Tax provisions in Senate health bill draw scrutiny

Nov 20 2009

Several news organizations report on new taxes in the Senate health bill and how they differ from those in the House-passed measure.

"Amid all of the uncertainties about how healthcare legislation would affect each American, one thing is clear: The more affluent would pay higher taxes," The Los Angeles Times reports. "Embracing the progressive -- and sometimes politically risky -- principle that the cost of carrying out public policies should fall to the well-off more than the disadvantaged, both the House and Senate bills would place new taxes on the wealthy to help pay for expanded insurance coverage." The taxes, however, come in different forms. "Under the House bill, couples with more than $1 million in income would pay an additional surtax of as much as 5.4%. The Senate bill would hit families of more modest wealth -- those making more than $250,000 -- with a payroll tax hike of 0.5%" (Hook, 11/20). 

"Senate Majority Leader Harry Reid (D., Nev.) made a late change to his bill by adding an extra Medicare payroll tax, which would generate $54 billion over 10 years according to the Congressional Budget Office," The Wall Street Journal reports. "Henry Aaron, a senior fellow at the Brookings Institution, said the extra tax on wages could have a distorting effect by causing high earners to take their pay in stock or other forms of compensation, rather than wages."

Meanwhile, "Conservatives said the proposed Medicare tax increase undermines the claim that Medicare is a social-insurance program, not a vehicle to redistribute wealth. That argument 'has been demolished,' said J.D. Foster, a senior fellow at the Heritage Foundation." There are also other new taxes in the Senate health bill, including "a 40% excise tax on insurance plans valued at more than $8,500 for individuals and $23,000 for families. Some economists, including Mr. Aaron, said the provision will prod employers and workers to choose more cost-effective health plans" (Vaughan, 11/19).

Meanwhile, Roll Call reports that "The Congressional Budget Office revised its estimate of the House health care bill Thursday, saying it would shrink the deficit by $139 billion in the first decade, $30 billion more than earlier estimates and $9 billion more than the Senate bill unveiled Wednesday by Majority Leader Harry Reid (D-Nev.)" (Dennis, 11/19).