The House Democrats released their anxiously-awaited health care bill yesterday with proclamations of coverage for all Americans, cost reductions and efficiency improvements. Those with expectations of tax increases to fund the $1.0 trillion bill were not disappointed, as funding provisions bill included:
- A tax on individuals who opt out of health care insurance, equal to the lesser of 2.5% of adjusted gross income (AGI) or the average individual premium amount.
- A tax on employers who do not provide a health care plan, equal to 8% of payroll for companies with payrolls exceeding $400,000 annually, with lower rates applying to employers with smaller payrolls. This, on top of the current 15.3% payroll tax for Social Security and Medicare, brings the total entitlement tax to a whopping 23.3%.
- A new excise tax on health insurance plans at a rate yet to be determined.
- A new “surtax” on the AGI of small businesses and other high income earners:
– 1% on AGI of $350,000 to $500,000
– 1.5% on AGI of $500,000 to $1,000,000
– 5.4% on AGI over $1,000,000
This last, on top of allowing the Bush tax cuts to expire, will result in a top marginal tax rate of 45% and a capital gains rate of over 25%. The fact that the surtax is applied against AGI rather than taxable income (meaning that it is applied before deductions such as mortgage interest, property taxes and medical expenses) will push the top rate, including state taxes, over 50% and the capital gains rate over 30%.
These punitive income tax rates alone will be a huge impediment to business, particularly small and medium sized businesses responsible for the vast majority of job creation. Additional corporate tax provisions contained in the bill, designed to close “loopholes”, reduce the use of offshore tax havens and accelerate the double taxation of foreign earnings, will further add to the corporate tax burden. These additional costs not only provide businesses further incentive to move to a more friendly environment, but will ultimately be borne by the consumer (taxpayer), again flying in the face of Obama’s vow not to raise taxes on families earning under $250,000.
Proponents of massive health care reform are once again playing the crisis card to accelerate approval of this bill. We are far from a health care crisis in this country. Collapse of the entire health care system is not imminent. Despite misleading statistics published on a daily basis by those complicit in the charade, the numbers of chronically uninsured Americans are relatively small. Improvements certainly need to be made, but taking the time to explore options, gather real facts and make intelligent decisions will ultimately result in a solution that makes more sense and has a far greater chance of actually working. This high cost, ill-conceived bureaucratic nightmare is not the answer.