1) GNP? net property income from abroad is irrelevant.
(note: I'm going to completely ignore everything all of you have said and apply a purely economical analysis)
I would argue that subsdized health-care services are, if applied properly, in the best interest of the general populace. I would also argue that taxes=good (if set at the right level).
Quick note before I delve deeper into the matter: If you don't understand what something means in the economic analysis that follows, look it up, don't even bother trying to come up with a counter-argument if you don't fully understand my argument.
(edit: the IC curves aren't supposed to cross, I just noticed that I accidently made them cross which would imply that Bob is intransitive)
Let's assume that a consumer, Bob is faced with a good A, healthcare, and a composite good, B. With a fixed level of income, 'I' Bob's budget line can be illustrated by Ph(H)+Pc(C)=I.
Note that Bob's maximum consumption of healthcare lies at (I/Ph, depicted by the x intercept), and Bob's maximum consumption of the composite good exists at the point (I/Pc, the y intercept). A tax of amount T would alter this in the following fashion:
Bob's new budget line would be equal to (I-T)=Pc(C)+Ph(H). This would, in effect, shift the budget line inwards. However, once the tax is applied to the price of healthcare, the new budget line exists at
(I-T)=Pc(C)+(Ph-Subsidy)(H), where the subsidy is X(a percentage value)*T, so Bob's new budget line exists at (I-T)=Pc(C)+(Ph-XT)(H). Now, the question here is whether (I-T)/(Ph-XT)>I/Ph (and hence, whether the 'maximum' amount of healthcare consumed by Bob is greater after the tax is applied).
Now, assuming Bob is rational (and hence has convex preferences), Bob's utility U, is a function of H, and C, so we can write U(H,C)=some function.
In light of the constraints placed on Bob by his income and the tax, Bob's trying to Maximize U subject to the constraint (I-T)=Pc(C)+(Ph-XT)(H). For the sake of simplicity, lets assume that Bob's utility function is defined as U(H,C)=C*H.
For the sake of simplicity once again, lets set Bob's income after the tax as It, and the price of healthcare following the government subsidy as Pht.
Applying a simple lagrange:
The partial derivative of U in terms of C is H
The partial derivative of U in terms of H is C
The partial derivative of It=Pc(C)+Pht(H) in terms of the lagrange multiplier (in terms of the partial derivative in terms of C): Pc
The partial derivative of It=Pc(C)+Pht(H) in terms of the lagrange multiplier (in terms of the partial derivative in terms of C): Ph
Hence, Bob's optimal bundle exists at where H(Pht)=C(Pc).
In light of the constraint It=Pc(C)+Pht(H), H=It-Pht(H), and C=It-Pc(c), hence, Bob's optimal bundle x exists at (It-Pht(H), It-Pc(c)), where Bob's utility is Pc(c)*(It-Pht(H)). Now, if Bob's new utility (It-Pc(c))*(It-Pht(H)) exceeds Bob's old maximum utility (I-Pc(c))*(I-Ph(H)), then the tax is 'good' because it increases Bob's maximum utility.
Where the tax is a 'good' thing, Bob's utility curve would be tangent to Bob's new Budget line illustrated by (I-T)=Pc(C)+(Ph-Subsidy)(H), where (marginal rate of substitution)(c,h)=Pc/Ph
(Note that I've completely simplified Bob's preferenecs and utility function, Bob's actual utility might be illustrated by a much more complex utility function)
In summary (this is an oversimplification of the above analysis), the tax can be a 'good' thing...it all depends on one's preferences and the location of one's utility curves in relation to one's budget line.
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