Nobody From Nowhere (@i8dc)

Occasional Common Sense

How much does Ted Cruz save taxpayers by using his wife’s gold-plated health insurance?

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“FYI: We already have a subsidized health care system. It just subsidizes Ted Cruz’s $40k
policy more than a family trying to get out of poverty.”  — @LOLGOP

Ted Cruz has very publicly and proudly that he doesn’t take the health insurance offered to members of Congress by the United States government, with the clear implication that he doesn’t think it’s right for Congressmen to take such a lavish benefit at taxpayers’ cost. Then news came out that not only does Cruz have another option, as do many married 2-earner families, but his family rationally takes his wife’s employer-supported insurance, which is a far more expensive plan than the one Cruz would get through Congress.

Cruz’s wife is a Managing Director (read VP) at Goldman Sachs, receiving a company-paid health insurance plan. In the news recently is a 2009 report indicating that at that time Goldman Sachs was paying more than $40,000 per year for health insurance for top executives. I’m guessing this didn’t apply to the 400 or so Managing Directors, but only to the executives. However, I find it likely that the MDs also have very generous plans.

I was curious: of Cruz’ two options, how much does each really cost taxpayers and how much does Ted Cruz save us by being on his wife’s plan?

There are two elements to the cost question.  First there’s the cost paid by the government for the insurance, and second is the revenue not collected because this element of employee compensation isn’t taxed.

For the Federal Employee Health Benefits program, the Government pays 75% of the cost of health insurance.  Looking up the premiums here, the Cruz family could have selected the median plan of those in Texas, which had a total cost of about $15,000 last year. Of this, about $11,250 would have been paid by the Government.

Additionally, taxpayers subsidize all employer-paid health insurance because compensation in the form of health insurance is not taxed.  In effect, $11,250 of Senator Cruz’s compensation would not have been taxed.  Assuming he and his wife make more than $388,350 and were subject to the top tax bracket of 35%, that’s $3,937.50 of lost tax revenue. In addition, was that $11,250 paid in salary rather than health insurance, it would have been subject to 2.9% Medicare tax for another $320 or so.

So the total cost to taxpayers to provide health insurance to a Congressman is a little more than $15,500.

I’m going to take a WAG and say Goldman pays $30,000 for the Cruz family’s health insurance.  Let’s make the tax answer easy: if Goldman didn’t spend that money on the Cruz family insurance, it would have been subject to corporate taxes of 35%, which is $10,500.

So Ted Cruz is saving us on the order of $5,000 by taking his wife’s health insurance.  Or 0.00016% of the cost to taxpayers of the recent government shutdown.

He’s also saving himself money. Almost certainly, Goldman’s health insurance is completely or almost completely paid for by the company. Dollars paid by the employee are after-tax dollars while dollars paid by the employer are not. Goldman is nothing if not good at avoiding taxes. So the Goldman plan, which is likely more generous than any plan available to the Senator, costs the Cruz family nothing or close to it, while the median government plan would cost them about $3,750 per year.

Or, put another way, by refusing the government health plan, Ted Cruz saved taxpayers $5,000 while saving Ted Cruz $3,750.

Now, I’m not going to impugn the Senator’s motives. But if I had two options and one was clearly better for me personally, I’d need a damned good reason not to take the one that was better for me personally.

And I’d probably not grandstand about how righteous my choice is when it happens to align with my politics.

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Written by David Clayton

October 30, 2013 at 10:31 am

Posted in Debunkery

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