It currently appears that the two biggest obstacles in this year's effort to reform health care will be deciding if it will include a public plan option and how to pay for it. Deciding on how to pay for health care reform could easily be the more contentious issue. Finding a consensus on including and/or structuring a public plan has the advantage of being a fairly narrow policy decision. Deciding on how to fund health care reform suffers from an over abundance of choices.
There are nearly limitless combinations of tax increases, dedication changes, program cuts and fees that could be used to pay for health care. The Obama administration originally proposed reducing the tax dedication rate for high income tax payers. Some Senators have floated the idea of capping the tax exemption for health care benefits over a certain level. Others have advocated for creating a federal value-added tax. Any of those three or a combination of the three could work. The problem is that there are too many workable options and no reason for legislatures to form a consensus around anyone of them.
Hopefully, Congress will be able to come up with a good, useful way to properly fund health care reform. There is a definite possibility it will not. If a real source of funding cannot be decided on, I think a likely way to fund the reform on paper would be to go after offshore tax havens.
The IRS estimates offshore bank accounts are used to illegally avoid paying an estimated $100 billion in annual taxes. That is same amount of money that health care reform is estimated to cost. I know that given the economic, political, enforcement, and foreign policy reality, only a fraction of that potential $100 billion in unpaid taxes might ever be collected. The point would not be to actually pay of health care reform but only to be able to claim that they have found a revenue source to pay for it.
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