Why Don’t They Just Listen to Me?

Yesterday I received something in the mail from Harvard’s flexible splending plan administrator describing some changes that will take effect next year. Primarily, over-the-counter medications (such as aspirin, cough medicine, and allergy-relief pills) will no longer be covered as a result of the health care overhaul implemented by, as FoxNews would say, “the democrats.”

Now, my understanding of this program was that it was supposed to improve (or provide) coverage for many who are not covered adequately, but I didn’t realize it was supposed to take away coverage from those already PAYING for their health plans through payroll deductions. Still, I can accept that. I mean, the way flexible spending works is that you have money withdrawn from your paycheck each payperiod and you can use that money pre-tax to purchase your over-the-counter medications. That’s like a 30% discount. And considering 30% off a $3.00 bottle of generic aspirin is only 90 cents…I am willing to let the government keep that little bit of savings to help those in need.

But then I read further into the document and it said that Band-Aids and saline solution will continue to be covered. Huh? Why do they need to complicate things? Why can’t they just say “No over-the-counter” drugs are included. Whenever they allow exceptions like this it just leads to confusion. And why such random exceptions like Band-Aids and saline solution?  Exclude all or nothing. No inbetweens, please.

It’s just like taxes. I have no problem paying taxes. Generally speaking, I think we’re undertaxed and with proper taxes (and a necessary reduction in state and federal employees), we wouldn’t be having so many issues with failing infrastructure (come on…3 bridges in Massachusetts crumbling just this past week alone? an under-funded public transit system in the red every single year?).

So why in the hell can’t we just have a flat income tax? I’ve read reports that over 50% of the population doesn’t pay any tax at all because they make less than the allowable thershold. That means less than half of the country is paying for entire country’s upkeep. That’s just wrong.

Instead of all these insane tax credits and tricks that benefit some and not others (homeowners can claim mortgage interest in their taxes while renters can’t claim their rent), people receive tax credits for having kids while they should be paying MORE since they’re using more of the programs), people stop contributing to social security after they reach a certain threshold (somewhere around $100,000) meanshile social security is in such dire straits everbody should continue contributing to it? That money would do a lot of good.

Long story short….I say charge everybody the same flat tax rate for all income: salary, investments, capital gains. The tax forms would be a helluva lot easier to read. And either allow ALL over-the-counter drugs to be approved for flexible, or none at all.

Why do we insist on complicating things that just don’t have to be?

6 Comments

  1. Comment by Jake on August 20, 2010 12:04 pm

    Why no flat tax? Because it’s fair and equitable, something our elected officials of both parties seem to have a problem with.

    I am all for a flat tax, no deductions, no credits, just take salary mulitply it by .xx and send in a check, of course tax preparers everywhere would revolt too and I am sure the IRS employees wouldn’t like it, but it would make life easier for millions and would finally make everyone pay taxes.

    Right now the tax code is nothing more than income redistribution take it from group A and give it to group B, nothing fair about that.

  2. Comment by Chris on August 20, 2010 12:18 pm

    The problem with a flat tax is that it’s regressive and not progressive. They’re deadly to any country that wants a healthy middle class and any kind of upward social mobility.

    Suppose we implement a 50% flat tax. Someone who makes 30K a year takes home 15K. Of that 15K take home they have to spend 100% of it on life’s necessities.

    Someone who makes $150K a year takes home 75K. Supposing they spend 50K on life’s necessities, that still leaves them with 25K to save or invest.

    The problem with a flat tax is that the middle and lower class spend a higher percentage of their take home incomes just to get by. The wealthy spend a lower percentage of their take home income. Think about it. How many lower income people have anything left over at the end of the month? While high income earners tend to have money left over to save or invest. A flat tax would be yet another way for the rich to get richer and probably be the last nail in the coffin for the middle class.

    That “50% don’t pay income tax” only tells part of the story. That only takes into account federal income tax. What that leaves out is the fact that even if you pay no federal income tax, you still pay state taxes, Social Security and Medicare taxes, as well as sales, gas, excise and every other type of tax. The “50% pay no taxes” is a BS talking point that conservatives are rallying around and really doesn’t stand up to even the slightest scrutiny.

    Google this issue and you’ll come across an MSNBC article that gives the example of a family of four that owns a home and makes around $50K a year, would pay no federal income tax (thanks to the mortgage and child deductions). That’s smack in the middle of the middle class. I’ll eat my hat if any politician goes on record saying they want to raise taxes on middle class families.

  3. Comment by snarl on August 20, 2010 12:52 pm

    Good thing I’m not a politican, then, because yes, I would say that your suggested family should still pay taxes. Not more taxes than is fair, but the same taxes as a single man or woman renting a home and earning the same amount. Why should my taxes subsidize his decision to procreate?

