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House Democrats Agree on Tax Hike to Help Revamp Health Care

By Lori Montgomery
House Democrats agreed yesterday to raise taxes on the wealthy to pay for a sweeping expansion of the nation's health-care system, proposing a surtax on the highest earners that could send the top federal tax rate toward 45 percent.

Beginning in 2011, the plan would target all income over $350,000 a year for families and $280,000 a year for individuals, Democratic sources said. The surtax would start at 1 percent, rise to around 1.5 percent for families earning more than $500,000, then step up again, to around 3 percent, for families earning more than $1 million, Democrats said.

That would raise about $550 million over the next decade, Democrats said -- about half the cost of reforms expected to cost about $1 trillion. The surtax percentages could rise two years later, they added, if lawmakers find that additional cash is needed to cover the cost of health-care reform.

The top federal tax rate currently stands at 35 percent, but Democrats have vowed to raise it to 39.6 percent next year, when tax cuts enacted during the Bush administration expire.

Combined with other federal tax adjustments, the surtax could leave most taxpayers with annual incomes more than $350,000 facing top federal rates of at least 45 percent, said Robert Carroll, a senior fellow at the nonprofit Tax Foundation.

"One has to decide whether the health care reform package they're talking about is worth imposing such high tax rates on the most productive members of society," Carroll said.

Republicans assailed the idea, saying the new tax would fall heavily on small business owners, who tend to report business income on their personal tax returns.

"In the middle of a serious recession, with unemployment nearing double digits nationwide, the last thing we need is a tax increase on small businesses, which will cost the American economy even more jobs," said Michael Steel, spokesman for House Minority Leader John A. Boehner (Ohio).

Democrats said their decision was guided by President Obama's pledge to protect middle-class families from higher taxes. Though wealthier families would face larger tax bills, Rep. Allyson Y. Schwartz (D-Pa.) said health reform, "if this works right," should significantly lower their insurance premiums.

Schwartz said that Democrats on the House Ways and Means Committee, who had been haggling for days over how to pay for Obama's signature domestic initiative, are concerned about imposing such high taxes on income. But she said Democrats hope eventually to rework the entire tax code, a task "we left for another day."

The agreement allows House leaders to move forward with plans to unveil health legislation Monday and bring it to a vote before the full body before the August break.

The schedule is less clear in the Senate, where the debate has been bogged down by a dispute over whether to tax for the first time the health benefits that millions of workers receive through their employers.

Yesterday, one of the negotiators, Sen. Kent Conrad (D-N.D.), told Bloomberg TV that he does not expect a Senate vote until after the month-long August recess.

By Post Editor  |  July 10, 2009; 9:55 PM ET
Categories:  Health Reform  
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Comments

Were these Congressional Democrats asleep during History class? Did they learn nothing from the failed plans and tax rates from FDR. As he was preparing to run for his 3rd term, the top tax rates were 90% and we were still in a depression that took WWII to end!

I cetainly don't want to see this country go through that again, especially since we don't manufacture anything in this country anymore.

Posted by: Chuckmba | July 11, 2009 12:00 PM | Report abuse

"One has to decide whether the health care reform package they're talking about is worth imposing such high tax rates on the most productive members of society," Carroll said.

Give me a break. These are the people who ruined the American economy. I work harder eating lunch, then they do all week. Top bank and financial executives should be taxed at 90%.

Posted by: richtrenton | July 11, 2009 2:21 PM | Report abuse

every american who cares about this country should just stop paying taxes.tear down their little playground.
government run healthcare will be the end of the greatest nation on earth. if these fools had half the money they have thrown away in the past six months the healthcare problem would be no problem.
as long as we do nothing,they will go on spending. they have put our childrens future in trouble,and some fools still support them.shame on those socialist freaks.
in sept the march on washington could make a difference,if enough people have the guts to stand together. black and white,rich and poor,we all need to stand up and take our country back before it is too late.hope to see all of you there in washington on sept 12. this could be the change that will go down in history.

Posted by: silusdogood | July 11, 2009 10:04 PM | Report abuse

It's simple. Small business owners subject to the surtax will spend more in their businesses and show a lower profit, thereby eliminating the additional tax liability (not to mention the base taxes they're already paying). While this will be of some benefit to the economy in terms of job creation and consumption of goods and services by businesses, the revenues anticipated by the proponents of this tax just wont be there.

Think about it, anything that is purchased with net profits will be at a real 45% discount, since the purchaser won't then be subject to tax on the profits used for the expenditure. Who wouldn't go on a spending spree?

Penalizing the realization of profits will cause them to decrease or disappear, at least on paper. Adding further insult to injury, the money spent on Escalades and boondoggles would likely have otherwise ended up invested in the markets, where others could borrow it to finance their own membership in the wealth creating/tax generating club

This is not 400 level Psych., friends.

Posted by: timbutera | July 12, 2009 9:09 AM | Report abuse

I just love when millionaires whine. Pay your taxes as they appear the cost of living in this country. Don't like to pay taxes? Go to Antarctica.

http://bit.ly/single_payer

Posted by: DEMOCRATZoORG | July 12, 2009 2:05 PM | Report abuse

I'll find more ways to increase the cost of my doing business, than you will be able to tax me out of it. My old desk will be replaced by and antique $10K roll up, or I will find other ways to enjoy my "ill gained wealth" that the IRS will bit on. Screw you Communist/Nazi a-holes.

Posted by: ssmorehouse | July 12, 2009 9:05 PM | Report abuse

every american who cares about this country should just stop paying taxes.tear down their little playground.
government run healthcare will be the end of the greatest nation on earth. if these fools
==========================================
AMEN!!

Posted by: atthun | July 13, 2009 9:52 AM | Report abuse

"One has to decide whether the health care reform package they're talking about is worth imposing such high tax rates on the most productive members of society," Carroll said.

Good lord. Having a huge amoung of assets on which you earn money and whining about the lowest tax rate in the industrial world does NOT make you a "productive member of society." What makes you productive is out working, and discovering ways to help your fellow American. It is only when we have a healthy, educated work force that we can rise as a nation again. We are no longer the beneficiaries of "American Exceptionalism," and the first step to rebuilding exceptionalism is health care and education. Nothing else will substitute for those things.

Posted by: jwelch5 | July 13, 2009 11:59 AM | Report abuse

"That would raise about $550 million over the next decade, Democrats said -- about half the cost of reforms expected to cost about $1 trillion. The surtax percentages could rise two years later, they added, if lawmakers find that additional cash is needed to cover the cost of health-care reform."

$550 million is $.55 billion, which is 1 comma and 3 zeros short of half a $ trillion.
($.00055 trillion)

Either the article should have said $550 billion or the lawmakers will raise the taxes when the shortfalls come home to roost. Or best case scenario, we will be spared the crippling cost of "ObamaCare" altogether and calmer minds will prevail.

Posted by: wrbpilot | July 13, 2009 4:31 PM | Report abuse

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