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President Obama is doing his best to implement what he told Joe the Plumber during the campaign, “When you spread the wealth around, it’s good for everybody.” As he continues to do his best to redistribute income, through projects such as the stimulus bill or the Auto Bailout, we are quickly learning that it is not good for everybody. Unemployment is actually worse with the stimulus that the POTUS said it would be if there was no stimulus, and despite the major distribution of the auto makers worth from primary investors to the unions, the company’s fortunes have not improved.

Obama’s Health Care scheme is a major step toward the President’s goal of income redistribution. The past two months has seen the administration and Congress float ideas on how to pay for the $1.4 trillion bill for Obamacare. Some of it surrounds empty promises of savings, much of it involves tax hikes . Some of these tax hikes even conform to Obama’s promise of not taxing people making under $250,000, some do not, but they are all designed to take money out of the hands of people who drive the economy and give it to what the Democrats call “the have-nots.” Anyone with $159,000+ loses income and gives it all groups below but mostly to people with incomes from $60-100,000.  All with the goal of replacing the greatness of America with a vast mediocrity.

The Tax Foundation has examined HR3200 and has laid out the bad news.

… we provide a somewhat different look at the bill by focusing on its distributional effects; that is, if it were signed into law as is, we estimate here how much income it would tax from some people to spend on others.1

Income Redistribution Is at the Heart of Health Insurance Reform
For many champions of the health insurance reform plans currently being debated on Capitol Hill, a major goal is the redistribution of income down the income scale, yet no estimate of the House bill’s distributional impact has thus far been done. Using economic analysis of the bill from the Congressional Budget Office (CBO), 2 this analysis utilizes the Tax Foundation’s Fiscal Incidence Microsimulation Model to produce estimates of how income redistribution will change if the bill becomes law. Specifically, we allocate the budgetary amount of tax increases to each family, as well as the budgetary amount of spending changes to each family (see Notes at the end for methodological assumptions).

For fiscal year 2016, the first full year in which the health care bill would be in effect, income redistribution would increase from the very top income groups, due in large part to the proposed surtax on high-income individuals. Most of that new redistribution would be spent on families in the middle of the income spectrum, and to a lesser extent to families in the upper-middle and lower-middle income levels. Some families with low incomes would gain, but they are comparatively small because most families at the lower end of the income spectrum are already covered by Medicaid or another government-provided health insurance program.

The two tables and charts below present income redistribution estimates by income group, in a before-and-after format designed to isolate the effect of the health reform plan. First we estimate the amounts of income taken from or given to each income group if all of the policies that President Obama has spelled out in his Budget become law except his health reform plan. Then we estimate how much those levels of income redistribution would change if HR 3200 were signed into law.

Average Redistribution for a Family in Each Income Group
Chart 1 presents the average amount given to or taken from one family in each income group in 2016. For the top 5 percent as a whole (minimum family market income of $358,193), the average net amount of income taken in 2016 would increase by nearly $20,000, from $167,761 to $187,550 per family. The primary beneficiaries of this additional income redistribution would be middle-income families between the 40th and 60th percentiles. Outside these two deciles in the middle of the income spectrum, the two deciles that benefit the most are the fourth decile (30th-to-40th percentiles) who would gain an average of $1,230 and the 7th decile (60th-to-70th percentiles).


Table 1 shows the estimates in more detail. We estimate that the average amount of income redistributed from the top-earning one percent of American families would increase by $88,729. That is the difference between $586,970, the amount that each family in the top one percent will have redistributed from them according to President Obama’s budget except for his health plan, and $675,698, the amount of redistribution that will occur with all those policies plus the provisions of HR 3200.

