April 2013, Vol 2, No 2
The RomneyCare Bill Comes Due
The health reform that Mitt Romney passed in 2006 in Massachusetts presaged President Obama’s, and its results are showing what we can expect nationwide. The latest warning comes in a huge new tax increase proposed by Governor Deval Patrick.
The second-term Democrat followed his party’s recent habit and proposed an increase in the state’s single-rate income tax to 6.25% from 5.25%, the first in more than 20 years. The Bay State constitution requires a flat rate, so the Governor is sticking it to all taxpayers.
Mr. Patrick will try to add progressivity by raising the personal exemption, which taxpayer groups will challenge as unconstitutional. His plan would also eliminate 45 income-tax deductions, for such things as the capital-gains exemption on the sale of a home, adoption fees and college scholarships. This is the left’s idea for tax reform: raise rates and limit deductions – a revenue twofer.
To help this bad medicine go down, Mr. Patrick would lower the state sales tax to 4.5% from 6.25%. He says the sales levy “is widely regarded to be the most regressive tax that states impose,” which is funny given that Mr. Patrick is the same guy who raised the rate to 6.25% from 5% in 2009. Then he said raising the rate was essential to pay state bills and wouldn’t hurt the economy. Now he says it’s regressive and must be cut.
Business taxes would also rise under the Patrick revenue raid, and Bay State residents would pay higher gas taxes, turnpike tolls and car taxes. All told it’s a $1.9 billion a year net tax hike.
Mr. Patrick says the money will fund the usual array of liberal programs. But this is salesmanship to disguise that the state’s real spending driver is the exploding cost of RomneyCare. That law was supposed to save the state money. But last August Beacon Hill was forced to impose new price controls and a cap on overall state health spending because “health-care spending has crowded out key public investments,” as Mr. Patrick puts it in his budget.
He’s right about that: Health care was 23% of the state fisc in 2000, and 25% in 2006, but it has climbed to 41% for 2013. On current trend it will roll past 50% around 2020 – and that best case scenario assumes Mr. Patrick’s price controls work as planned. (They won’t.) In real terms the state’s annual health-care budget is 15% larger than it was in 2007, while transportation has plunged by 22%, public safety by 17% and education by 7%. Today Massachusetts spends less on roads, police and schools after adjusting for inflation than it did in 2007.
Mr. Romney expanded coverage without a tax increase at first, but Democrats quickly passed one anyway and now they are tripling down. Call it the return of Taxachusetts, the state’s old moniker from the 1970s and 1980s before a string of GOP Governors were elected to hold the line.
Republicans can offer only token resistance now because Democrats hold 127 of the 160 House seats and 36 of 40 Senate seats on Beacon Hill. But will the voters buy it? In the late 1970s Massachusetts helped launch the national tax revolt with property tax measure 2½, and as recently as 2000 59% of voters approved a ballot initiative to cut the state income tax rate to 5%.
Mr. Patrick is gambling that Mr. Obama has so changed the politics of taxes that he can get away with anything. He may also figure that he may skip town soon enough for the Obama Administration – think AG after Eric Holder – that he needn’t worry about the political fallout. The lesson for voters is that universal health care is going to have universally large costs. The middle class will pay the bill, as they are starting to do in Massachusetts.
Reprinted with permission of The Wall Street Journal © 2013. Dow Jones Company. All rights reserved.
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