Posts Tagged ‘surtax’

House Democrats Pass Worst Bill Ever To Destroy U.S. Health Care, Economy

November 8, 2009

Congratulations, America.  This is what you’ve “won”:

NOVEMBER 1, 2009

The Worst Bill Ever
Epic new spending and taxes, pricier insurance, rationed care, dishonest accounting: The Pelosi health bill has it all.

Speaker Nancy Pelosi has reportedly told fellow Democrats that she’s prepared to lose seats in 2010 if that’s what it takes to pass ObamaCare, and little wonder. The health bill she unwrapped last Thursday, which President Obama hailed as a “critical milestone,” may well be the worst piece of post-New Deal legislation ever introduced.

In a rational political world, this 1,990-page runaway train would have been derailed months ago. With spending and debt already at record peacetime levels, the bill creates a new and probably unrepealable middle-class entitlement that is designed to expand over time. Taxes will need to rise precipitously, even as ObamaCare so dramatically expands government control of health care that eventually all medicine will be rationed via politics.

Yet at this point, Democrats have dumped any pretense of genuine bipartisan “reform” and moved into the realm of pure power politics as they race against the unpopularity of their own agenda. The goal is to ram through whatever income-redistribution scheme they can claim to be “universal coverage.” The result will be destructive on every level—for the health-care system, for the country’s fiscal condition, and ultimately for American freedom and prosperity.

The spending surge. The Congressional Budget Office figures the House program will cost $1.055 trillion over a decade, which while far above the $829 billion net cost that Mrs. Pelosi fed to credulous reporters is still a low-ball estimate.  Most of the money goes into government-run “exchanges” where people earning between 150% and 400% of the poverty level—that is, up to about $96,000 for a family of four in 2016—could buy coverage at heavily subsidized rates, tied to income. The government would pay for 93% of insurance costs for a family making $42,000, 72% for another making $78,000, and so forth.

At least at first, these benefits would be offered only to those whose employers don’t provide insurance or work for small businesses with 100 or fewer workers. The taxpayer costs would be far higher if not for this “firewall”—which is sure to cave in when people see the deal their neighbors are getting on “free” health care. Mrs. Pelosi knows this, like everyone else in Washington.

Even so, the House disguises hundreds of billions of dollars in additional costs with budget gimmicks. It “pays for” about six years of program with a decade of revenue, with the heaviest costs concentrated in the second five years. The House also pretends Medicare payments to doctors will be cut by 21.5% next year and deeper after that, “saving” about $250 billion. ObamaCare will be lucky to cost under $2 trillion over 10 years; it will grow more after that.

Expanding Medicaid, gutting private Medicare. All this is particularly reckless given the unfunded liabilities of Medicare—now north of $37 trillion over 75 years. Mrs. Pelosi wants to steal $426 billion from future Medicare spending to “pay for” universal coverage. While Medicare’s price controls on doctors and hospitals are certain to be tightened, the only cut that is a sure thing in practice is gutting Medicare Advantage to the tune of $170 billion. Democrats loathe this program because it gives one of out five seniors private insurance options.

As for Medicaid, the House will expand eligibility to everyone below 150% of the poverty level, meaning that some 15 million new people will be added to the rolls as private insurance gets crowded out at a cost of $425 billion. A decade from now more than a quarter of the population will be on a program originally intended for poor women, children and the disabled.

Even though the House will assume 91% of the “matching rate” for this joint state-federal program—up from today’s 57%—governors would still be forced to take on $34 billion in new burdens when budgets from Albany to Sacramento are in fiscal collapse. Washington’s budget will collapse too, if anything like the House bill passes.

European levels of taxation. All told, the House favors $572 billion in new taxes, mostly by imposing a 5.4-percentage-point “surcharge” on joint filers earning over $1 million, $500,000 for singles. This tax will raise the top marginal rate to 45% in 2011 from 39.6% when the Bush tax cuts expire—not counting state income taxes and the phase-out of certain deductions and exemptions. The burden will mostly fall on the small businesses that have organized as Subchapter S or limited liability corporations, since the truly wealthy won’t have any difficulty sheltering their incomes.

