How Warren’s Medicare for All plan could impact the middle class financially

Sen. Elizabeth Warren has promised that she won’t raise taxes on the middle class “by one penny” to finance “Medicare for All.”

The Massachusetts Democrat’s funding proposal, now key to her 2020 platform, is chock full of new levies on employers, corporations, the wealthy and financial firms.

She highlights that people would save $11 trillion that they would have spent on premiums, deductibles and co-pays over the next decade — but that benefit isn’t completely tax-free. Americans of all incomes would fork over $1.4 trillion more in taxes over 10 years.

That’s because they would take home more money since their share of employer health insurance premiums would no longer be deducted from their paychecks. Warren relies on this additional revenue to help fund the government-run insurance program.

Unlike Sen. Bernie Sanders, Warren has been adamant that Medicare for All can be paid for without increasing taxes on middle class Americans. But some economic experts — as well as rival Democratic presidential campaigns — have pointed out that Warren’s plan could affect the middle class financially directly and indirectly.

Employees shell out just over $6,000, on average, a year for family coverage, according to the Kaiser Family Foundation. It’s not currently subject to tax in most cases.

“Congratulations on the raise!” Warren writes in her Medium post on the proposal. But Americans would have to pay taxes on those additional earnings.

And, buried in the footnotes of the proposal is the assumption that these earnings would be taxed at higher marginal income tax rates due to the full repeal of the 2017 Republican tax cuts. The law reduced the top rate, which benefited the wealthy, but it also lowered other rates, which helped a large share of the middle class. The proposal assumes marginal tax rates would rise by 2.3 percentage points.

Warren’s campaign told CNN that she only supports repealing the tax cuts for the wealthy and big corporations — not middle-class families — and doing so would have no material effect on the revenue estimate.

Another provision of Warren’s plan — which calls on employers to foot a large share of the bill — could also affect the middle class in an indirect way, say some economic experts and opponents.

Under her proposal, employers would no longer pay premiums to private insurers, which on average cost them more than $14,500 annually, on average, for family coverage. Instead, companies would write a check to the federal government for 98% of their current health insurance tab to foot nearly half bill for Medicare for All. She calls this $8.8 trillion levy an “employer Medicare contribution.”

That could hurt the middle class in a roundabout way, say some experts. Workers typically receive lower wages because companies factor health insurance costs into their total compensation. So if employers no longer had to pay for health coverage, they would use some of the savings to boost salaries, according to Howard Gleckman, senior fellow at the Tax Policy Center, a joint program of the Urban Institute and Brookings Institution.

“She has found a clever way to make middle-income people finance a portion of government health insurance without paying a direct tax,” Gleckman said. “But make no mistake, they still will be paying.”

Former Vice President Joe Biden, in particular, has attacked her on this point. His campaign calls this provision “a new tax of nearly $9 trillion that will fall on American workers.”

Other experts, however, counter that the employer Medicare contribution would not prompt companies to further diminish workers’ wages.

“Employers are already paying this in the form of premium contributions to employer plans,” tweeted Topher Spiro, vice president for health policy at the Center for American Progress, which supports a universal coverage model that would retain an employer-based insurance option. “This is just redirecting the premiums to Medicare.”

Warren’s campaign says larger companies are already required to provide health insurance to their workers under the Affordable Care Act’s employer mandate. Her plan would actually save these businesses $200 billion over 10 years.

Meanwhile, Sanders, who authored the Medicare for All bill but has only provided a brief menu of options of how to pay for it, is hitting his rival on how her financing plan would affect employment and raises. He argues that companies may be more reluctant to hire if they have to pay a set amount of tax for each employee, as opposed to his proposal to levy a 7.5% income-based tax on employers, which he said is more progressive.

“I think that that would probably have a very negative impact on creating those jobs, or providing wages, increased wages and benefits for those workers,” Sanders told ABC News on Sunday.