• More on Senator Cruz’s health insurance

    When I posted about Senator Cruz’s health insurance last week, I did not have all the relevant information, something I admitted in the post. Since then, some readers and Adrianna have brought some of the missing information to my attention. This is an update.

    • Goldman Sachs, where Mrs. Cruz is a managing director and the source of the family’s health insurance, offers coverage that cost $40,543 in 2009, according to the New York Times.*
    • That same figure shows up in this SEC filing for the company.
    • According to the Texas Tribune, Senator Cruz had an adjusted gross income of $2 million in 2010. In 2009, the Senator’s taxable income was $659,000. The article documents income for other years.
    • Taxable income at that level was associated with a 35% federal marginal tax rate in 2009. (It’s higher today.)
    • Income at that level does not incur a Social Security tax. (The 2009 cutoff was $106,800.)
    • The Medicare tax rate is 1.45%.
    • Texas has no income tax.

    Plugging and chugging with these numbers (formula here), I compute that  the “tax price” of Senator Cruz’s health insurance is about 64%. In other words about 36% of his health insurance premium cost would be government tax revenue if employer-sponsored health insurance were taxed like wages. That’s $14,595.*

    A typical, able-bodied, adult Medicaid beneficiary costs government $3,000. In other words, Senator Cruz’s health insurance tax subsidy could fund Medicaid coverage for almost five such adults.*

    For the record, I also receive a tax subsidy, though a smaller one than Senator Cruz. I earn much less and have a much lower health insurance premium. (I can’t imagine what a $40,543 premium covers.) Neither he nor I are doing anything wrong by receiving this subsidy. We’re both entitled to it under the law. I am in favor of revoking, or phasing out, this tax subsidy for him, me, and everyone. The Cadillac tax is a good start, though crude.

    I do not know Senator Cruz’s position on this policy issue. The first step is recognizing the size and scope of this subsidy. Too few Americans, including his spokeswoman, are aware of it.

    * It has been raised in the comments that the Cruzes may, in fact, have a $20k, not a $40k policy. The comment is unsubstantiated (no links). However, to be (overly?) fair, let us presume it to be true for a moment. If so, then divide the figures I’ve noted with a “*” by two. The broader point still stands, the employer-sponsored health insurance tax exclusion costs a lot. Such insurance is not free of assistance by taxpayers.


    • Paul Krugman’s column in today’s NYT is about hidden government. He refers to an article written by Steven Teles, Kludgeocracy in America, in the Fall issue of National Affairs (available on-line, and Krugman has the link to the article). It’s not so much new information that Teles presents, but he makes a compelling argument. I highly recommend the article by Teles.

    • So what? What does this prove? You didn’t need Senator Cruz as the lead-in for your opinion. Did you check out the insurance policies of all the rich individuals on the other side? No? Quite selective.

      One need not attack an individual and create cross party hostility to make the point that these high end plans should not be fully tax deductible. Their use is not exclusive to Senator Cruz or the Tea Party. It is done by most rich individuals whether on the left or the right. It is just another flaw in our health care system.

    • Breathtaking bad faith. Well done.

      You’ve taken an innocuous statement, in which an aide to Senator Cruz notes that he declines tax-payer provided health insurance–something that comes with the office of Senator–and is instead covered by a private employer’s plan, and twisted it into something quite different. (Senators are eligible to participate in the federal health insurance program, and the government pays a portion of their premiums, as with other employees of the government.)

      In the process, you ignore the facts reported by the Times (the health insurance plan costs more than $20,000) to latch on to some other figure that there is no reason to believe applies to the Cruz family. Ms. Cruz is a VP at Goldman, not (as erroneously reported by the Times) a MD. Even if she were an MD, she is not a participating managing director (as Goldman’s SEC filings refer to its partners). (How do we know she isn’t a PMD? Well, she doesn’t make more than $8 million, does she?)

      The fact is that the tax subsidy is something like half of what you suggest, and that it is less than the premium subsidy that would have been provided if Cruz had accepted the federal benefit. (And then you’d have to calculate a tax subsidy for that–and for the Medicaid beneficiaries too, while you’re at it.)

      • I welcome substantiation of the statements in your comment. Two points:

        1) Even at $20k, that’s a tax revenue loss of 2.5 times the cost of an able-bodied, non-elderly, Medicaid beneficiary.

        2) Even if the Cruz’s don’t have a $40k+ insurance policy, someone does, and it costs taxpayers a fortune.

        Of course I want to get the details of each tree right, but the forest here is quite clear, and it goes well beyond the Cruz’s. They just happened to step in it. They have nothing to be ashamed of! This is the way it is in America.

        • Unsubstantiated? No links? The link is in your original post, which includes this sentence: “Catherine Frazier, a spokeswoman for the senator, confirmed the coverage, which Goldman said was worth at least $20,000 a year.” I copied that from your page, but if you’d like I can link to it as well. There’s no reason to believe that the Cruz family has been supplied the same insurance that is provided to the most highly paid partners at Goldman.

          • “There’s no reason to believe that the Cruz family has been supplied the same insurance that is provided to the most highly paid partners at Goldman.”

            It’s links/evidence substantiating that that I seek. I recall my own post well enough.

            My main point stands. Nothing changes, qualitatively, at $20k vs $40k. The taxpayer is still supplying a tremendous subsidy. Meanwhile, there are people with $40k policies, which is astonishing.

            UPDATE: Relating to your first comment, the SEC filing to which I linked says “All of our participating managing directors (PMDs), who are the approximately 400 most senior employees of the firm, including our NEOs, receive a base salary of $600,000 per year.” I don’t know where your $8M figure comes from. Again, evidence please, per the comment policy.

