Rochestermn.com

RochesterMagazine.com

RochesterMarketplace.com

AustinPB.com

Rochester, MN's local news source.

News Business Sports Entertainment Life Obituaries Opinion Jobs Homes Auto Classifieds Shopping

Text size: font - font +

National News

Health care plan hits rich with big tax increases

11/2/2009 12:00:02 PM

Comments (9)

By Stephen Ohlemacher

Associated Press Writer

WASHINGTON (AP) -- The typical family would be spared higher taxes from the House Democratic plan to overhaul health care, and their low-income neighbors could come out ahead.

Their wealthy counterparts, however, face big tax increases that could eventually hit future generations of taxpayers who are less wealthy.

The bill is funded largely from a 5.4 percent tax on individuals making more than $500,000 a year and couples making more than $1 million, starting in 2011. The tax increase would hit only 0.3 percent of tax filers, raising $460.5 billion over the next 10 years, according to congressional estimates.

But unlike other income tax rates, the new tax would not be indexed for inflation. As incomes rise over time because of inflation, more families -- and more small business owners -- would be hit by the tax.

"Twenty years from now, we're going to see more and more small businesses ensnared into paying higher taxes," said Rep. Dave Camp of Michigan, the top Republican on the tax-writing House Ways and Means Committee.

The tax would hit only 1.2 percent of taxpayers who claim business income on their returns, according to the estimates by the nonpartisan Joint Committee on Taxation. But that percentage would grow as business owners' nominal incomes rise with inflation.

In 2011, a family of four with an income of $800,000 a year would get a $24,000 tax increase, when the new tax is combined with an increase in the top two tax brackets proposed by President Barack Obama and other scheduled tax changes, according to an analysis by Deloitte Tax. That's a 12.5 percent increase in federal income taxes.

A family of four making $5 million a year would see a $434,500 tax increase, about a 32 percent increase, according to the analysis.

"These are very big numbers and very high effective tax rates," said Clint Stretch, a tax policy expert at Deloitte Tax.

The new health care tax would come on top of other tax increases for the wealthy proposed by Obama. The top marginal income tax rate now is 35 percent, on income above $372,950. Obama wants to boost the top rate to 39.6 percent in 2011 by allowing some of the tax cuts enacted under former President George W. Bush to expire.

House Democrats said they are proud that they found a way to finance the health care package largely from a tax on the wealthy. There is, however, little appetite for a millionaire's tax in the Senate, and some tax experts think it is a mistake to tap only rich people to pay for services used by all.

"If health care is a benefit that is worth having, then it's worth paying for," said William Gale, who was an adviser to President George H. W. Bush's Council of Economic Advisers and is now co-director of the Tax Policy Center. "This gives the impression that it's only worth having if someone else pays for it."

Obama promised during the presidential campaign that he would not increase taxes on couples making less than $250,000. However, the health care bill would impose new taxes on people who don't buy qualified health insurance, including those making less than $250,000 a year.

Under the bill, individuals are required to obtain health insurance coverage or pay penalties, which are described as taxes in the legislation. The penalty would be equal to the cost of an average insurance plan or a 2.5 percent tax on incomes above the standard threshold for filing a tax return, whichever is less. There would be waivers for financial hardships.

To help afford insurance, families with incomes up to four times the federal poverty level would qualify for subsidies. The poverty level for a family of four is $22,050 this year.

Republicans argue that the penalties violate Obama's tax pledge, and they liken the millionaire's tax to the Alternative Minimum Tax, which Congress enacted in 1969 to ensure that wealthy Americans cannot use loopholes to avoid paying any income taxes.

The AMT was never indexed for inflation, so Congress must enact a fix each year to spare about 25 million middle-income families from being hit with big tax increases.

"They're going down the same road by not indexing this tax," said the Republican lawmaker Camp.

E-mail Story

Print Story

There are 9 comments - Display All Comments

Atilla
Rochester, Mn

Posted on 11/3/2009 at 7:05:15 AM

Add onto that the income tax rates necessary to erase the deficit, ONLY “erases the deficit” – it does not even make a small dent in the DEBT which stands somewhere in the 11 trillion dollar area.:

http://taxprof.typepad.com/taxprof_blog/2009/11/a-952.html

Report comment as inappropriate

BillChris
topher
Olmsted County, MN

Posted on 11/3/2009 at 8:05:30 AM

This article couldn’t convince a desert nomad to carry water on his journey. Its hard enough to convince the avg American to oppose yet another government program that they will never see a dimes increase in taxes (although it will hit their pocket book in inflationary spending), let along get them to sympathize with someone making upwards of 1/2 million dollars or more.

The biggest problem with lumping yet more and more taxes on .5% - 1% of the tax filing population is what you do when the high incomes falter as they do in recessionary cycles. Add in that most of these folks have volatile incomes because they rise and fall with the business climate. Its foolish of most politicians (as hard as that is to believe) to rely on such a small and unpredictable segment of our population to fund so much of the government.

