By John C. Goodman
Originally posted on Forbes, November 2015
Jeb Bush has been taking a beating lately – from the talking heads on TV and radio, from some of his own backers and from the mainstream media. But all these folks are talking about the governor’s performance as a debater. What’s getting ignored is far more important: the innovative policies he would pursue as president.
You would expect the Republican candidates to agree on many things. But Bush has introduced two novel economic ideas into the policy arena. One would liberate every two-earner couple in America from the onerous provisions of an anti-marriage tax code. The other could liberate seniors from some of the anti-work provisions of Social Security. In both cases, the economy as a whole would benefit from the skills, talents and productive ability of millions of people who are not now contributing as much as they could and would, with better economic incentives.
A third idea would liberate seniors as patients in a medical marketplace that is far too dominated by non-market rules and regualtions.
Two earner couples. Take a couple with a husband in the labor market and the wife who is stay-at-home. If the wife decides to enter the labor market, she will be in her husband’s tax bracket, even if she earns only the minimum wage. If he earns, say, $60,000, she will be in the 25 percent income tax bracket – even though her single co-workers won’t pay any income tax at all. A 15.3 percent, payroll tax pushes her marginal tax rate to 40 percent – just a tad higher than the rate at which we tax millionaires. If the couple has children, the combination of child care expenses and work related expanses can easily push the penalty for working to 60 or 70 cents on the dollar.
Working spouses –especially working mothers — are easily the highest taxed people in our economy!
Why is that? The short answer is that our income tax system – along with Social Security, the labor law, employee benefits law and other institutions – was formed more than half a century ago when policymakers had only one vision of how family life would be lived. There would be a husband in the labor market and a wife at home. If the wife worked at all, it would only be temporary.
As Kimberley Strassel and l explained in Leaving Women Behind: Modern Families and Outdated Laws, if that is how you live your life, these institutions work pretty well. But that isn’t the way most people are living these days. Forty years ago only one third of households consisted of two wage earners. Today it is more than three of every four. And among two-parent households, in almost half both parents are working full time.
The Bush proposal: let two earner couples file tax returns as single individuals. That would end the penalty faced by two-earner couples and create a tax code that is at least neutral with respect to marriage.
Seniors as potential workers. Probably the most underutilized source of labor in our economy is the potential employment of senior citizens. This group of individuals has accumulated a lifetime of experience and job skills. Why allow that valuable resource to go to waste?
One of the strange features of our Social Security System is that we make people who are receiving Social Security benefits pay payroll taxes back into the system if they go back to work. Private pension plans don’t do that. State and local pension systems don’t do that. So why does Social Security do that? There appears to be no good reason.
The Bush solution: eliminate the employee’s share of the payroll tax for those who have reached the normal retirement age.
Research by economists Eric French (University College London) and John Bailey Jones (State University of New York, Albany) has found that work decisions by those near the retirement age are particularly sensitive to tax rates. Boston University economist Laurence Kotlikoff and American Enterprise Institute scholar Andrew Biggs have independently estimated that full or partial elimination of the payroll tax would come close to paying for itself in terms of additional revenue generated by additional work.
Seniors as patients. Among non-seniors, the fastest growing plans in the health insurance marketplace are plans that allow the enrollees to manage more of their own health care dollars in accounts that they own and control. These plans save money, improve quality and increase access to care. Yet Medicare continues to cling to a 20th century model of health insurance and (all too often) 20th century medical practice. Consider that:
- Medicare won’t pay the market price for the services of walk-in clinics even though medical records are kept electronically, the nurses can prescribe electronically and the cost is low, the quality high and access is so much better than anywhere else that the CVS version of the service is called “MinuteClinic.”
- Medicare won’t pay for most phone, email and video consultations, even though Teladoc’s average cost for a phone consultation is one third of the cost of a new physician office visit and less than one-tenth the cost of the average emergency room visit.
- Medicare won’t pay for Uber-like house calls, even though the cost is less than one-fifth the average cost of an emergency room visit.
- Medicare won’t pay for the services of a concierge doctor, even though preliminary evidence suggests that concierge doctors actually save Medicare money.
The Bush solution: let seniors have some of the same options that non-seniors have: a flexible Health Savings Account they can use to make some of their own buying decisions. Give them the opportunity to manage some of their own health care dollars and take advantage of the innovations the private sector is offering to younger patients.
Here is a suggestion for the next round of debates: Moderators should focus on some of these and other innovative policy ideas instead of gotcha questions that have no relevance for public policy.