• Reflex: October 25, 2011

    GOP governors oppose Obama plan to cut Medicaid spending, reports Sam Baker. Republican governors on Monday urged the congressional supercommittee to consider major changes to Medicaid, but not the cuts in federal spending that President Obama has proposed. The Republican Governors Association said in a letter to the supercommittee that Obama’s proposal would simply shift costs to the states. Democratic governors also oppose Obama’s plan, for the same reason.” Aaron’s Comment: I get that states see reduced federal spending, with no plans to lower costs, as just cost-shifting. But it’s hard to understand why they don’t see even more reduced federal spending in the name of “block grantsas the same.

    Ricky Perry lays out his tax reform plan in the WSJ. The plan is sketched in broad outlines, but would allow people to pay a flat tax of 20% or their tax burden under the current system. Don’s comment: Need more details, but the flat tax proposal maintains some tax deductions and credits, but the most significant one from a health policy standpoint: the deductibility of employer paid insurance is not mentioned. Tax reform could have a great impact on health policy. As always, the devil is in the details. Update: via twitter @aviksaroy reports speaking to Gov. Perry policy staff who say his flat tax proposal would leave the tax exclusion of employer paid insurance intact and here is a post by Avik to that end. Update 2: Philip Klein has more.

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    • Please stop trying to be even-handed about the flat tax.

      The progressivity of the tax code and deductions are two completely separate issues. You can have a flat tax with lots of loopholes, just as with out current system.

      But a flat tax definitely does one of two things:
      1) Reduces our overall tax income, hugely expanding our deficit and sending the country into default.
      2) Keeps the overall tax burden the same, but hugely increases taxes on the poor and middle class to pay for less taxes on the rich.

      Both 1 and 2 are unacceptable, even to most moderate conservative economists. It’s just a bad idea that doesn’t deserve to be taken seriously.

    • I think it is obvious why GOP governors don’t mind the block grants when they oppose the Obama cuts. The block-grant plan allows the governors to cut benefits to people in the name of “state innovation.” The Obama plan requires states to maintain current minimum benefit levels, so the taxpayers have to pick up the slack from the reduced federal payments. GOP governors don’t mind if poor people don’t get care (or somehow have to come up with additional money to pay for care). The GOP governors only mind if costs to the state increase so that either taxes have to go up or spending on other items have to go down. While I am symathetic to the idea that the federal government should not shift costs to the state, I find the apparent lack of concern for people’s access to health care reprehensible.