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Saturday, June 27, 2009

The Yacht Tax & Why Government-Run Healthcare is a Bad Idea

In 1990, in a fit of populism, the US passed a special tax on the purchase of yachts. These were the results:

1) The Government collected very little revenue from the tax.

2) The people who wanted yachts bought them anyway, although usually overseas to avoid the tax.

3) Many US yacht comapanies went bankrupt and were forced to lay off thousands of skilled craftsmen and other workers with good-paying jobs.

In attempting to punish the wealthy, the Government ended up screwing the middle class instead. This sort of backfire happens fairly frequently, which brings me to my next point.

I wrote a short essay about healthcare reform before, but after reading it again, it seems disorganized and weak. So here goes again.

Suppose you want to buy some potato chips. If you live in a country with a free market, you can go into a supermarket and find a whole aisle with dozens a varieties of potato chips to suit all tastes and pockets, and if you don't like potato chips, there's a whole aisle of cookies right next to it. Did the government plan any of this? No, it's the power of free-markets to provide variety and low costs. But suppose the government decided to get involved. Perhaps a pressure group would persuade them to pass a special law to provide low-priced or free snacks to poor people.
The government would probably do this by issuing special food stamps to poor people to get the snacks for free. But someone must still bear the cost. The government might reimburse the supermarket (with money raised by taxing something else more), or it might require the supermarket to bear the cost. In that case, the supermarket would increase the prices of the other products to offset the money lost from the free snacks. Either way, in order to provide free or low-cost services to some people, everyone else has to pay a higher price.

This basically what is going in the US healthcare system. The government requires hospitals to perform services at a cost dictated by the government. To make up for the loss, the hospitals and insurance companies pass the costs onto the insurance-holders, AKA the people actually honest enough to try and pay for healthcare themselves. The middle class gets shafted twice: they pay higher prices for healthcare plus taxes to pay for services for other people.

The argument that healthcare costs are lower in countries with socialized medicine (such as the UK, France, etc) is misleading because the healthcare programs in those countries are funded by higher taxes on other commodities (usually alcohol and tobacco). Gasoline costs over twice as much in the UK and France than it does in the US because of higher taxes. To look at it another way, the cost looks low only because the price has been added onto something else. These countries also keep healthcare costs low by rationing treatment (bad idea) and allowing easy access to preventative care (good idea).

The high cost of healthcare in the US is not the result of too little government intervention; it is the inevitable result of trying to control the market. The free market works great for snacks, movies, books, cars, clothes, and just about everything else. So why not healthcare? A free market for healthcare would cost less, be more efficient, offer a greater range of choice, and treat people like responsible adults.

Seems like an obvious choice to me, but then again, I'm a heartless, money-grubbing libertarian.

Bah, humbug!

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