House Democrats think they have a plan to pay for health care reform. And yes, it’s going to cost… somebody.
The 1000+ page health care plan as proposed by President Obama comes with a hefty price tag. Congress has been charged with coming up with the funds for the plan. That isn’t proving to be very easy.
But the Dems have an idea. They’re proposing a federal surtax on upper-income taxpayers. Who fits the bill? Married couples who earn between $350,000 and $500,000 would see a 1% increase; married couples earning between $500,000 and $1,000,000 would see a 1.5% increase; and married couples more than $1 million a year would pay an additional 5.4%. For purposes of the surtax, income would include wages and capital gains. The new income tax would raise more than $500 billion over the next decade.
When the dust settles, upper-class taxpayers or no, the plan calls for raising taxes. House Ways and Means Committee Chairman Charles Rangel tried to soften the blow by explaining that the surtax “causes the least amount of pain on the least amount of people.”
Again, still raising taxes. That worries some Dems in an election year. It especially worries House Dems since the rumor-mongers suggest that the Senate isn’t planning to offer a sister proposal. It would be a “yes” for higher taxes when the bill has no real chance of going anywhere. Don’t you just love Congress?
The proposed health care reform bill would not just affect individuals. Under the proposal, employers who don’t offer “affordable” (whatever that means) health insurance to their workers would face a penalty equivalent to a percentage of payroll. Businesses with payrolls of $250,000 or less than $250,000 would be exempt; the penalties would start at 2% and would rise to 8% of payroll, depending on the size of the employer. The US Chamber of Commerce claims that, based on U.S. Census data for average wages, a small business with between 10 and 14 employees would face a 4% tax under the plan, while one with 15 to 19 employees would be taxed at 6% of payroll.
Additional corporate tax provisions have been included because, um, I guess there wasn’t anywhere else to put them. Those provisions affect interest allocation and the economic-substance doctrine.
The good news? There’s enough in the health care proposals so far to annoy everyone!
Of course, the bill hasn’t even made it to committee yet. Don’t expect much.
So, 45% top marginal rate if the Bush tax cuts are allowed to expire. Doesn’t leave much dry powder to fund many other domestic initiatives.
This is a fascinating story because there are about 487 different proposals on the table, both on the revenue side and on the shape of what reform will look like. There will pretty clearly have to be some sort of tax raises in whatever bill is ultimately produced because the administration has committed to reform being deficit-neutral and the CBO won’t give them credit for many of the supposed cost reductions that a reformed health care system will provide.
My guess is we’ll end up with a combination of some form of the surtax, the limitation on itemized deductions, a cap on the tax exclusion for really, really expensive plans (capping premiums above whatever is the most expensive union-bargained plan) and some of the penalties and miscellaneous offsets contained in the house plan (economic substance, that old chestnut).
Only about half of the money will come from the tax, according to the WSJ. The other half will come in the form of reducing payments amounts for procedures covered by Medicare patients.
Grandma gets a bigger tab.
Half of the trillion. $500 billion is expected to come from the tax increases, you are right re the remainder.
Note that the surtax is based on adjusted gross income and not taxable income, so in theory you don’t have to be in the highest tax bracket to be subject to the surtax (assuming you had plenty of deductions to bring your AGI down).
Vinny, thanks for pointing that out. I wasn’t quite clear.
Congress is set to ruin the entire health care system to insure about 16 million uninsured. The bogus numbers about 40 or so million people has already been debunked. If you remove guest workers, those that choose not to get the coverage they have available to them, and the rich who self insure, you are left with about 16 million people. That means that in order to provide health care to those 16 million, government will essentually ruin the system for 290 million people. There will never be a perfect system but the one we have is the best in the world and and is NOT in crisis. If you want to see crisis, go to Europe where people have to wait for everything and routinely get denied things due to cost and their age. the 500 billion dollars to be raised by this new tax is pie in the sky. Besides, it will cost a lot more than that and the burden will trickle down. Grandma will have a bigger tab.
Actually garagefather, Grandma will have a bigger tab, AND will be rationed out of care. Obama is on record as saying older folks might be better off taking more pain killers and having fewer procedures. His original choice for Sec of HHS, Tom Daschle (who had to withdraw due to nonpayment of taxes) wrote a book about how to ration/deny care. Details at the link:
http://online.wsj.com/article/SB123060332638041525.html