Committee for a Responsible Federal Budget

Health Care and Taxes

Oct 31, 2010 | Taxes| Health Care

The Bottom Line presents the next installment in our series highlighting our Ten Questions to Ask the Candidates leading up to Election Day.

7. Controlling Health Care Costs. Will more have to be done to control federal health care costs? If so, what? Health care costs remain the biggest threat to our fiscal health in the long run and are set to continue growing faster than the economy. The Congressional Budget Office projects direct federal health care costs will total 9.7 percent of GDP by 2030 and 13.7 percent by 2050.

Health care costs are a key driver behind our bleak fiscal outlook. The recently enacted health care reform bill may be a start, but the Congressional Budget Office has analyzed the law and still finds that health care costs will continue to spiral upwards, driving up our long term debt through increased costs in Medicare, Medicaid, Children’s Health Insurance Program and other federal health programs such as TRICARE (a military health program).

Pointing to the health care reform law is not enough of an answer for a candidate on this question. It alone will not slow the spiraling growth rate of health care costs, nor will repealing the law fix the problem. A candidate must therefore give a full and credible plan to address this crucial issue. Political slogans will not work. See our health care reform proposal here.

8. Raising Taxes. Will we need to raise taxes to gain control of the federal debt? If not, and you think it can be done all through spending cuts, which ones? It is very difficult to lay out a credible deficit plan that would not increase taxes. It is also very difficult to develop a comprehensive plan that would not raise taxes on families making less than $250,000 per year. If a candidate is willing to raise taxes, which ones? If not, what spending cuts would they support instead? Tax expenditures, the tax breaks that are often narrowly targeted and benefit relatively few taxpayers, also must be addressed. They are spending by another name; with little oversight by policymakers or analysis of their effectiveness.

No one wants higher taxes. Yet any candidate that proposes to close our enormous fiscal gap without raising revenues must detail the massive spending cuts required. The Center for American Progress has put together a report entitled “A Thousand Cuts” which illustrates the magnitude of the cuts required if taxes are not increased. Even so, they used tax expenditures to cover part of this plan.

Tax expenditures are little more than spending programs labeled as tax breaks. They are designed so that targeted groups have more money in their pockets if they meet certain criteria. They function no differently than spending in their incentives, yet receive little Congressional oversight or analysis of their benefits. This year alone, the federal government lost over $1 trillion in revenue due to tax expenditures. Broadening the tax base and simplifying the tax code by reforming these programs would contribute significantly to improving our budget outlook. See our ideas for reforming tax expenditures here.