    This is going to get me attacked, I’m sure (because it’ll be perceived as so politically incorrect), but if you chose to have a family (in your example, a wife and two kids), then you shouldn’t be doing it unless you can afford to care for them…yourself. That may mean your spouse having to get a job, too. In Boston, $50K/year isn’t much. Though $50K could probably comfortably support a family in Tennessee. Move there so your cost of living is less and pay your fair share of taxes. Othewrise, wait to have kids until you’re financial stable, or have the spouse also get a job, too.

    Just as you searched for articles condeming flat tax as bad, you can find other articles that suggest the opposite. I did a quick search and learned that the Baltic nations have typically opted for a flat tax and have generally done well. For the record, they charge closer to 24-27% per income earner (not 50%), and it helped those countries grow fairly robustly after the fall of communism.

    Playing devil’s advocate here, but if your belief is that the $50K/ family man should pay no taxes or that the single $30K/year guy you mentioned will have to spend all of his take-home pay on living expenses under a flat tax system….could this flat tax potentially be a motivator for those people to live more wisely?

    Perhaps he would then forego the flat screen TV, SUV, iPhone contract, or other symbol of excess consumption and choose public transit, or continuing education to get a higher paying job? Maybe the family wouldn’t have a third child? Perhaps in addition to fairness, a flat tax could also motivate many to improve their lot in life? I know when I first got out of college I was making shit for money, but still paying taxes (because I had no kids or mortgage). It was tough during those years, but it developed in me a level of responsibility/maturity to improve my situation. I didn’t buy what I didn’t need, I had room mates, I didn’t over-eat, I never felt entitled.

    And I paid my taxes.

  4. Comment by Jeffrey on August 20, 2010 4:57 pm

    I personally think the gas tax needs to go up. Way too many people driving around out there.

  5. Comment by Mark on August 21, 2010 7:47 am

    Karl – something you said at the beginning of your rant – oops, I mean blog entry. 🙂

    Does the health care law REALLY state that Band-aids and saline solution are covered when using flex plans? Or did Harvard’s health plan administrators make that decision? It might seem like a minor point, but you make it sound like the law is at fault. Granted, I didn’t read every provision in it (although unfortunately, I forced myself to read a lot of it – ugh – legalese), so maybe that provision is in there. But I just did a quick check and this is all I found: “[R]eimbursement for expenses incurred for a medicine or a drug shall be treated as a reimbursement for medical expenses only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin.” Maybe because Band-aids and saline solution aren’t drugs, Harvard has decided they’re still eligible OTC.

    Inicidentally, regarding subsidizing other people’s houses and children: I’m with you. The U.S. fertility rate is 2.05 as of 2010, which suggests a stable population, but we are, after all, a nation of immigrants. At the risk also of being pilloried, I would suggest that we shouldn’t be like the French, who live in such mortal fear of losing their Frenchness that they overtly subsidize “familles nombreuses” (it’s not even covered up in tax deductions – it’s money directly given to mothers of more than one child (as of this July, it’s €119 per month for a family with two children, €272 for a family with three children, and then an extra €153 for each additional child – plus supplements for each child when the child reaches a certain age…). We’re not dealing with some war-torn society trying to rebuild its population base after being decimated in a war (as France was when it instituted the allocations famiiliales – although it no longer is). Why should the government (and taxpayers) propagate policies that suggest otherwise? Likewise, although home ownership is the American dream, having a home is much more important. Why should owners profit at the expense of renters?

    And I agree with Jeffrey, too – speaking as someone who lives in a country with fantastic public transport infrastructure, and despairing of ever seeing the same in the U.S., I think gas taxes should go up, and that they should pay for public transport projects. But of course all my car-driving friends think I’m nuts.

  6. Comment by snarl on August 21, 2010 11:28 am

    Hey, Mark –

    Based on the wording of the paperwork I got from Harvard, they implied that it’s a federal change to the Flexible Spending program. They personally wouldn’t benefit from excluding OTC items since the money in those accounts is from our own contributions – not theirs.

    Plus, they always tend to provide the employees more than the minimum benefits required by law (maternity leave is longer than federally mandated, dental coverage is higher than the norm, time off is more generous). Heck, they even provide this unusual benefit I’ve never heard offered elsewhere…a copay reimbursement program.

    If you spend over, I believe, $150/year on copayments (perfect for somebody going to weekly physical therapy or mental health therapy), Harvard will pay for anything above that amount. So, after you go to your specialist 10 times, you’re getting the rest of the visits for free.

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