, 2 employees work for a company, one’s a delivery driver, one’s in the office, same insurance, now with excise tax:

Guy makes  50,000 a year, gets 15,000 in gold plated Caddie benefits, pays more on the 15,000 in benefits.  say, 3% so $450 a year.   .69% of total gross

Gal makes 150,000 a year, gets 15,000 in gold plated Caddie benefits, pays more on the 15,000 in benefits.  say, 3% so $450 a year.   .27% of total gross

Who took the bigger financial hit ?   Who has more take home pay ?  Who would actually need more help to attain the same level of basic access to medical care ?  Who can afford a bigger deductible, and larger co- pays ?  Is this fair ?  Of course not.  It’s backwards.  It’s designed to ration accessibility.  It’s designed to make the system have more HMO’s and more frustration.

Oh, but there’s GOING TO BE SUBSIDIES.  

Who do those subsidies to go to ?    Directly to the consumer ?  Oh, hell no.  Wave buh- bye as they pass thru your accounts.   Working class people in Massachusetts with Romneycare™, 21% of them,  still can’t afford to use their subsidized insurance because of the price of out of pocket expenses.  The very well to do and wealthy, of course, brag about how much they love it, and ignore that Massachusetts is a very small state with an atypical demographic.


So, wouldn’t the private, FOR PROFIT, Insurance Industry LIKE to see BIGGER SUBSIDIES ?

Hell yeah, they’re drooling over them as I type.   The more customers they can create which NEED SUBSIDIES, the more guaranteed income they get.  Then they can lobby for rules on how stingy they can be in doling it back out, as needed, (as they define “need”)  to the hapless consumer.

Sweet, isn’t it ?

So what does the Senate Finance Committee bill do, again?

No Public Option, so far.   Just a Medicaid expansion, for the poorest people in the country.  

This is really great.  God knows the poor do need expanded Medicaid benefits.  Some states which generously take in a lot of immigrants, such as my California, do need this because the state legislature is so screwed up by the idiotic 2/3 majority budget rule, yearly Republican kamikaze kabuki budget theatre, and the anti tax fetish combined with the loans and bond gimmicks.   We sure are good at making more poor people in this country, indeed, we excel at that.   And the poorer you are, the less likely you have the ability to fight with an insurance company bent on ripping you off.  

But what about the working and middle class ?  Especially the ones over age 40, with a higher probability of developing age related medical problems, needing to actually use the insurance.  Any guarantee of getting TeaPartyCare, aka Medicare like those retirees, with its lack of advertising and lobbying and low cost of overhead ?   Oh, hell no, they are being bartered to the existing private, for profit insurance industry, and they will be forced to pay a percentage of their taxes to a private industry that will NOT be, in turn, obligated to cover them with access to affordable medical care.

Because the Senate Bill leaves out 40 million people.     What?  Check the Treasury figures. The Senate bill leaves out over half the people who need medical insurance in this country.  70 million need help. It covers 30.

It is the result of having a small vision.

“Is that all there is ?”, as Armando/Big Tent Democrat said ?

Red Meat for the Republicans.  

But tell me again, why are you penalizing the working/middle class with a big TAX HIKE to pay for a state welfare expansion ?   BECAUSE THE REPUBLICANS ARE GOING TO EAT YOUR KITTENS ON THIS, besides the voters think it’s stupid, or even horrifying.   Excise taxes are typically used to punish consumptive behaviors which the state wishes you wouldn’t indulge in, but that they refuse to ban because they love the revenue. So this is the Federal Government treating you having a decent health insurance policy, courtesy of your employer being swell or a great businessperson, as being as bad as having no self control or being addicted to nicotine or alcohol.  

Have I mentioned Tobacco, Corn, or Sugar growing subsidies lately ?  The government wishes you wouldn’t smoke, drink a lot of high fructose corn syrup and alcohol, too, but they’re sure not going to stop subsidizing those agricultural products.  The Tobacco Industry thru Phillip Morris Altria fights against the Public Option.

Now, why does our President want a tax full of such suckitudinalness, this excise tax on health insurance benefits, to begin with ?

