Wednesday, November 18, 2009
Great Wealth Transfer of America
How is this country going to finance the health care reforms so that we may have universal health insurance? Nobody wants to increase the trillion dollar deficits that the federal government is facing into the foreseeable future. According to an AP poll, the majority of Americans are in favor of taxing the "rich." Mary Path Rodthaler, who was interviewed for the poll, may be typical of most Americans. She says, "You know, I mean, why not? If they have that much money, it should be taxed." Never mind that the vast majority of the "rich" work their butts off for their income. Fifty seven percent of those polled like the idea of increasing taxes of those making over $250,000 per year with only 36 percent opposed. With the health reform bills subsidizing health insurance for those making up to $88,000 per year, well into middle class territory, the government is desperately trying to find ways to finance this enormous new subsidy. Welcome to the great wealth transfer of America, 21st century edition.
So let's count the ways the government is attempting to raise revenue to pay for this wealth transfer. I've only listed a few that I can think of. I'm sure there are other schemes that I have missed, what with the health care reform bills in Congress changing almost daily.
There is the simple accounting gimmick. The taxes will go up almost immediately, in 2010. But the universal health benefits won't kick in until 2013. Therefore Congress is budgeting ten years of revenue for only seven years of benefits. It's not until after 2019, which they fail to take into account for now, will the deficits really explode. Look how long it took Medicare to bankrupt the country.
Let the Bush tax cuts expire in 2011. That will immediately raise the marginal tax rate from 35% to 39.6% without Congress lifting one finger.
At the same time, the capital gains tax will jump to 20%, again without the cowardly Congress having to vote for a tax increase.
Add a surcharge of 5.4% to the marginal tax rate of individuals making over $500k or families making over $1 million. This will raise the highest income tax bracket to 45%.
Increase the Medicare withholding tax. Currently the Medicare tax is 2.9% split between employer and employee. Of course business owners and the self employed like most doctors have no illusion of paying only half the Medicare tax. We pay the whole darn 2.9%. Congress is proposing increasing the tax by 0.5% on both employee and employer contributions, to 3.9% for those making over $200,000.
Add the 5.4% surcharge not just to the payroll incomes of the rich, but also their capital gains, interest, and dividend incomes too. That will raise the tax to 25.4% after the Bush tax cuts expire.
Charge medical device makers a 2.5% tax of sales. But don't penalize the companies that supposedly cater to the poor and blue collar and contribute to our health crisis like fast food restaurants and beer makers.
Levy a tax on expensive insurance plans, the one tax that the Congressional Budget Office thinks will actually "bend the curve" on rising health care costs? Are you kidding? Don't you know union members, who are the ones most likely to have these Cadillac health plans, aren't rich? They shouldn't be forced to participate in this wealth transfer. Plans to tax individual insurance plans costing over $8000 for individual or $21,000 for a family plan are opposed by liberal Democrats.
For people who snicker that only the "rich" will be affected by all these tax schemes, remember that these income brackets are not indexed to inflation. One only needs to look at the Alternative Minimum Tax, the original millionaire's tax, to see what will happen. Today the AMT ensnares millions of tax payers, down into the sub $100K income brackets, because it is not inflation adjusted. The same thing will happen with taxes to pay health care reform. And conveniently the widening net of tax collection will happen around 2019, when the current universal health insurance bills start to explode.