With the event horizon of the vote on the Reid Health Care Bill approaching, it appears that passage of the legislation would, yet again, amount to President Barack Obama breaking his “no new middle class tax” pledge.
As blogger Keith Hennessey reminds readers, then-candidate Obama pledged on September 12, 2008:
I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.
Hennessey notes that Obama first broke that pledge with his February signing of the Children’s Health Insurance Program Reauthorization Act of 2009, which hiked tobacco taxes by 156% – effectively a tax on middle class American consumers. And that broken promise occurred only 15 days into the Obama presidency.
Now, as the Senate takes up the Reid Bill, there are a whole slew of new middle class taxes that also amount to breaches of the Obama “no new tax” pledge. Hennessey writes that there are six tax increases that qualify. Here is his analysis:
1. The clearest violation is the 5% excise tax on cosmetic surgery and similar procedures (including teeth whitening). I assume that cosmetic surgery and similar procedures are skewed toward the high end of the income distribution, but there certainly are many people getting these treatments with annual family income less than $250,000.
2. The bill would allow State insurance exchanges “to charge assessments or user fees to participating health insurers, or to otherwise generate funding, to support its operations.” [ §1311(d)(5)(A) ] Health insurers would pass these “assessments or user fees” through to consumers as higher premiums. This would affect anyone who buys health insurance, including those with family income less than $250,000.
3. The bill would impose a 40% excise tax on health coverage in excess of $8,500 (individuals) / $23,000 (families). While policies this generous are almost certainly skewed higher on the income distribution, there are definitely families with income less than $250,000 receiving these plans. Again, health insurers would pass these tax increases through to those families.
4. The bill would increase taxes on all health insurance plans, as well as on brand-name drugs and biologics, and on medical devices. These tax increases would affect anyone who buys these goods, even if their family income is less than $250,000.
5. According to CBO, “By 2019, … the number of nonelderly people who are uninsured would be reduced by about 31 million, leaving about 24 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants.)” (p 8 ) These roughly 16 million people would pay “penalties” of $95 per adult in 2014, $350 per adult in 2015, and $750 per adult in 2016 and later. You’re charged half as much for each kid. Most of these 16 million people paying higher taxes will have family income less than $250,000 and will pay higher “penalties,” although not all will pay these full amounts.
6. The bill would create a new 0.5 percentage point increase in payroll taxes on individuals with incomes greater than $200,000 in 2013 and families with incomes greater than $250,000 in 2013. Since these amounts are for 2013 and not indexed, someone making $233K in 2009 would be affected by this in 2013, assuming 1% annual real wage growth and CBO’s assumptions about inflation. If you’re making $220K this year, you’ll probably be hit by the new tax in 2016. $210K this year, you first get bit in 2017, and so on.
For a more comprehensive look at the growing list of taxes already on the table in the health care reform legislation, take a look at The Heritage Foundation’s Senior Analyst in Tax Policy Curtis Dubay’s piece titled “Taxes Proposed to Pay for Health Care Reform.”
As Dubay writes, all the taxes in the House bill, when combined with state and local income taxes, would raise the average top marginal rate in the U.S. to over 52 percent, “higher than traditionally high-tax countries such as Italy, Spain, and even France.”
So much for Obama’s pledge.