This morning it seems like all the headlines are about the new plans for health care reform. For those of you who have not have heard, yesterday House Democrats unveiled their health care reform bill (H.R. 3200). To finance the massive project, they are hoping to raise taxes on the following taxpayers.
- 1.0% increase for married couples earning $350,000 - $500,000
- 1.5% increase for married couples earning $500,000 - $1,000,000
- 5.4% increase for married couples earnings > $1,000,000
Additionally, the 1.0% and 1.5% rates are scheduled to increase in 2013 to 2.0% and 3.0% unless the government can find $150 billion in health care savings. Understandably, many taxpayers are angered by the announcement, which would push the total tax rates in some states to nearly 60%.
As the Wall Street Journal points out, “Obama has promised to let the lower Bush tax rates expire after 2010. This would raise the top personal income tax rate to 39.6% from 35%, and the next rate to 36% from 33%. The Bush expiration would also phase out various tax deductions and exemptions, bringing the top marginal rate to as high as 41%.”
Then add the Rangel Surtax of one percentage point, starting at $280,000 ($350,000 for couples), plus another percentage point at $400,000 ($500,000 for couples), rising to three points on more than $800,000 ($1 million) in 2011. But wait, there's more. The surcharge could rise by two more percentage points in 2013 if health-care costs are larger than advertised -- which is a near-certainty. Add all of this up and the top marginal tax rate would climb to 46%, which hasn't been seen in the U.S. since the Reagan tax reform of 1986 cut the top rate to 28% from 50%.
States have also been raising their income tax rates, so in California and New York City the top rate would be around 58%. The Tax Foundation reports that at least half of all states would have combined state-federal tax rates of more than 50%.
The Associated Press also published an article on the new surtax, claiming that the “House Ways and Means Committee announced it would vote on the proposal beginning on Thursday. The panel is one of three that must act before the bill can go to the full House, probably later in the month.”
Their article also explains Obama’s involvement in the bill, noting that “the developments occurred one day after President Barack Obama met with key Democrats in a White House session in which he told a powerful Senate chairman he wants legislation by week's end in his committee.”
In a statement, Obama praised the proposal, saying it "will begin the process of fixing what's broken about our health care system, reducing costs for all, building on what works and covering an estimated 97 percent of all Americans. And by emphasizing prevention and wellness, it will also help improve the quality of health care for every American."