This surtax could hit ever more earners because, like the alternative minimum tax, it isn’t indexed for inflation. Yet it still won’t be nearly enough. Even if Congress had confiscated 100% of the taxable income of people earning over $500,000 in the boom year of 2006, it would have only raised $1.3 trillion. When Democrats end up soaking the middle class, perhaps via the European-style value-added tax that Mrs. Pelosi has endorsed, they’ll claim the deficits that they created made them do it.

Under another new tax, businesses would have to surrender 8% of their payroll to government if they don’t offer insurance or pay at least 72.5% of their workers’ premiums, which eat into wages. Such “play or pay” taxes always become “pay or pay” and will rise over time, with severe consequences for hiring, job creation and ultimately growth
. While the U.S. already has one of the highest corporate income tax rates in the world, Democrats are on the way to creating a high structural unemployment rate, much as Europe has done by expanding its welfare states.

Meanwhile, a tax equal to 2.5% of adjusted gross income will also be imposed on some 18 million people who CBO expects still won’t buy insurance in 2019. Democrats could make this penalty even higher, but that is politically unacceptable, or they could make the subsidies even higher, but that would expose the (already ludicrous) illusion that ObamaCare will reduce the deficit.

The insurance takeover. A new “health choices commissioner” will decide what counts as “essential benefits,” which all insurers will have to offer as first-dollar coverage. Private insurers will also be told how much they are allowed to charge even as they will have to offer coverage at virtually the same price to anyone who applies, regardless of health status or medical history.

The cost of insurance, naturally, will skyrocket. The insurer WellPoint estimates based on its own market data that some premiums in the individual market will triple under these new burdens. The same is likely to prove true for the employer-sponsored plans that provide private coverage to about 177 million people today. Over time, the new mandates will apply to all contracts, including for the large businesses currently given a safe harbor from bureaucratic tampering under a 1974 law called Erisa.

The political incentive will always be for government to expand benefits and reduce cost-sharing, trampling any chance of giving individuals financial incentives to economize on care. Essentially, all insurers will become government contractors, in the business of fulfilling political demands: There will be no such thing as “private” health insurance.
***

All of this is intentional, even if it isn’t explicitly acknowledged. The overriding liberal ambition is to finish the work began decades ago as the Great Society of converting health care into a government responsibility. Mr. Obama’s own Medicare actuaries estimate that the federal share of U.S. health dollars will quickly climb beyond 60% from 46% today. One reason Mrs. Pelosi has fought so ferociously against her own Blue Dog colleagues to include at least a scaled-back “public option” entitlement program is so that the architecture is in place for future Congresses to expand this share even further.

As Congress’s balance sheet drowns in trillions of dollars in new obligations, the political system will have no choice but to start making cost-minded decisions about which treatments patients are allowed to receive. Democrats can’t regulate their way out of the reality that we live in a world of finite resources and infinite wants. Once health care is nationalized, or mostly nationalized, medical rationing is inevitable—especially for the innovative high-cost technologies and drugs that are the future of medicine.

Mr. Obama rode into office on a wave of “change,” but we doubt most voters realized that the change Democrats had in mind was making health care even more expensive and rigid than the status quo. Critics will say we are exaggerating, but we believe it is no stretch to say that Mrs. Pelosi’s handiwork ranks with the Smoot-Hawley tariff and FDR’s National Industrial Recovery Act as among the worst bills Congress has ever seriously contemplated.

In 2008, America voted for national suicide, whether they understood it or not.  While it is increasingly obvious that Americans are rethinking their suicide pact with the Democrat Party, and beginning to change their minds, Democrats are nevertheless racing ahead to finish the job of destroying the country while they still can.