Report comment as inappropriate

sbintn
Murfreesboro, TN

Posted on 11/3/2009 at 8:30:31 AM

I think California and New York discovered the the downside of “taxing the rich”.

It is simply morally wrong to take the money for health care from 1.2% of the wage earners so the rest of us don’t have to pay for healthcare. Like the quote in the article says “If health care is a benefit that is worth having, then it’s worth paying for”

Report comment as inappropriate

Atilla
Rochester, Mn

Posted on 11/3/2009 at 9:01:15 AM

Here’s the thing. Of course they SAY it will only be the “rich” who are taxed.....but that is only one more LIE.

Spending and debt are already at record levels. This bill creates a new and probably un-repealable middle-class entitlement that is designed to EXPAND OVER TIME.
Taxes will need to rise precipitously, even as 0bombaCare so dramatically expands government control of health care that eventually all medicine will be rationed via politics.

Worst Bill ever;
“Epic new spending and taxes, pricier insurance, rationed care, dishonest accounting: The Pelosi health bill has it all”:

http://online.wsj.com/article/SB100014240527487033992
04574505423751140690.html

Report comment as inappropriate

sbintn
Murfreesboro, TN

Posted on 11/3/2009 at 9:08:11 AM

Put the 5.4% tax on EVERYONE, if you are going to do it. If it’s so important then lets share the burden.

Report comment as inappropriate

Atilla
Rochester, Mn

Posted on 11/3/2009 at 9:26:30 AM

Now on top of that, add on the cap and tax - the “Copenhagen Treaty”. The “global warming” tax.
0bomba is OBVIOUSLY for the world welfare treaty. Rich countries, i.e. America is obligated to send to third world countries anywhere from $70 to $140 billion PER YEAR because we breathe to much carbon dioxide.

In addition, there will be a global tax on carbon emission at $2 per ton, airline & maritime tax, 2% tax on international financial transactions, etc. All to benefit the “Carbon Credit Exchange Corporation” which has already made billions in Europe, and made Europeans poor.

Here is a WSJ article on the treaty:

http://online.wsj.com/article/SB1000142405274870357
4604574500580285679074.html

And straight from the United Nations here is the text of the treaty:

http://unfccc.int/resource/docs/2009/awglca7/eng/inf02.pdf

Page 39 of the proposed treaty text has mentions the $70 to 140 billion a year in third world aid. And page 134 provides a list of the proposed global taxes.

Please open up your wallets.
We need to enrich Al Gore, the “Carbon Credit Exchange Corporation” and save the polar bears.

Report comment as inappropriate

Stan55904
Rochester, mn

Posted on 11/3/2009 at 9:44:39 AM

The Dems are funny. Use class warfare saying only the richest .3% will pay for this. They assume the 99.7% that aren’t impacted with a massive tax increase will approve. Yet, anyone with a calculator can figure out it won’t work and the 99.7% will in fact get a massive tax increase also.

Only the people that don’t pay taxes are safe!

Report comment as inappropriate

singlepar
ent
Rochester, MN

Posted on 11/3/2009 at 11:20:13 AM

So if the rich are required to pay for the poor, isn’t that redistribution of wealth and hence socialism? And when did the poor become those families making $88,200 per year or less?

So, if I have a job which has insurance and my premium is, say $400 per month and the “government option” is $400 per month but I get a “subsidy”, why would I stay on my employer’s insurance?

We need more FACTS, but we just get bits and pieces of the truth from BOTH sides, and a rush to cram the legislation through.

Just a couple other observations. If we tax the rich for this, they don’t have that money to invest or expand their business with, and the economy suffers.

If we tax the insurance companies, our rates go up. For all those who believe that insurance corporations make too much money, here is a simple lesson in economics. Corporations are owned by investors who buy into stock in order to make a profit. No profits, and the folks divest their money and put it somewhere where they can make money. The divested corporation becomes insolvent. Corporations also pay NO TAXES. They have these smart accountants who figure out what the taxes will be based on anticipated revenues and pass those costs off to the consumer in higher rates.

Government is attempting to compete with private business which is never in anyone’s best interest. But they are doing that now with controlling interest in a car company and a bunch of banks.

Obama always wanted a single payer system. He’s simply taking the necessary steps to achieve his goal, and is counting on the uninformed or greedy masses to help him achieve it.

Report comment as inappropriate

charlie
Rochester, Mn

Posted on 11/3/2009 at 12:31:07 PM

“If health care is a benefit that is worth having, then it’s worth paying for,”

Then go pay for it. I pay for it every month. There are insurance agents all over willing to sell you a health insurance plan. If you can’t afford it, there is such a thing called Medicaid, it’s based on income not age. Or there’s Medicare, based on age/disability, not income.

So if you don’t have health insurance, then you personally don’t feel it’s worth having.

Report comment as inappropriate