Rich Union Members Are Still Rich
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To agree with Harold Pollack the mere fact that John McCain’s health care plan during the campaign was bad is not a good reason to take curbing the tax exclusion of employer-provided health benefits off the table as a financing mechanism:
Well, no. The tax proposals Democrats are debating would be good politics and good policy. Most Americans, certainly most union members, would benefit from policies that impose modest taxes on generous employer-provided plans for affluent Americans. There are ways to do this that honor unions’ core concerns. One proposed option would cap the deduction at $6,780 for individuals and $17,280 for families beginning in 2013–but would only apply the cap on individuals with incomes exceeding $100,000 or families with incomes exceeding $200,000.
Such measures would hit a minority of union members–for example teachers married to high-earners in New Jersey. By and large, though, these are progressive tax increases on affluent professionals, and would impose very little additional tax on most rank-and-file union members. Even this highly constrained cap on the affluent would raise some serious cash, an estimated $162 billion over the next decade.
I would go a bit beyond this. Progressives should support labor unions. But progressives should also support progressive tax policy, not just the interests if members of labor unions as such. Most union members aren’t rich. But some are pretty well-off. For example, any family whose income exceeds $200,000 is earning much more money than the average American family. My father is in a union. So’s LeBron James. Just as high-earners who own small businesses are still high-earners who ought to be taxed like high-earners people, high-earners people who belong to unions are still high-earners who should ought to be taxed like high-earners.
It’s a good thing about labor unions that being in one is consistent with being an unusually prosperous American—the structural position of labor in a capitalist economy is such that people from all walks of life who don’t control the means of production can benefit from collective bargaining. But it doesn’t follow that tax policy should cater to the idiosyncratic interests of high-earning union members any more than it should cater to the idiosyncratic interests of high-earning people in general. Over the long-term, organizing health care around employment is a bad idea. And financing health care through giant hidden tax subsidies is also a bad idea. But eliminating the tax exclusion in one fell swoop would be unfair and politically infeasible. Curbing its applicability to high earners would, however, be a step in the right direction, raise some necessary funds for health reform, and help put us on the road to cost control.
9 Responses to “Rich Union Members Are Still Rich”
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July 21st, 2009 at 11:40 am
Amazingly enough, this is one MY post I pretty much agree with.
July 21st, 2009 at 11:58 am
Unfair? Eliminating an inefficient tax subsidy is unfair?
Well, it looks like Matt’s willing to swallow a lot for the unions.
July 21st, 2009 at 12:05 pm
My eyes! My eyes! Please Matt, change that picture.
July 21st, 2009 at 12:07 pm
This just in: people in under collective bargaining agreements should also pay taxes! Wow, simply ground breaking stuff here.
Anyway, I think a better post would have recognized the real issue. That employers would have more leverage to change the health care plan after the bargaining agreement expires if the health plan is taxed. Employees would be paying more for their existing health care if it were taxed and would provide an incentive to move to a cheaper plan. Of course, the whole point is to change behavior in the market! It’s the same logic as a gas tax. Do we care if union members were to pay more for gas? Of course not, which is why this issue is a non-issue.
July 21st, 2009 at 12:41 pm
As some columnists have pointed out, unions do not have the power to alter the more basic capitalistic topology governing our economy.
Part-time, or adjucnt, instructors in California community colleges are defined as “at will” and “temporary” workers, no matter how long we teach in the state Ed Code. We have zero right to a job and no health insurance–unless the union in each CC district bargains these for us. Full-time, or “regular” faculty have dozens of rights in CA ed code, and union contracts can legally enforce or augument health care coverage that is automatically entered into their contracts.
But the budgets for most community colleges the country have become shrink-wrapped around severely under-paying two thirds to over three quarters of their instructors–the adjunct faculty. If the unions were to successfully negotiate a niggling amount of health coverage for the adjuncts, taxing these would be unaffordable, even though the full-time instructors might afford the tax.
The capitalist mantra of supply and demand makes it highly unlikely that adjunct instructors will gain any more rights on the state and federal level; there are far too many would-be CC teachers entering grad school and thus far too many who are “willing” to work under incrediblly exploitive conditions. The unions thus have very limited power in securing any more money for certain groupos of employees than a non-union workplace. Therefore, a much closer and nuanced approach needs to happen before anyone ocnsiders taxing “union” employees any more than non-union employees.