Table 1
Distributional Analysis of the House of Representatives’ Health Care Reform

Average Amounts Taxed From and Spent on Each Income Group in Fiscal Year 2016
Family Market Income Percentile
Minimum Market Income to Be in This Group
Average Market Income Before Any Redistri-bution
Post-Redistribution
Average Amount HR3200 Redis-tributes From (-) or To (+) Each Group
According to Obama Policy w/o Health Reform
If the House Health Reform Is Made Law
Average Income
Redistri-bution From (-) or To (+) Each Group
Average Income
Redistri-bution From (-) or To (+) Each Group
0 – 10%
$ 0
$ 6,517
$ 28,340
+ $ 21,823
$ 28,935
+ $ 22,418
+ $ 595
10 – 20%
$ 15,391
$ 23,674
$ 37,618
+ $ 13,944
$ 38,223
+ $ 14,549
+ $ 605
20 – 30%
$ 32,059
$ 40,012
$ 50,643
+ $ 10,631
$ 51,309
+ $ 11,297
+ $ 666
30 – 40%
$ 48,083
$ 56,420
$ 64,602
+ $ 8,182
$ 65,832
+ $ 9,412
+ $ 1,230
40 – 50%
$ 65,704
$ 75,894
$ 82,788
+ $ 6,894
$ 84,694
+ $ 8,800
+ $ 1,906
50 – 60%
$ 86,929
$ 99,391
$ 104,444
+ $ 5,053
$ 106,352
+ $ 6,961
+ $ 1,908
60 – 70%
$ 112,721
$ 126,266
$ 126,695
+ $ 429
$ 127,674
+ $ 1,408
+ $ 979
70 – 80%
$ 141,101
$ 159,448
$ 155,155
– $ 4,293
$ 155,122
– $ 4,326
– $ 33
80 – 90%
$ 180,642
$ 210,818
$ 199,942
– $ 10,876
$ 199,584
– $ 11,234
– $ 358
90 – 95%
$ 252,212
$ 295,639
$ 279,039
– $ 16,600
$ 278,458
– $ 17,181
– $ 581
95 – 99%
$ 358,193
$ 519,162
$ 457,767
– $ 61,395
$ 455,471
– $ 63,691
– $ 2,296
99 – 100%
$ 917,709
$ 2,712,382
$ 2,125,413
– $ 586,969
$ 2,036,684
– $ 675,698
– $ 88,729
All Families
$ 117,701
$ 117,701
$ 117,701
Exhibit:
Top 20%
$ 180,642
$ 420,170
$ 368,623
– $ 51,547
$ 363,349
– $ 56,821
– $ 5,274
Top 10%
$ 252,212
$ 629,358
$ 537,172
– $ 92,186
$ 526,987
– $ 102,372
– $ 10,186
Top 5%
$ 358,193
$ 963,030
$ 795,268
– $ 167,761
$ 775,480
– $ 187,550
– $ 19,789
Top 1%
$ 917,709
$ 2,712,382
$ 2,125,413
– $ 586,969
$ 2,036,684
– $ 675,698
– $ 88,729
Notes: These estimates use economic assumptions spelled out in a methodology paper. See “Tax Foundation Working Paper, No. 7, “Methodology of the Tax Foundation’s Fiscal Incidence Project.” The deficit is assumed to be financed by combination of higher taxes and reduced spending on today’s families. Savings from Medicare and Medicaid are distributed as follows: 50 percent allocated based upon share of capital income and 50 percent of amount allocated based upon calculated benefit share of Medicare and Medicaid spending.

For the middle 20 percent, we estimate that post-redistribution incomes would increase the greatest as a result of the health care bill. For example, in the middle 20 percent of the income distribution, the health care bill would increase the average amount of redistribution by $1,907.

For families at the bottom of the income distribution, redistribution would increase somewhat as a result of the House’s health care bill. Redistribution to those in the bottom decile (bottom 10 percent) would increase by an average of $595 per family, while redistribution to those in the second and third deciles would increase by about $605 and $665 per family, respectively. Finally, the fourth decile (30th – 40th percentiles) would see an increase in income redistribution from the health care bill by an average of $1,230 per family.

Often the question is asked, why does congress need to come up with a plan that tampers with everyone’s health care?  Why can’t the just fix the pre-existing conditions and the people without insurance? The answer is health care is not, nor has it ever been the primary driver of the Obamacare push, it is really all about what Barack Obama told Joe the Plumber, income redistribution.

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