Think Cloward-Piven.  The Democrats believe that they are creating a “win we win, lose we win” stratagem.  If by some increasingly unlikely miracle our massive unprecedented debt-financed spending doesn’t cause the entire economic structure to implode, Democrats will be in a position to claim credit for their “success.”  If, far more likely, the economy self-destructs under the weight of the mind-boggling debts and economic hamstringing foisted upon us by the liberal agenda, Democrats are counting upon the fact that hungry, desperate, panicking people will turn to massive government structures to feed them and help them from the very problems that massive government structures caused in the first place.

Tax Increases on ‘Rich’ People Planned by Democrats Would Hit Over A Million Small Businesses

July 17, 2009

Let’s file this under the category, “Yet another stupid Democrat idea”: Let’s finance a socialized medicine plan that Americans don’t want by taxing the owners of small business who create the few jobs we’ve got left.

Tax Increase on ‘Rich’ People Planned by House Democrats Would Strike More Than a Million U.S. Small Businesses
Tuesday, July 14, 2009
By Christopher Neefus

(CNSNews.com) – More than a million small business owners and about two-thirds of the profits earned by U.S. small businesses would be hit by the income tax increase on the “rich” that House Democratic leaders want to enact to pay for the health-care reform plan President Obama wants passed this summer, a taxpayer watchdog say s.

Ryan Ellis, director of tax policy for Americans for Tax Reform, told CNSNews.com he calculated that 1.09 million of 21.5 million small business owners would see a one- to three-percent surtax on their profits in order to fund the House of Representatives’ trillion-dollar health care reform bill.

While only about five percent of small business owners would be exposed to the extra charge, Ellis says two in every three dollars of profit made by small businesses would be subject to it.

Rep. Charles Rangel (D-N.Y.), chairman of the House Ways and Means Committee, announced late Friday that Democrats want to enact  this tax increase.

The plan reportedly would include a one percent increase in the income tax rate paid by individuals earning $280,000 or more and by households earning at least $350,000. Steeper rate increases of up to three percent would be imposed on those earning $500,000 and $1 million or more. The committee hopes these income-tax rate increases will raise about $540 billion for the federal government over a decade.

Small business owners would be subject to the income-tax rate increases because many of them report the profits of their small businesses on individual tax returns. As a result, the roughly five percent who make more than $200,000 a year would be hit with the extra tax.

Ellis said the Obama administration’s claims that only a few small businesses will be affected misses the point. “(T)hat’s what the Obama guys will always tell you. It’s a small, single-digit percentage of small businesses that would be affected by this, and that’s absolutely true. It’s probably somewhere between five and 10 percent … of all small businesses.

“But if you actually look at the small business profits being reported, two-thirds of all small business profits are reported in these households.”

Indeed, IRS figures from 2006, the most recent year reported, show that $479 billion of the $707 billion in small business profits was reported by households in the top two percent of earners, those earning more than $200,000.

Republicans went on the offensive after Rangel’s Friday announcement. A spokesman for House Minority Leader John Boehner (R-Ohio) said, “In the middle of a serious recession, with unemployment nearing double digits nationwide, the last thing we need is a tax increase on small businesses, which will cost the American economy even more jobs.”

Blue Dog Democrats in the House also voiced some concern. Rep. Jason Altmire (D-Pa.) told CQ Today, “I have a concern with going outside the health care system” when discussing funding options.

“I feel like the House has moved this issue so far to the left we’ve taken ourselves out of the discussion entirely.”

But Ways and Means Committee member Rep. Allyson Schwartz (D-Pa.) told The Washington Post that “if (the bill) works right,” the high earners who pay extra taxes will also see lowered health insurance premiums.

Ellis, however, is skeptical. “If you’re a very successful company and you’re making more than a million dollars a year,” he said, then at “a three percentage point surtax, you basically have to assume that their healthcare costs will go down by 3 percent of their profits in order to even themselves out.”

“That’s just not reasonable to expect,” he told CNSNews.com. “(T)here’s not one example of where the government is going to go in and take over something and start spending money on something and then it saves money.”

Rea Hederman, assistant director of the Center for Data Analysis at the conservative Heritage Foundation, also said small business owners will not see their money back unless they force their employees to take the proposed public health care option.