July 21st, 2009 at 1:40 pm
McCain wanted to tax employer-provided health care so people would be stuck buying their own health care.
The Dem proposals on the table would tax employer-provided care in order to provide more care.
There’s a difference.
July 21st, 2009 at 2:36 pm
Most union members aren’t rich. But some are pretty well-off.
Guess which group the union leadership actually represents more (and is drawn from).
July 21st, 2009 at 3:24 pm
I’ll begin with one prefacing statement for this: As the president of a union local…
I strongly support ending the exemption of taxation on health insurance benefits. This is one of the key props continuing the employment-based health insurance system. It is a sop to private health insurance. And it is a major revenue drag.
Historically, it evolved out of the WWII price controls where union members (and there were comparatively a lot more then than now, and we had a heavy manufacturing industry, and we…) couldn’t gain in wages, so companies had to come up with something to increase compensation, like health insurance coverage and pensions and the like. That was the beginning of the employment-based health insurance and healthcare system as well as the advent of the growth of private health insurance – to say nothing of being the end of the still-relevant visions of American social democracy at that time.
So why keep the employment-based and private health insurance system going? I don’t know. The current proposals for healthcare reform (which are neither “healthcare” nor “reform”) are an OK way-station on the road to single-payer. And getting rid of the tax exemption gets us one step closer to people being fed up with private health insurance and wanting single-payer.
Further, as a realist and a pragmatist of idealism, I want to minimize the suffering of people who do not have or have enough health insurance coverage. Let’s get universal coverage now (even if through private and public insurance mixes) – and let’s pay for it with a high-income surtax as well as the revenue form ending a bedrock of employment-based, private health insurance.
Now, union members almost universally have private health insurance coverage through their collective bargaining agreements. That’s because unions do good things for represented workers. Let me say unequivocally that unions are unmitigated goods for workers.
And the benefits of union contracts are not something that should attacked by anyone who doesn’t enjoy them, but instead a call to lift the floor up to union benefit levels instead of a reason to drag down union benefits to the levels the rest of the neoliberalism-wracked polity has to endure.
Of course union members and union leaders are worried about ending a benefit they enjoy disproportionately, that’s human nature. And it’s in the best interests of unions to fight for their members. Setting aside a moment the tendency of organized labor to see itself and act as a special interest in the democratic political arena, and I know that’s hard to do here, consider that health insurance benefits are understood by many union leaders as a justification for unionization as well as simply a bread-and-butter benefit that unions don’t want to see sacrificed for their members.
Don’t blame unions for opposing this. Unless you want to grant agency to unions to get things like labor law and financial regulation reforms done. We clearly don’t have the political juice to get done anything we want. This is the combination of unions providing political cover, unwittingly, for health insurance companies to keep the current ruse going. Unions and union members are easily trotted out for process stories or whatever about how there is disagreement within the Democratic ranks on healthcare reform.
And it’s too bad. Unions should step aside and reveal this broken employment-based system for the crap that it is – outdated, never really all that good, and certainly not a solution for universal coverage that reigns in healthcare costs.
Along with some major labor law reforms as an external factor, the internal factors of union renewal can be transformational. When the general public sees organized labor as fighting for the interest of ALL workers and not just the currently-unionized, we’ll see even more positive feelings toward unions, and ideally, a more receptive audience for unionization (or at least one that can’t be swayed anti-union during organizing drives). Healthcare is a great place to start building that sentiment once again that unions are for working people, not just union members.
This is one union member and union leader who thinks we need to end the employment-based, private health insurance racket and go to single-payer for the benefit of all working people. This is a great opportunity for unions to lead and bring the whole public along. It’s good politics and it’s even better policy.
July 21st, 2009 at 5:28 pm
[...] whether in the form of a surtax, in the form of curbing itemized deductions, or in the form of modifying the tax exempt status of employer-provided health benefits would be an appropriate countermove. That’s where the lion’s share of the wealth [...]