            UPDATE 2: Also, take another look at the post, in particular the footnote. All out in the open. Readers can make up their own minds.

            • Oh my. I hadn’t realized this was that difficult. Here’s the part I’m referring to: “which Goldman said was worth at least $20,000 a year.” That’s the NY Times speaking, not a quote from a spokesperson. Presumably they contacted Goldman for this little nugget. That’s what reporters do, or are supposed to do, when they say that someone said something.

              Goldman PMDs split a very large bonus pool. Their average compensation last year, based on the per capita split of that bonus pool, was over $8.5 million. (Did you think that people wanted to work at Goldman to make hundreds of thousands of dollars? No.)

            • Updated accordingly. Still nary a link. I just don’t think it’s as clear as you. Either way one of us is inconsistent with some bit of NYT reporting.

              And my point still stands. We’re debating details that aren’t crucial to it.

            • Links? Start with google.com . Here’s a (really old) story about PMD comp at Goldman: http://dealbook.nytimes.com/2007/02/13/for-goldmans-highest-echelon-a-salary-to-match/

              You can choose to believe they make significantly less now, if you’d like.

              The NY Times has never said that the Cruz family has a $40,000 policy through Goldman. You said that, despite linking to and quoting an article that said that the policy was more than 20,000. Obviously 40 is more than 20, but there’s no reason to think that the number selected in the piece we’ve now both quoted isn’t somewhat approximate to the actual cost. The fact that certain incredibly highly paid folks at Goldman have a more expensive plan doesn’t create any conflict for anything the Times has reported.

              Meanwhile, OPM.gov publishes the costs of various plans available to Senators. It’s quickly obvious that the government’s employer contribution for a family plan can easily exceed the value of the tax subsidy in question here (properly calculated now), while of course also offering its own tax subsidy. So that’s the context you yanked this statement from, for no good reason.

        • “They have nothing to be ashamed of! ”

          Quite the contrary, they very much have something to be ashamed of. The problem isn’t their taking the tax benefit, the problem is the hypocrisy of taking that tax benefit and objecting to a much smaller tax benefit for someone else, all the while claiming to be a principled conservative.

          • Read my post on how much the Cruz’s actually pay in taxes – they have NOTHING to be ashamed about – or go to the Texas newspaper link to see the actual returns if you prefer.

            The genuine hypocrites are the 10 or so Dem Senators who now want a delay so they will not have to run for re-election on this issue.

            To bad a couple of them did not step up on October 1 and say let’s see if we can work out a way to have a delay the will allow individual the same grace period that the President unilaterally granted to business.

            And can we start using this time to fix some things that we might all find acceptable – like the 29 hour problem.

            But the Dems wanted to demonize Cruz, Lee, Paul and Rubio – and loved the idea of having a distraction to keep the media from focusing on the incompetence of the administration in getting this up and running.

    • Maybe it’s a PPO that covers 98% of any bill?

    • Austin,

      We are in violent agreement that Cadillac plans should be heavily taxed and that in my perfect world the deductibility of health insurance expenses by employers would go away.

      But in fairness to the Cruz’s I would point out that in 2010 they paid over $674k in federal income taxes – of which over $60k was in the form of the “Self-Employment” tax – which is the employer side of Social Security and Medicare. the SS part is indeed limited – but the 2.9% for Medicare is applied to all income – and more than exceeds any offsets you calculate whether it be a $40k insurance plan or a $20k plan.

      When we finance the government on the backs of the rich – roughly 50% of us pay no federal income tax – $0 – it is pretty easy – and sometimes fun to demonize them…

      • I’m picking on the policy, not Senator Cruz or the rich.

        • Fair enough – and I don’t want to defend the policy because as I said earlier I would do away with health insurance deductibility if it were up to me – but I find it a bit hard to understand how folks like the Cruz’s are a net cost to the taxpayer. The self employment tax will – assuming they both continue to work at the same levels for the next 20 years or so [he is 42]- alone will generate well over a million dollars for Medicare. Again we can argue about whether they should pay more – but it really seems that the policy works pretty well in their case – they get a subsidy [the same sort available ot us all] but also pay in far more than most of us – and far more than they are likely to consume in total health care cost over their lifetime let alone medicare reimbursements

    • Wouldn’t you have to include the excise tax revenue to get the true cost to taxpayers?

    • Suppose (hypothetically speaking) that a couple of handymen were at my house on Saturday and I paid them $300 cash for the work they did. Can you please calculate their tax subsidy? Thanks.

    • to be clear the them I was alluding to was the “rich”…

      And I would not want to be seen as arguing for lower taxes on them – I think the burden they pay is pretty close to optimal at present…

      My personal preference would be for the system to be much simpler – but get roughly the same result for most of us – putting a lot of IRS agents and accountants out of work…

      • Eliminating most tax expenditures, including the health care exemption, would go a long way towards this. Putting tax lawyers out of work would be even better.


        • I’m with you
          Time to eliminate most tax expenditures 😉

          Think u meant deductions – I like that idea too…

    • Since the Cruz have a live in child care provider, I was wondering if they (as an employer) pay for his/her health insurance? Maybe they will take advantage of sending this domestic employee to the Federal Health Insurance Marketplace/Texas. Just thinking….

    • “I can’t imagine what a $40,543 premium covers.”

      I would hope it at least includes getting every boo-boo personally kissed by an MD.

    • “A typical, able-bodied, adult Medicaid beneficiary costs government $3,000”

      I would like to see the link to this please? Is this just the cost to the federal government or does it involve the cost to states?