Friday, June 15, 2012

HB 392 will raise your Delaware income taxes by 4.5% to 7%

I'm John Kowalko, and I'm
betting you won't go back
to see this is exactly the same
bill I introduced in 2007, long
after Dr Floyd McDowell
wrote the original plan.
Don't believe me--read the bill.  And when you do, take the time to compare it, line by line, with SB 177 from 2007 in order to look for any substantive differences.  (Good luck with that, by the way.)

Here's, literally, the "money quote":

(3) Private individual and employer health insurance payments and out-of-pocket health care expenses will be replaced in this single payer Delaware Health Security Act as follows:
(A)  All employers shall pay a graduated payroll tax as follows:
(i) 4 percent for employers with less than ten employees;
(ii) 5 percent for employers with 10 to 24 employees;
(iii) 7 percent for employers with 25 to 49 employees; and
(iv) 9 percent for employers with 50 or more employees.
This payroll tax may be shared by employers and employees.
Single employers shall pay no payroll tax as each will pay according to paragraphs (B) or (C) of this subsection that applies.
(B)  All heads of households and persons subject to Delaware's income tax return shall pay an additional Health Security income tax of 2.5 percent of taxable income.
(C)  Persons filing a Delaware income tax return shall pay an additional Health Security income surtax of 2.5 percent on net taxable income in excess of $250,000. Married couples filing a Delaware joint income tax return shall pay an additional income surtax of 2.5 percent on net taxable income in excess of $500,000.

So let's see what that means.  I am employed by a university that has over 700 employees.  Let's say I make $60,000/year in taxable income.  I will pay $1,500 in Health Security Income Tax (2.5%), and my share of the graduated payroll tax will be $2,700 (4.5%) for a total health insurance cost of $4,200/year.  This raises my effective state income tax rate from its current base of 6.75% to 13.75%, or from $2,943.50 to $7,143.50.

Now what's really interesting is that my neighbor makes exactly what I make ($60,000 in taxable income), but works for a small business with only eight employees.  His share of the graduated payroll tax will only be 2%, as opposed to my 4.5%, or $1,200 as opposed to my $2,700.

In other words, he will receive his single-payer health insurance for $2,700, but I will pay $4,200.

What's the difference between us?  I made the mistake of working for an entity that employs too many people.

This is not progressive, it's simply discriminatory.

Hi, I'm Earl Jaques, and I
believe you are naive enough
to accept all the numbers from
a 5-year-old bill as if I really
had them investigated
recently.
To make matters more interesting, Representative Jaques visited Delawareliberal tonight to make a very unlikely claim:
DoTheMath: Your comment that somebody ought to do a rough estimate on the math and then see what they think. Rep Kowalko and I did. We had both the Sec of Finance office and the Controller General’s office check the numbers. They took into account the size of employers across the state to determine who has to pay 4% and who would pay 9%. Then they used last year’s tax numbers to determine the 2.5% factor. Then we added in the money which will be included in the pot from various federal programs,i.e. medicare, etc. Guess What? The numbers in the bill work!!
Uh, sorry, as I pointed out in response, this answer is patently inaccurate on its face:

Mr Jaques, the question should actually be WHEN did you do the math?
You say, We had both the Sec of Finance office and the Controller General’s office check the numbers. They took into account the size of employers across the state to determine who has to pay 4% and who would pay 9%. Then they used last year’s tax numbers to determine the 2.5% factor.
But the fact of the matter is that the percentages for each level of business you use in HB 392 are EXACTLY THE SAME as the percentages used in SB 177 five years ago. Given the fact that the state population, economic condition, number of businesses, number of uninsured persons, and the amount of money the state receives from Federal sources ARE ALL DIFFERENT than they were five years ago, what are the odds that the numbers for precisely the same funding mechanism would have matched up so well?
I’d say it was damn near impossible. Occam’s Razor would suggest that most of this analysis is old.
If I’m wrong, since Rep Kowalko also co-sponsored SB 177 back in 2007, he should have access to the Controller General’s report from 2007 (when presumably the same study was done before introducing the bill) and you could show us how two different sets of circumstances led to exactly the same funding structure.

 Even as I am writing, Representative Kowalko stops by to admit that when he introduced this bill the first time, there was no actual study of the numbers done:
There was no study involving Sec. of Finance and Controller Generals office done on SB 177.
He does not explain, however, how the numbers managed to produce all of the exact percentages that were previously used in SB 177 for HB 392.

Instead, he chides me for criticizing this bill on the day he announced it:
Since you’ll have a number of months to intimately scrutinize each characteristic of this proposed legislation I would suggest that you spend more than a few hours thinking about it to try to verify your pessimistic reasoning so that Rep. Jaques and I can seriously consider any legitimate concerns you may have. 
That would perhaps be necessary, Mr. Kowalko, if this was a new bill.  I spent far more than a few hours examining it when you first introduced it in 2007.

It smelled bad then.  It smelled bad now.

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