“The only way they would see reductions in health care,” he said, “is if small businesses just say we’re not going to offer health care to our employees all together, and I don’t think that’s a direction that people want to go,” Hederman said.

While the surtax for small businesses may top out at three percent, Hederman said, “in percentage terms, the tax burden is jumping somewhere between four and a half to five percent, and this is going to be combined with the expiration of some of President Bush’s tax cuts.”

The health care surtax would come in addition to the scheduled expiration of the Bush tax cuts at the end of 2010, which will move the federal top rate from 35 percent to 39.6 percent.

In a statement, Thomas Hodge, president of the nonpartisan Tax Foundation, said total top rates, including federal taxes, could push past the 50 percent mark in some states.

“Combining top federal and state rates, and factoring in all deductions, the government would be taking over half of every additional dollar from high-income taxpayers in two-thirds of the states under this latest funding scheme.”

According to Hederman, “Unfortunately, right now, businesses are going to have trouble pricing in (these) cost increases.

“(So) businesses will continue to try to wring out as much efficiency as they can in the labor force, and that means cutting back hours and cutting back jobs,” he said.

A May 2009 survey performed by the National Federation of Independent Businesses, small business owners identified high taxes as the second biggest problem facing them, trailing only poor sales.

The tax increase, if enacted, would take effect in 2011.

People see the “small number” of small businesses affected by the tax and think it’s no big deal.  But think about it: there’s the difference between small businesses that are truly small and small business that are big enough to actually hire people.

When I was a kid I had a paper route.  I didn’t work directly for the newspaper; rather, I was listed as “an independent contractor.”

I had a small business.  And like the overwhelming majority of small businesses, I didn’t make a ton of money, and I certainly didn’t hire anybody.

The small businesses that are going to be the most impacted – and the most negatively impacted at that – are the ones that hire people.  And given that these small businesses are going to experience the double whammy of having to pay for Obama’s imposed health care burden even as their profits are taxed to pay for everyone else’s health care, there are going to be a lot of job losses, as surely as 1 + 1 = 2.  Only a fool, or a Democrat, would 1) raise a business’ cost while 2) reducing its profits and NOT expect that business to cut back.

The Democrats’ plan imposes an additional 8% payroll tax on businesses unless they meet the Democrats’ health care requirements.

Another (related) factor that needs to be contemplated emerges from thinking about the concern of the blue dog Democrats regarding going outside the health care system to fund the Obama health care system.  If the darn Democrat health care plan is REALLY something that will save money for the health care system, then why do you have to go outside the system to pay for it?  Why impose so much in additional taxes for something that is supposed to cost LESS? The fact of the matter is that this thing is going to cost TRILLIONS.  It will be like Medicare, with its $61.6 trillion unfunded liabilities, and which is expected to go completely bankrupt by 2015.

And a frightening corollary to that is exactly why people like me keep calling Obama’s health care grab “socialized medicine” to begin with.  Because the plan will necessarily push people into the government plan in FAR greater numbers than Democrats claim will go in.  Small business who employ most American workers, squeezed by the double whammy, will have absolutely no choice but to push their workers into the government plan.

Democrats naively argue that a government plan would not be intended to replace private health care plans, but would only reduce costs by “competition.”  They just don’t have enough functioning brain cells to understand that a government system – which does NOT have to depend upon profitability the way private systems do, and which can draw its funding by forcing even its competition to pay for it through taxation – doesn’t “compete.”  It devours.  The way Republican Rep. Mike Pence put it:

But what I heard yesterday at my town hall meeting was profound skepticism about the introduction of a government option to compete with private health insurance companies within this economy. I think most Americans know that the government competes with the private sector the way an alligator competes with a duck. It consumes it.

That, and of course, the fact that every conspiracy theory about government health care is about to come true: Democrats are openly claiming that they are going to use Obama’s health care plan as a backdoor to socialized medicine.

Bottom line: we’re going to tax our producers into non-producers in order to create a socialized medicine boondoggle that is going to be a disaster.

