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Obama’s New Secretary of Redistribution

2 min readBy: Scott Hodge

This week, President Obama made Harvard Professor Dr. Donald M. Berwick a recess appointee to run Medicare and Medicaid. Based upon his public statements, Dr. Berwick seems very much in line with Obama's belief in the benefits of "spreading the wealth around."

During a speech in England in which he praised the British national health care system, Dr. Berwick said:

"Any healthcare funding plan that is just, equitable, civilized, and humane must, must redistribute wealth from the richer among us to the poorer and the less fortunate. Excellent healthcare is by definition redistributional." (view here)

As the head of Medicare and Medicaid, Berwick will play an instrumental part in implementing the new health reform laws that, by Tax Foundation estimates, will redistribute $104 billion annually from the top half of American families to the bottom half.

Below is a table summarizing how the changes in taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. and spending policies will benefit some families while costing others. Virtually every income group will see a tax increase, either directly because of the new Medicare tax on investment income, or indirectly because of the way the taxes on medical devises will flow through to consumers.

While the majority of the health care bill's new spending is targeted to low-income families, its interesting to note that families up to the 90th percentile ($252,000 in market income) will also benefit – though not enough to offset their higher tax burden. As a result, they will be net losers under the bill, as will every family over the 50th percentile.

When these individual changes are summed up, we can see how much income the legislation will redistribute by income group. The big losers will be the top 1 percent of families who will have more than $61 billion redistributed from them to others. Overall, the bill will redistribute $104 billion from the top half of families to the bottom half and Dr. Berwick will be at the helm.

Redistributional Effects of the Health Care Bill by Income Group in 2016
Income Decile/Cut Off in 2016 Average Tax Change Average Spending Change Average Income Redistribution Aggregate Change in Redistribution ($Billions)
0 -10% — $0 — $15,391 $158 $1,085 $927 $17.1
10-20% — >$32,059 -$5 $2,028 $2,033 $37.4
20-30% — >$48,082 $62 $1,747 $1,685 $29.5
30-40% — >$65,704 $117 $894 $777 $12.7
40-50% — >$86,928 $112 $367 $255 $3.8
50-60% — >$112,720 $343 $139 -$204 -$2.7
60-70% — >$141,100 $529 $95 -$435 -$5.3
70-80% — >$180,641 $632 $68 -$564 -$6.7
80-90% — >$252,212 $691 $18 -$674 -$7.8
90-95% — >$358,192 $806 -$169 -$976 -$5.6
95-99% — >$917,708 $2,243 -$928 -$3,172 -$14.6
99-100% — $917,709+ $30,783 -$21,421 -$52,204 -$61.2