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Reflections


Next Up, Tax Reform

by Ralph R. Reiland,
Professor of Free Enterprise at Robert Morris University
 

After eight months of more big talk than big accomplishments, including the failure to produce a cogent alternative to ObamaCare after seven years of bellyaching, the inept Congress and squabbling Trump administration are now gearing up to debate tax reform.

I had lunch last week with an old friend who said she was unable to get necessary medical treatment. Still two years away from being Medicare-eligible, she could no longer afford her $450 monthly bill for insulin to manage her blood sugar. For people in her situation, or worse, you'd think that our politicians and policy professionals by now would have developed a workable, equitable, universal and efficient U.S. health-care system.

For starters, our D.C. politicians, rather than reinventing the wheel, could look at how any number of countries have succeeded in providing universal health care: France, Germany, Italy, Austria, Netherlands, Denmark, Sweden, Finland, Greece, Malta, Croatia, Romania, Luxembourg, Moldova, Portugal, Ukraine, Czech Republic, Great Britain, Russia, Serbia, Portugal, Iceland and Ireland.

Evaluating their health-care quality and availability and their population’s overall health, the Legatum Institute, a London-based research organization, ranked the 16 countries with the best health-care systems in its annual Global Prosperity Index released in November 2016. The institute ranked how healthy a country's people are, as measured by basic mental and physical health, the health-care infrastructure and the availability of preventative care.

The Legatum ranking is as follows of the 16 best health-care systems, in descending order: Luxembourg, Singapore, Switzerland, Japan, Netherlands, Sweden, Hong Kong, Australia, Israel, Germany, Belgium, New Zealand, Norway, France, Qatar, and Canada.

Great Britain, whose National Health Service, launched in 1948, globally pioneered free ďż˝" i.e., tax-paid ďż˝" health care at the point of delivery missed out on being included among the 16 best, finishing 20th. The United States placed 32nd.

Now, with tax reform now on the agenda, the politicians in D.C. could again benefit by looking at what has already worked ďż˝" this time in our own country to revive a sagging economy, as developed by both Democrat and Republican administrations, respectively, in the 1960s and 1980s.

Inaugurated in January 1961, President John F. Kennedy faced a sluggish and declining economy. He proposed cutting the top marginal income tax rate to 65 percent, down from 91 percent, and cutting the corporate tax rate to 47 percent, down from 52 percent. Adhering closely to Kennedy’s tax reduction recommendations after his assassination, Congress passed the Revenue Act of 1964, dropping the top marginal income-tax rate from 91 to 70 percent and dropping the corporate tax rate from 52 to 48 percent.

The annual GDP growth in the U.S., hemmed in at a modest 2.6 percent growth in 1960, more than doubled after Kennedy's tax proposal was enacted, rising to 5.8, 6.5 and 6.6 percent, respectively, in 1964, 1965 and 1966, while unemployment dropped from 6.6 percent in 1961 to a “full employment” rate of 3.8 percent in 1966.

Similarly, the Reagan tax cuts of 1981 and subsequent economic improvements were nearly a mirror image of Kennedy's tax cuts and the ensuing economic turnaround, as evidenced by the changes in the misery index.

A measure of economic well-being, the misery index is determined by adding together the nation’s unemployment and inflation rates. A lower rate is better, since both a higher rate of unemployment (generating declines in household income) and a higher rate of inflation (generating greater declines in real income) create economic and social costs for households, businesses and the nation.

At its highest point from 1948 to 2017 (1948 was the first year national data on both the unemployment and inflation rate were available), the misery index in the U.S. reached its peak at 21.98% in June 1980, midway through the final year of Carter’s one-term presidency and seven months prior to Reagan’s first inauguration on January 20, 1981.

By November of 1984 the misery index had declined steadily to 11.25 percent and Reagan was reelected. By November 1988 the misery index had declined to 9.55 percent.

During Reagan’s two terms, the misery index in the United States was reduced to a greater degree than in the terms of any other U.S. president in the post-1952 era.
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Ralph R. Reiland is associate professor of economics emeritus at Robert Morris University in Pittsburgh, the owner of Amel’s Restaurant, and a columnist with the Pittsburgh-Tribune-Review.

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Ralph R. Reiland
Email: rrreiland@aol.com
Phone: 412-527-2199

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