It is long past time we stopped listening to liberals’ Marxist class warfare messages.  The rich aren’t the bourgeoisie, and the rest of us aren’t the proletariat.  Rather than welcoming the government seizing the rich’s wealth to create one social program after another, we seriously need to start demanding that government finally get the hell out of the way and let all the people have the freedom to invest and spend as we see fit.  For it is liberty and freedom, rather than tyranny and big-government control, that made this country great.  And only returning to the fundamental principles of liberty and freedom are going to be able to get us out of the massive crisis that too much government has forced us into.

Reuters’ Nine Reasons Democrats’ Healthcare Surtax Is Dangerous

July 16, 2009

Our republic is in the worst kind of danger.  No enemy could do to us from without what Obama and liberal Democrats are doing to us from within.

9 reasons Pelosi’s healthcare surtax is disastrous

by: James Pethokoukis

So what explains the crazy, cockeyed optimism of House Democrats? Maybe they still believe Team Obama’s rosy-scenario forecast that shows the stimulus package a) keeping unemployment under 8 percent this year and b) launching an economic boom next year and beyond. For some reason, though, they think the battered U.S. economy is so strong that politicians can pile tax upon tax on it with no fear of further harm. Less than three weeks after passing a costly cap-and-trade carbon emission plan, Pelosi & Co. have giddily unveiled a $1.2 trillion healthcare plan partially funded by a $544 billion surtax on the work and investment income of wealthier Americans, including small business owners.

[See why Obama’s economic gamble is failing.]

The ten-year proposal calls for a 1 percent surtax on adjusted gross income — including capital gains — between $350,000 and $500,000; a 1.5% surtax on income between $500,000 and $1 million; and a 5.4% surtax on income exceeding $1 million. (Interestingly, the House fact sheet on the surtax forgets to mention the highest tax rate. Hey, they were in a rush.) How bad an idea is this? Let me count the ways:

It’s not the first Obama tax hike. This tax would be in addition to the $1 trillion in new taxes that Obama called for in his budget released earlier this year. (And then there’s cap and trade, remember.) And if healthcare reform costs more than expected — what are the odds of that, you think? — the surtax would go up.

[See 5 economic stimulus plans better than the one we’ve got.]

It pushes income tax rates above a key threshhold. Once you take into account state income taxes, the top tax rate would sneak above 50 percent. Research by former White House economist Lawrence Lindsey has found that rates above 40 percent really start to hit economic growth especially hard.

It’s risky in a weak economy. Democrats love the “consensus view” when it comes to climate change, so how about the economy? The consensus view is for unemployment to hit double digits this year and stay high throughout 2010 and beyond as the economy staggers to its feet. Even Treasury Secretary Tim Geithner said “it seems realistic to expect a gradual recovery, with more than the usual ups and downs and temporary reversals.” In a “long recession” environment, do we really want a policy that, according to research that current White House economic adviser Christina Romer conducted at Stanford University, is “highly contractionary.”

It actually makes America’s healthcare problem worse. Entitlements, including Medicare, will eventually bankrupt the economy unless action is taken. Agreed. But lowering the potential U.S. growth rate will only make those problems worse by generating lower tax revenue and making the overall pie smaller than it would be otherwise. Yet many economists think government interventions in finance, housing, autos, energy and now healthcare will do just that. And adding layers of additional new taxes helps how?

It makes the tax code more lopsided and inefficient. As it is, the top 1 percent of Americans in terms of income pay 40 percent of taxes. Not only would this plan exacerbate this imbalance, it adds further complexity to the tax code. Most tax reformers favor a simpler system with fewer brackets and deductions matched by a lower rate. Indeed, Howard Gleckman of the Tax Policy Center points out the following:

Many of the uber-rich are unlikely to pay much more in taxes than they do now, despite the rate increase. Since we’d be returning to pre-1986 rates, we shouldn’t be surprised when the very wealthy reprise their pre-1986 sheltering behavior. The hoary financial alchemy of turning ordinary income into capital gains, morphing individuals into corporations, and deferring compensation will return. Remember, the targets of these tax hikes are the people who can most easily manipulate their income. The bad old days of bull semen partnerships may not return, but I suspect the financial Merlins are already cooking up new shelters for what promises to be a booming new market.

