Monday, March 30, 2009

Health Care and Taxing Benefits

According to the New York Times, the Obama administration is signaling to Congress that the president could support taxing some employee health benefits, as several influential lawmakers and many economists favor, to help pay for overhauling the health care system. The proposal is politically problematic for President Obama, however, since it is similar to one he denounced in the presidential campaign as “the largest middle-class tax increase in history.” Most Americans with insurance get it from their employers, and taxing workers for the benefit is opposed by union leaders and some businesses. The idea of taxing medical insurance benefits, according to the Detroit Free Press, has long worried many lawmakers concerned that new taxes could jeopardize the employer-based health system most Americans rely on. Even now, the idea is fiercely opposed by many in Congress and many in organized labor.

According to the Washington Post, a Senate plan to overhaul the nation's health system is likely to include a new tax on some employer-provided health benefits that exceed the value of the basic plan offered to federal employees, currently about $13,000 a year for a family of four, the chairman of the Senate Finance Committee reported this week. Democrat Max Baucus of Montana said he is drafting the health reform measure, which he expects to unveil next week. He told reporters that taxing employer-provided benefits is "perhaps the best way to raise money for an overhaul of the health-care system" and offered details about the form that tax is likely to take. Baucus said his proposal is likely to cap benefits at "a level higher than the actual benefit that members of Congress receive today." An employer-provided plan worth less than that level would remain tax-free, he said, while any benefit exceeding the cap would be taxed as ordinary income. Such a tax, if adopted, would be phased in over "several years," Baucus said. And it would be likely to "grandfather" in health benefits set as part of a collective-bargaining agreement, he said, allowing union plans to remain tax-free until new contracts can be negotiated. Baucus declined to say how much money the proposal would generate.

According to the Washington Post, the nonpartisan Joint Committee on Taxation estimates that taxing employer benefits above the value of the Federal Employees Health Benefit Plan, adjusted for inflation, would generate nearly $420 billion over the next 10 years -- a sizable chunk of the $1 trillion or more likely to be needed to expand coverage for the uninsured. A higher cap and exemptions for unions would make the tax more politically palatable but would diminish the amount of money it would raise. Baucus said the sums under discussion remain "significant" but added that he is looking at a variety of other money-raising options, including Obama's plan to limit the value of itemized deductions for families earning more than $250,000 a year. At a closed-door meeting of the Finance Committee last month, the Joint Committee on Taxation also provided estimates for repealing the tax deduction for certain large medical expenses ($180 billion over 10 years), a new tax on flexible savings accounts and health reimbursement accounts (about $70 billion over 10 years), a new 3-cent tax on sugary drinks (about $50 billion over 10 years) and higher taxes on alcohol (about $60 billion over 10 years). A more dramatic proposal -- taxing half of all employer-provided health premiums -- would generate $1.2 trillion over 10 years, according to a memo provided to Finance Committee members. Baucus's comments came after a lunchtime meeting of Senate Democrats at which lawmakers began hashing out the complex details of a health overhaul. "This is the first week of crunch time," said Sen. Charles E. Schumer (D-N.Y.). "This is the first day when, instead of looking at the car, we're starting to test-drive it."

Democratic leaders in both the House and Senate yesterday continued to trickle out details of proposals without saying how they would raise the money, according to the Washington Post. The Senate Health, Education, Labor and Pensions Committee released an outline that would require the vast majority of businesses to contribute to workers' health costs and would impose tight restrictions on the practices of insurance companies. Like a developing House plan, it would include government-sponsored insurance for people who have trouble finding coverage on the private market -- an idea adamantly opposed by Republicans.

If Democrats could tax the air we breath, they would do it. The new tax legislation proposed to cover this mandatory health insurance plan is a crushing blow to American tax payers and the health care industry. Punishing tax payers and consumers in general to pay for a gargantuan national government health care system is typical of how Democrats and some Republicans view the value of Americans and our economic system. The absurdity of the taxes proposed to cover this new initiative harkens back to the day when Americans were taxed for drinking tea, the soft drink beverage of choice in the 1700's. That didn't go over too well. How ridiculous to mandate a policy that in its affect will cause hugely detrimental economic injury to the nation--businesses will be forced to let employees go because they cannot afford to keep workers, and the plan will reduce the purchasing power of all Americans. Plus, who is going to pay for it? Tax payers, not only now, but in generations to come.

Americans need to wake up, and shake up their elected representatives to let them know that the current political mess brewing in Congress known as national health care should be canned--immediately.

Until next time. Let me know what you think.

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