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The ObamaCare Tax: Fooling the Rubes Once Again

Written by Robert Murphy on December 11, 2014

Near the end of his treatise on economics, Ludwig von Mises wrote:

There is no means by which anyone can evade his personal responsibility. Whoever neglects to examine to the best of his abilities all the problems involved voluntarily surrenders his birthright to a self-appointed elite of supermen. In such vital matters blind reliance upon “experts” and uncritical acceptance of popular catchwords and prejudices is tantamount to the abandonment of self-determination and to yielding to other people’s domination. As conditions are today, nothing can be more important to every intelligent man than economics. His own fate and that of his progeny is at stake.

Very few are capable of contributing any consequential idea to the body of economic thought. But all reasonable men are called upon to familiarize themselves with the teachings of economics. This is, in our age, the primary civic duty.

Whether we like it or not, it is a fact that economics cannot remain an esoteric branch of knowledge accessible only to small groups of scholars and specialists. Economics deals with society’s fundamental problems; it concerns everyone and belongs to all. It is the main and proper study of every citizen. (Mises, Human Action, pp. 874-875)

The most obvious illustration of Mises’ wisdom was the recent fiasco over Jonathan Gruber’s remarks about the Affordable Care Act (aka ObamaCare). In particular, Gruber referred to the deliberate “exploitation of the lack of economic understanding of the American voter” regarding (what economists call) tax incidence.

Gruber’s point was that removing the tax deductibility of health insurance premiums was economically comparable to imposing a surtax of 40% on so-called Cadillac insurance plans. Because the surtax will be levied on the health insurance companies, it met with less resistance than a policy of eliminating the tax code’s favorable treatment of employer-provided health plans. Yet to repeat, these policies are similar in their impact once the dust settles.

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