GOP Governors Refusing To Expand Medicaid Could Cost Their States’ Employers More Than $1 Billion

The Republican governors who are refusing to accept Obamacare’s optional expansion of the Medicaid program typically cite financial concerns; despite all evidence to the contrary, GOP leaders claim that accepting federal funds to extend health coverage to additional low-income American will end up being too costly for their states. According to a new study, however, they have it backwards. Continuing to resist health reform could be significantly financially riskier than simply agreeing to expand Medicaid.

Each governor resisting Medicaid expansion could end up costing the employers in their state over $1 billion dollars, a new Jackson Hewitt Tax Service report finds. That’s because, since the health reform law seeks to ensure that everyone has access to insurance, Obamacare holds businesses with more than 50 employees responsible for making sure their workers have adequate benefits. Employers won’t be penalized for failing to offer health care to their low-wage workers if those employees can access public insurance through Medicaid — but if states don’t expand their Medicaid pools, the workers who have no other way to get health care could end up costing their employers:

A clause in the 2010 health-care overhaul penalizes some employers when their workers aren’t able to obtain affordable medical coverage through the company. Employers can avoid those fees if their workers qualify for Medicaid as part of an expansion that as many as 22 states have rejected, according to a report today by Jackson Hewitt Tax Service Inc.

Without Medicaid, a “shared responsibility” payment of as much as $3,000 may be triggered for each employee who can’t get insurance through their company. In Texas, the largest state to refuse to increase Medicaid, employers may be liable for as much as $448 million in fines, the study found. In Florida, where the legislature has refused an expansion supported by Governor Rick Scott, employers may pay as much as $219 million. [...]

Of course, this won’t come as welcome news to many of the companies that have so far gotten away with denying their workers health benefits. Employers are decrying Obamacare’s “shared responsibility” provision for potentially raising their costs, threatening to slash their workers’ hours, freeze hiring and lay off staff, or raise the prices for their products.

But the health law is simply trying to work within an employer-based insurance system that hasn’t historically been able to ensure that poor Americans can access the benefits they need. If low-wage workers can’t qualify for public insurance programs because their governors won’t expand Medicaid’s eligibility levels, then they will need to be able to get health care from their employers. And if their bosses won’t provide it, they’ll have to turn to the subsidized insurance on Obamacare’s health exchanges — triggering the employer fine.

Even aside from Medicaid expansion’s potential to help alleviate the “shared responsibility” fee, several reports have projected that the states choosing to expand their Medicaid programs will actually save money by doing so. The financial benefits are largely thanks to the increased federal funding that will free up states’ funds for other purposes, but also because of the reduced strain of providing fewer health services for the uninsured once more people are covered.

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Why Manny Pacquiao Refusing To Fight In Vegas Doesn’t Prove A Problem With American Tax Policy

Conservatives are overjoyed at the news that boxer Manny Pacquiao is refusing to fight his next bout in the United States because he doesn’t want to pay taxes, and anti-tax groups like Grover Norquist’s Americans for Tax Reform are already using it as an example of how America’s “punitive” tax policy makes it less competitive with other countries around the world.

ATR first worries that the American tax code will make it more likely that other boxers follow Pacquiao’s lead, then expands into a broader critique of taxes on ordinary American investment:

Fewer boxing matches per year would mean fewer vendors, a decrease in tourism, and less money being spent in host cities. Hosting a major sporting event has proven to create jobs and insert economic life within the city. The federal government needs to follow the examples being set by GOP governors seeking to reduce their respective state’s income tax burden or risk losing investments across every industry.

At the end of the day, people migrate and invest in places where they will receive the most for their services and skills. The higher the income tax, the less return these same people will see. By continuing to have this excessively high income tax, the U.S. continues to discourage businesses and workers looking to make profitable investments.

The most obvious problem with this thinking is that the Marquez-Pacquiao fight is somehow going to bring great benefit to Las Vegas. It won’t. Fight or no fight, Vegas hotels and casinos are going to be full of high-rollers and ordinary gamblers and non-gamblers alike, because it’s Las Vegas. The utility of a sporting event in that type of economy is almost certainly even smaller than the utility of bigger sporting events, and gearing tax policy toward the attraction of sporting events is a terrible idea anyway.

The real problem, though, is the idea that tax policy is somehow the only factor in where future fights will take place. Fight promoters are going to lose a substantial amount of money if Pacquiao and Marquez fight in Asia, because more people will pay to watch if they fight in the U.S. That means there is an advantage for promoters and even most boxers to fighting in the U.S. even if they have to pay higher tax rates. It even extends in Pacquiao’s case, since lower tax rates aren’t the only reason he wants to fight in southeast Asia: nearing the end of his career, the Filipino boxer sees it as an opportunity to broaden his global fan base.

And that hits at the fallacy of ATR’s broader critique of American tax policy. Conservatives aren’t necessarily wrong when they argue that “people migrate and invest in places where they will receive the most for their services and skills.” Where they go wrong is in assuming that tax rates are the only or even the dominant determinant in that equation, and in assuming that people and their investments automatically flow to the lowest tax rate attainable. Place matters to people, and the United States is still a more advantageous place to do business, make social and business connections, and live than many other countries with lower tax rates. That’s why rich people don’t flee high-tax states like California and New York en masse, because California and New York still offer business and social advantages to many of the people who choose to live there that other states don’t have. And it’s why businesspeople and their investment don’t just up and leave the U.S. even though we charge a higher personal tax rate than many other countries. There’s no evidence backing up the claim that taxing the rich hurts growth or drives away investment, and in the U.S., periods of higher marginal tax rates actually featured higher rates of economic growth.

There are any number of reasons why people choose to live, invest, and do business in the places they do, and taxes fund many of the things, from education to infrastructure to law enforcement that protects against the graft and corruption that are the price of doing business in Macau, that make certain places advantageous to others. Conservatives don’t like to acknowledge that reality, though, because it makes it obvious that race-to-the-bottom tax policy, in which wealthy people like Pacqiuao benefit at the expense of everyone else, is a fallacious idea.

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