Democrats Risk Taxing the Wealthy for Healthcare
AnAmericanCitizen
Democrats risk taxing the wealthy for healthcare
The House and Senate bills differ on who's considered rich enough and how much they
should chip in. But both represent a shift that Republicans are bound to jump on.
White House healthcare accord with drug industry may be going sour
By Janet Hook November 19, 2009
Reporting from Washington - Amid all of the uncertainties about how healthcare
legislation would affect each American, one thing is clear: The more affluent would
pay higher taxes.
Embracing the progressive -- and sometimes politically risky -- principle that the
cost of carrying out public policies should fall to the well-off more than the
disadvantaged, both the House and Senate versions of the bill would place new taxes
on the wealthy to help pay for expanded insurance coverage.
But the bills differ on who counts as rich and how much they would pay.
Under the House bill, couples with more than $1 million in income would pay an
additional surtax of as much as 5.4%. The Senate bill would hit families of more
modest wealth -- those making more than $250,000 -- with a payroll tax hike of 0.5%.
The fact that both bills include tax increases marks a striking shift in Democrats'
political calculus. Not many years ago, when the party sought to shed its liberal
reputation, Democrats treated any kind of tax increase as political dynamite.
Now, however, concern about the deficit is mounting and party members are less
fearful of taxing the wealthy, said Sen. John D. Rockefeller IV (D-W.Va.), a
multimillionaire who also would favor means-testing for Medicare premiums. "It's not
a complicated idea," he said.
In a recent Associated Press poll, 57% of those surveyed favored taxing people who
earn more than $250,000 a year to pay for the healthcare overhaul. Of a variety of
financing options tested in the survey, that tax was the only idea supported by a
majority.
"Taxing the rich works because they've got the money," said Roberton Williams, a
senior fellow at the nonpartisan Tax Policy Center. But, he warned, "you can't go to
that well over and over again."
Many other provisions of the two healthcare bills would affect families' pocketbooks,
for better and worse. For example, people who have very generous insurance plans
would probably face higher costs or reduced benefits under the Senate plan. It would
tax insurance companies that offer such plans, and the cost probably would be passed
on to workers.
The proposed tax increases offer a target for Republicans who say the healthcare
overhaul burnishes Democrats' reputation as a party of tax-and-spend liberals.
"The voters spoke loud and clear at the ballot box earlier this month -- they are
sick and tired of all the reckless spending and big-government interference coming
out of Washington," Republican National Committee Chairman Michael Steele said,
referring to some high-profile Democratic losses in the off-year elections.
" Harry Reid's bill is exactly what the voters don't want, and Senate Democrats who
let this bill even come up for debate will pay a price on election day next year," he
said.
Sen. Judd Gregg of New Hampshire, the ranking Republican on the budget committee,
predicted that the bill's tax proposals would not be approved, so the cost of the
legislation would instead be added to the deficit.
"It's just not going to happen," he said of the tax hikes.
When President Obama proposed his healthcare plan early this year, he said he would
insist that it not add to the deficit, promising to offset any new spending with tax
hikes or spending cuts in other areas.
His principal proposal to pay for the initiative was a limit on the deductions that
upper-income taxpayers could take, including the widely used deductions for home
mortgage interest and charitable donations.
That proposal met with stiff opposition from two of the most powerful lobbies in the
Capitol: home builders and charities. That sent Democrats searching for other sources
of revenues.
The House bill would raise $460 billion over 10 years with its 5.4% surtax on income
in excess of $500,000 a year for individuals, or $1 million for a couple, beginning
in 2011. According to an analysis by the Joint Tax Committee, the tax would affect
about 0.3% of all households, some 445,000 filers.
The Senate bill would increase the Medicare payroll tax levied on wages of couples
earning more than $250,000, and individuals with more than $200,000 in wage income.
Beginning in 2013, the rate would rise from the present 1.45% to 1.95%.
The increase would affect an estimated 1.3% of all tax filers, according to a Senate
aide. It would raise an estimated $54 billion in revenue over 10 years.
The Senate approach is less progressive than the House bill because the payroll tax
applies only to wage income -- not to dividends, capital gains and other non-wage
income that usually fattens the wallets of wealthier people.
Although both bills would raise revenues from a very narrow slice of the population,
many analysts and lawmakers worry that neither tax increase would advance one of the
principal goals of the health overhaul: slowing the growth of healthcare spending.
That is why the Senate bill also includes the 40% excise tax on companies that offer
high-end insurance plans -- those that cost $8,500 in annual premiums for individuals
and $23,000 for families. Proponents argue that would not just raise revenues but
also curb costs by discouraging companies from offering expensive plans.
It is not clear how many people will be affected by that tax, but critics warned it
would not hit just luxury plans, but also those for middle-class workers whose
premium costs are high because they live in high-cost states.
A recent study by the Commonwealth Fund projected that the average premium for family
coverage in 2015 would be nearly $20,000 in high-cost states. To address those
concerns, the Senate bill sets the threshold $3,000 above that for certain states and
for plans covering workers in high-risk professions.
Richard Trumka, president of the AFL-CIO, said that was a step in the right
direction, but that labor would seek to kill the provision from the bill. "We
continue to believe that a tax on working families' benefits is the wrong way to
finance healthcare," he said.
janet...@latimes.com
Copyright � 2009, The Los Angeles Times