Democrats in the House of Representatives released their version of a health-care bill yesterday. While it marks just one phase in the complex legislative process, it's still a signal moment and one that poses opportunities and risks for the Obama administration. On one hand, it's really happening--a bill that could greatly expand health insurance coverage to milllions of Americans who don't have it. On the other hand, the ideal of near-universal insurance comes with a price tag and with a way to pay for it. The House Democrats went with a surtax on the wealthy, as much as a 5.4 percent tax on families making more than $350,000 a year. There's a common sense aspect to this: You want health care. You need the money. It's got to come from somewhere. Why not those who are able to afford it?
The tax would affect individuals making more than $280,000. The Tax Policy Center says that we're talking about 2.1 million taxpayers, a pretty rarified group in a nation of more than 300 million. Still, we're in a nasty recession and a tax hike, reflexively opposed by Republicans even in the best of times, is bound to make some Democrats nervous, too. The Washington Post quotes Sen. Ben Nelson, the moderate Nebraska Democrat, noting that his constituents hope to make that much and won't be comfortable with it. Republicans are quick to point out that a lot of small business owners file their returns as individuals, so that the number includes modest shopkeepers as well as fat cats.
We'll see where all of this goes. The Senate Finance Committee Chairman, Max Baucus of Montana, is working on his own, bipartisan bill. Despite the administration's hope of seeing the committee pass a bill before August, when Congress takes one of its long breaks, that's unlikely.
But we're starting to see the risks for Democrats. Health care that raises taxes on the wealthy will galvanize opposition. That may be a small price to pay for something like universal health care, but it is a price nonetheless. Until now, because of the recession, the Obama administration hasn't had to come in and raise taxes. They've been able to spend. Now they have to, and that's never easy, even when it involves the rich.
You know, it wouldn't hurt you to accurately describe the surtax. 1% on income between 350K and 500K, 1.5% on income between 500K and 1 million, and 5.4% on income over 1 million. Alot more accurate than "as much as a 5.4 percent tax on families making more than $350,000 a year", in hardly any more space!!!
perhaps the politicians are not familiar with what should be the most important paragraph every written.
"You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is the beginning of the end of any nation. You cannot multiply wealth by dividing it."*
* Adrian Rogers, 1931*
"a small price to pay for something like universal health care?"
Whatever happened to the No. 1 imperative driving health care reform: the need to "bend the cost curve?"
And please don't tell me that somehow covering more people will reduce costs. Medicare and Medicaid have already shown that doesn't work.
I guess we shouldn't be surprised that "health care reform" is turning into yet another Trojan Horse masquerading for a new government entitlement — along with a new interest group of lobbyist, unions, activists and voters dependent on the Democratic Party for their survival.
Please, be more careful with that "Small Business Owner" line.
Republicans usually try to make people think that Uncle Joe's Drycleaner will get hit with a rich person's tax because after all, Joe spends more than 300,000/year on salaries, electricity, dry cleaning fluid, advertising, etc.
WRONG!
If you own a small business and file as an individual, on your Schedule C you get to deduct your operating expenses. That is, the money you spend on salaries, supplies, rent/mortgage, advertising, licenses and fees, depreciation on equipment does not count in your income!
Only if Uncle Joe clears a profit of 300,000 and chooses to draw it out rather than invest in new equipment or whatever would he show an income of 300,000. That is, he's really making 300,000 for himself, same as a "fat cat" who gets 300,000 on a W2. If Joe gets 300,000 in receipts and spends 290,000 of it on operating expenses, then his 1040 shows a whopping 10,000 in income.
Please, let's stop this "small business owners who file as individuals" line -- it ignores how the tax laws really work.
Its true that small business people dont pay taxes on gross receipts, but net profit --
but the vast majority of sole proprietorships / small business file under LLC, and to a lesser extent, Sub chapter S
they get taxed on that profit whether it gets drawn out or not-- or even if its in the form of cash or not ( most have to reinvest a good portion of profits -- so at tax time, that profit is likely sitting in the form of inventory or the like)
I know to most -- $300k or even $1 mm in profit sounds like a huge business -- but its not. We are really talking about the country's most successful small businesses -- the same that supply the vast majority of job growth in this country.
All the surtax will do is take funds away that could have been used to grow those businesses.
Regardless of the attractiveness of what it is spent on -- the surtax will cost economic and job growth going forward. Very few dispute that fact, only the degree.
I think you're spot-on to note the risks here for Dems -- tax hikes in a recession, etc. But why not note the risks for GOP opposition? Polls show strong public support for health care reform -- strong support for universal coverage. Isn't there a risk for GOPers who oppose a plan that might actually bring reform and coverage to the public? I would think so -- especially if the media will make as much of it as they're sure to make of the tax hikes!
Oh, and I agree completely with anirprof (above). Another GOP talking point that you could've provided counterpoint to, with minimal effort.
jane,
You seem concerned about people receiving what they haven't worked for, and others not receiving what they did work for.
Well, a corporation makes profits on the backs of workers. The real value of the worker's labor is the profits that labor generates. But the worker only gets paid a wage -- i.e., less than the full value of her work. And the corporate execs take home much higher wages, as well as a split of the corporate profits -- i.e., more than the value of their actual work. Moreover, shareholders do ZERO work, yet they take a split of those profits in the form of stock dividends.
Note also that most wealthy folks (making over $350K/yr, and especially making over $1,000,000/yr) are making a good chunk of that money off investments -- i.e., not off any "work" per se.
So who, exactly, is getting what they haven't worked for, and who is not receiving what they did work for?
Moreover, it is in the interests of the wealthy elite -- who rely on the working class for those big profits -- to have a healthy workforce. So it is in the interests of the wealthy elite to pay a tiny fraction of their wealth to provide decent health care to the working class.
From some quick googling, it seems like the average Schedule C sole proprietorship (whether LLC or not) net income is about $20,000/year, and something like $75,000 average net income passed through to partners in S-corps. Very, very few are drawing a million bucks a year in profit out of their small business -- not a million bucks to a sole proprietor at least.
I stand by my point. The way this argument is being made by the GOP is that if Fred's hot dog stand sells $300,000 in hot dogs per year, $290,000 of which went to buy weiners, then Fred will get hit with a surtax! Oh noz! Simply not true.
dont confuse "average" with "not that many exist"
there are about 180,000(at least in 2006 -- last year IRS put out data) returns showing AGI above $500 k sourced from business income.
its not a small amount --- and probably collectively have created 10 million jobs.
Dems just love small business --- except they spend all their governing stacking the deck against them.