Tax on business is a tax on you | Don Brunell

Jonathon Gruber recently created a stir with his comments about Obamacare and “the stupidity of the American voter.”

Gruber, an MIT economist, was one of the architects of the president’s health reform law. Recently, videotape surfaced of Gruber’s appearances over the past several years in which he described how the drafters of Obamacare used deception and manipulation to get the bill passed.

In one venue, Gruber noted that because taxes were a hard sell politically, “This bill was written in a tortured way to make sure [the Congressional Budget Office] did not score the [individual] mandate as taxes.” But when the law was later challenged in court, administration lawyers successfully argued before the Supreme Court that the mandate was a tax.

Gruber also acknowledged that supporters of the bill disguised how the program would be paid for – that young healthy people would pay to finance care for older, sicker people. That’s why there is such an aggressive effort to enroll young people in Obamacare.

As Gruber put it: “Lack of transparency is a huge political advantage. And basically, call it the stupidity of the American voter or whatever, but basically that was really, really critical to get the thing to pass.”

Gruber told another audience that Obamacare’s 40 percent “Cadillac tax” on generous employer-provided health plans – many of them union plans – will ultimately end all employer-provided health coverage.

“Over time it’s gonna apply to more and more health-insurance plans,” he said. “[The] tax that starts out hitting only 8 percent of the insurance plans essentially amounts over the next 20 years [to] essentially getting rid of the [tax] exclusion for employer-sponsored plans.”


But Gruber may have actually done taxpayers a favor.

In one appearance, he revealed what is an open secret at all levels of government: That a tax on businesses is a hidden tax on consumers.

Gruber said that, to make the so-called Cadillac tax more politically palatable, the drafters “mislabeled” it, “calling it a tax on insurance plans rather than a tax on people, when we all know it’s a tax on people who hold those insurance plans….We just tax the insurance companies, they pass on higher prices. It’s a very clever, you know, basic exploitation of the lack of economic understanding of the American voter.”

Politicians are loath to raise taxes on individual voters. Remember the voter-approved initiative that overturned Washington’s car tab tax in 1999? That was a check voters had to write every year, and they felt the pain directly. So, elected officials prefer to tax businesses instead, knowing full well those businesses will have to pass along the tax to individuals through higher prices wherever possible.

Think of that the next time you buy gasoline. In Washington state, we’re paying 56 cents in federal and state taxes on every gallon of gasoline; 62 cents on each gallon of diesel. At current prices, that’s about a 20 percent tax.

Take a close look at your phone bill. Washington has the highest state tax in the nation on cell phone service – adding up to a whopping 24.42 percent in state and federal taxes. And many cities assess their own cell phone taxes, as well.

Many taxpayers enthusiastically support higher taxes on business, not realizing that they, as consumers, will actually pay those taxes. But the politicians know it. While it’s politically risky to openly tax the voters, slipping those taxes through by taxing businesses or phone bills or utility bills – or your insurance company – happens every day.

So, the next time elected officials talk about raising taxes on business, pay attention. They’re talking about you.

Don C. Brunell is a business analyst, writer and columnist. He recently retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at