Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

House wants to jack up taxes on high-earners

November 02, 2009

While the Senate health care bill pretends to pay for itself through increased taxes on insurance policies, the House bill pretends to finance itself through taxes on "the rich." The Tax Policy Blog explains*:

The $1.05 trillion House health care reform legislation unveiled by Speaker Nancy Pelosi yesterday is financed primarily through net cuts to Medicare (which would save $472.8 billion, or 39 percent of the bill's 10-year cost), and a 5.4 percent surtax on high-income individuals (which would generate $460.5 billion, or 38 percent of the bill's cost), according to a Tax Foundation review of the Congressional Budget Office's (CBO) analysis.

By comparison, nearly half of the $829 billion Senate Finance Committee plan is financed through Medicare cuts ($377.8 billion, or 41 percent of the bill's 10-year cost), and 22 percent would come from an excise tax on so-called "Cadillac" health insurance plans, which would raise an estimated $201.4 billion over 10 years. The House plan would reduce the deficit by $104 billion and the Senate version by $81 billion.

TaxVox questions the wisdom of the House plan:

First, do we really want to put most of the cost of a national priority such as health care on the backs of a relatively few people? My concern has more to do with our social compact than economics, but wouldn’t it make more sense if we all had a horse in this race? I know, those hit by the surtax are the same people who benefitted most from the Bush tax cuts in 2001 and 2003. But there is still something wrong with pretending that health reform is a free lunch for 99.7 percent of us.

Gee, really?

The Tax Foundation has some great illustrations of the purported financing for the health bills:

The dark blue slices of the pie -- the largest ones -- are medicare cuts. These are cuts that will never happen.

But Tax Pro Russ Fox finds a silver lining:

This measure would lead to higher taxes on the wealthy. This would lead to more strategies by the wealthy to shelter income, which means more work for tax professionals. Additionally, the requirement that 1099s be issued to corporations would mean a lot more work for tax professionals. As I keep telling my brother, I’m convinced I have lifetime employment.

The problem is how long that "lifetime" might be after the IRS takes over health care administration.

* My apolgies for inadvertently omitting the link when the post first went up, and for not correctly block-quoting the entire passage from the Tax Policy Blog. Fixed now, I think.