In his letter to Health and Human Services Secretary Kathleen Sebelius rejecting the expansion of Medicaid under the Affordable Care Act, Texas Governor Rick Perry tells a whopper. Expanding Medicaid, he writes, would "threaten even Texas with financial ruin."
Texas has the highest rate of uninsured residents in the country (25 percent), and it stands to enroll some 1.8 million new Medicaid recipients through the expansion. These are some of the poorest people in America, making less than 133 percent of the federal poverty level (just $31,000 a year for a family of four). In the first six years of the expansion, from 2014 to 2019, the total cost of insuring these Texans would be about $55 billion — not an inconsiderable sum. But the federal government would pay more than 95 percent of that amount; Texas's share would be just $2.6 billion. That's not chump change — but threaten Texas with financial ruin? Not by a long shot.
What does threaten Texas with financial ruin is the fact that it has some of the most regressive, insane tax policies in the nation. According to Matt Gardner, executive director of the Institute on Taxation and Economic Policy (ITEP), Texas is one of nine states without any broad-based state income tax. Back in 2008, the Center for Public Policy Priorities calculated that Texas could raise $7 billion a year through a modest personal income tax comparable to what its neighbor Kansas had at the time (6.45 percent for individuals making more than $30,000 a year). If Texas collected that amount annually through a personal income tax during the first six years of the expansion, it would raise $42 billion. That would pay for its share of the Medicaid expansion more than sixteen times over. (I suspect the state's teachers, social workers, firefighters, police and other public employees would have some ideas on how to spend the surplus.)
That's not all. In 2006, the Texas state legislature required school districts to cut their property tax rate and then failed to make up fully the difference with new taxes. The result was a $10 billion structural deficit in every biennial budget. If Texas just returned to the property tax rate it had before 2006, it would raise at least $30 billion in the six years of the expansion. Or in another words, it could pay for the Medicaid expansion more than eleven times over. (If Texas both passed an average state income tax and repealed its property tax cut, it could pay its share of the Medicaid expansion almost twenty-seven times over!)
Rick Perry is not alone. Ever since the Supreme Court allowed states to opt out of the law's expansion of Medicaid without forfeiting all their Medicaid funding, at least five other Republican governors — led by Tea Party darlings like South Carolina's Nikki Haley, Florida's Rick Scott and Louisiana's Bobby Jindal — have summarily refused to implement the expansion on the grounds that their states just can't afford it. They're as wrong as Rick Perry. The federal government covers 100 percent of the expansion in 2014 through 2016. In 2017, states begin sharing the cost, paying 5 percent; that share grows to 10 percent in 2020. States are never on the hook for more than 10 percent of the annual cost. To put that in perspective, states currently pay between 25 to 50 percent of current Medicaid's costs.
In many cases, Republican governors have wildly exaggerated what Medicaid expansion would actually cost their state. For example, South Carolina's Nikki Haley wrote in an op-ed that the "price tag to South Carolina tax payers" would be "an extra $1.1 to $2.3 billion" over the next six years. In fact, the Kaiser Commission on Medicaid Expansion and the Uninsured calculated that South Carolina would have to kick in between $470 million and $615 million, depending on how many people chose to enroll. Again, in the first six years of the expansion, the federal government would pay for more than 95 percent of the total costs, between $11.4 and $12.7 billion depending on the participation rate.
South Carolina is also one of eight states that offers a substantial capital gains tax break, a policy that overwhelmingly benefits the wealthiest 20 percent. Since 1991, the state has allowed residents to deduct 44 percent of their long-term capital gains income from their taxes. According to the Institute on Taxation and Economic Policy, in 2010, this tax break cost South Carolina about $115 million in revenue. If they were to raise only that amount annually during the first six years of the expansion by getting rid of the capital gains tax break, they'd raise $690 million — which would more than pay for the Medicaid expansion.