Government already pays for more than half of U.S. health care costs, and nearly all universal health insurance proposals assume continued government involvement through tax subsidies and other means. The question of what specific taxes could be used to finance universal coverage is, however, seldom carefully examined, in part due to efforts by health care reform proponents to downplay tax issues. In this article we undertake such an examination. We argue that the challenges of relying on taxes for universal coverage are even greater than is generally appreciated, but that they can nevertheless be met. A proposal to fund a universal health insurance voucher system with a value-added tax illustrates issues that would arise for tax-financed plans in general and provides a broad framework for a bipartisan approach to universal coverage. We discuss significant problems that such an approach would face and suggest solutions. We outline a long-term political and legislative strategy for enacting universal coverage that draws upon precedents set by comparable legislative initiatives, including tax reform and Medicare. The results are an improved understanding of the relationship between systemic health care finance reform and taxation and a politically realistic plan for universal coverage that employs undisguised taxes.

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