What, ARC?  Surely you jest.  President Obama is a nice person.  He would never do such a thing.  It’s the Big, Bad Senate DINO Dems.  The Republican Obstructionists! Not us, we are nice. Polite. Nice, $%^&*($%^&*$%^&*  nice, nice.  Billionaires for Bush, now for Barack?  

Look, get over your squeamishness now because I just heard Mr HopeyMcChangee talk about creating some craptastic committee on freezing domestic spending and deficit reduction this morning.  He’s not your friend.  He’s a politician with right wing advisors.  He’s two steps ahead of you.  When the Republicans take back Congress, he’s going to be ready for them.  We may not be, but he will.

No, go back to this story back on January  in The Hill –  Healthcare bill excise tax likely to survive, labor leader says


Andy Stern of the Service Employees International Union (SEIU) was anticipating going to the White House and came out sounding like he had just been told to put up or shut up.

“When you have a president who says he wants to incorporate it and a Senate that says it wants to incorporate it and some in the House who say they want to incorporate it,” Stern told The Hill, “it’s hard to look that in the face and say we can just win this outright.”

The Senate-passed bill would establish a 40 percent tax on the cost of health insurance policies above $8,400 for individuals and $23,000 for families (the cost below those thresholds would not be taxed). Some people, such as police officers, firefighters and others whose insurance is expensive because they hold high-risk jobs would be exempt.

Now, why would ANYBODY who’s run as a Democrat, want to fund a financial regulatory reform on taxing the working class’ health insurance to pay for a Medicaid expansion ?

Because, if we want to be generous of assigning motivation,  back in January, “they” (dumba$$es assigned to shepard this task) thought that was the only way they could get a deal thru the Senate.  

That was then.  This is now, next year.  

How many months of the Republicans and their Tea Party Wing hammering the Democrats on the “no new taxes” theme do the DLC DINO DEMS have to experience before they begin to comprehend that the biggest whiners on the Beltway are the biggest government benefit suckers ?   Is this a coincidence ?  No.  This is what Republicans do.  They want this new business entitlement excise tax even more than the Democrats do, but they need to set up the Dems to tax themselves and not the richest Republicans. It’s a two- fer.  It gets them Federal tax dollars for private murder by spreadsheet industry, and it gets them an unfair tax to run against.    Democrats, if they wish to succeed,  need to take control of the situation and quit playing into their media dialogue.  Quit enabling them.   And they need to redefine what is a success.

If your criteria is that a program must pay for itself, and that you must do a (small)  tax hike to implement it, why are you doing it on the working class who is going to be manipulated by the Republican Party into hating it the most ?

Wouldn’t you rather stand up before the country and say, we have repaired the system so you are now guaranteed a benefit for the small amount that everyone is paying, including the wealthiest who can afford it the most ?

Right now, they can’t.

Can we apply logic to this ?

I would suggest to the Senate, if they are serious about getting the bill reconciled with the House’s version, ditch the excise tax.  Replace it with a true tax on higher wages.  

Because this dynamic of hating regressive, punitive taxes isn’t going away.


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  1. …. and at random, I just typed in “excise tax” in the google search and came up with yet another blogger’s rant on the excise tax-  Perdido Street School, which has a sidebar link to the Bonddad Blog, where my favorite phrase is-  “this sucks.”


    Go read.  

    • Eddie C on February 19, 2010 at 2:38 am

    We elected a Democratic president after a Bush recovery where workers did not participate. Eight years of flat followed by a Democratic president who claimed he would raise taxes on the rich to finance health care reform.

    End result Democratic president comes up with a fucking bullshit scheme to finance not health care reform, not even close to health care reform but insurance company expansion and American citizen reform. His scheme is to tax the workers that got jack squat from the Bush economy and leave the rich people alone.

    Did I forget to mention that he is a Democratic president? I need to keep telling myself that over and over.  

  2. A tax that creates a disincentive to purchase health care plans with an actuarial value above the threshold simply means people will buy less expensive, lower quality plans that cover less and less as time goes on.

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