It hurts U.S. competitiveness. America already has the second highest corporate tax rate in the world. Under the House plan, the top U.S. income tax rate would be higher than the OECD (advanced economies) average of 42 percent. France and Germany, by contrast, are looking to keep rates stable or lower them. Pro-growth China doesn’t even tax investment income.

It ignores the lessons of Clinton. Democrats love to point out how the Clinton tax increases didn’t tank the economy back in the 1990s. Oh, you mean the economy that was expanding for more than two years before he signed his tax increases? The economy is far weaker today and may be anemic for some time given the history of economies that suffered a banking crisis.

It ignores the lessons of 1937. The slowly recovering 1930s economy weakened again in 1937 and 1938. Again, Christina Romer tells all:

In this fragile environment, fiscal policy turned sharply contractionary. The one-time veterans’ bonus ended, and Social Security taxes were collected for the first time in 1937. … GDP rose by only 5% in 1937 and then fell by 3% in 1938, and unemployment rose dramatically, reaching 19% in 1938. The 1937 episode is an important cautionary tale for modern policymakers. At some point, recovery will take on a life of its own, as rising output generates rising investment and inventory demand through accelerator effects, and confidence and optimism replace caution and pessimism. But, we will need to monitor the economy closely to be sure that the private sector is back in the saddle before government takes away its crucial lifeline.

Except in this the case, Uncle Sam is not taking away a lifeline but tightening the noose.

It pays for a wrong-headed healthcare reform plan. Health exchanges, a public option, subsidies, taxes … well, we could go on and on. Or we could try to create a simpler consumer-driven market. Harvard Business economist Regina Herzlinger recommends reforming the tax system by making the money spent by employers on health insurance available as cash, tax-free, to employees. “Insurers would then compete for customers with policies that offer better value for the money,” she wrote in an analysis for consultancy McKinsey. Not even on the Obamacrat radar screen, though.

All in all, it’s another sign from the Obama administration and the Obamacrats in Congress that their top priority is redistributing existing wealth — at least what’s left of it — rather than creating new wealth. That, I guess, explains those ear-to-ear smiles on Capitol Hill.

Small businesses – widely recognized as by far and away the biggest job- and wealth-creating engines for our economy – are about to get hit with a massive double whammy.  Since most file as “S corporations” by which they are taxed on their total earnings, they will fall under the Democrats plans to “tax the rich.”  More than 1 million of our most successful small businesses which employ the most workers will be hit by this tax.  And at the same time, all but the very smallest small business will be hit with Obama’s additional 8% payroll tax unless they provide health care insurance that passes liberals’ scrutiny.

Meredith Whitney, who gained a great deal of credibility after predicting much of the economic calamity that has since come to pass, has predicted that unemployment will surpass 13%, and continue to harm the banking industry and the overall economy for years to come.  What fool thinks it’s a good idea to impose job-crushing policies while our unemployment rate is already soaring?

We are facing deficits and debts that dwarf anything ever seen in human history.  And we are about to reach a critical mass, a point at which the entire house of cards comes crashing down.  And America is going to experience suffering on a scale never even imagined before.

Gerald Celente, CEO of the highly regarded Trends Research Institute, predicted that we will have food riots and tax revolts by 2012.  He said “America’s going to go through a transition the likes of which no one is prepared for.”

Obama and his giant nest of liberal snakes have already imposed shocking levels of debt on this nation that will almost certainly result in hyperinflation in coming years.  And he is hard at work poisoning our economy with stupid and immoral health care legislation and even more stupid and immoral cap-and-trade legislation that will kill our economic output without even slightly reducing overall global warming gasses.

What is going to happen in the next few weeks is the difference between whether this nation has any chance whatsoever to recover, or whether we are destined to become a banana republic spiralling down a cyle of violence and repressive government regimes.