The U.S. House Ways and Means Committee might include a surtax on those with incomes over $250,000 to help pay for an overhaul of the healthcare system, similar to but smaller than the one the committee proposed two years ago.
“The surtax is obviously more attractive to Democrats in the House because it’s more progressive, which they find attractive in and of itself,” Paul Van de Water, a senior fellow at the Center on Budget and Policy Priorities, told Bloomberg.
A surtax proposal would force President Barack Obama to decide whether he is willing to add the levy on top of higher income-tax rates for top earners that he wants to take effect in 2011.
It would also mean the top income-tax rate would climb to well over 40 percent, said Ryan Ellis of Americans for Tax Reform. It would hit small businesses hardest because two out of every three tax dollars paid by small businesses are paid on their owners’ 1040 tax filings.
“There are 28 million sole proprietors, business partners, and Subchapter-S corporation owners in America,” Ellis said. “Most of the profits generated by these companies will face a higher marginal tax rate.”
“No matter which way you slice it, you can’t raise taxes on ‘the rich’ without having most of that burden fall on small business,’’ he said. “… All for the sake of healthcare with the efficiency of the post office and the customer service of the DMV (Department of Motor Vehicles).”
The White House and hospitals around the United States reached a deal on July 8 in which the hospitals will give up $155 billion in future Medicare and Medicaid payments to help defray the cost of Obama’s healthcare plan.
The White House hopes this concession will boost his healthcare reform effort that has hit a roadblock in Congress.
But the question remains: Where will the money come from?
Under a proposal being considered in the Senate, workers would have to pay income taxes on the value of their health insurance once it exceeded a certain level as yet to be determined by Congress.
Democrats are resisting the tax, but Republicans favor it as a way to slow medical costs.
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