From the Wall Street Journal

President Barack Obama’s new health-care legislation aims to raise $210 billion over 10 years to pay for the extensive new entitlements. How? By slapping a 3.8% “Medicare tax” on interest and rental income, dividends and capital gains of couples earning more than $250,000, or singles with more than $200,000.

The president also hopes to raise $364 billion over 10 years from the same taxpayers by raising the top two tax rates to 36%-39.6% from 33%-35%, plus another $105 billion by raising the tax on dividends and capital gains to 20% from 15%, and another $500 billion by capping and phasing out exemptions and deductions.

It won’t work. It never works.

The maximum tax rate fell to 28% in 1988-90 from 50% in 1986, yet individual income tax receipts rose to 8.3% of GDP in 1989 from 7.9% in 1986. The top tax rate rose to 31% in 1991 and revenue fell to 7.6% of GDP in 1992. The top tax rate was increased to 39.6% in 1993, along with numerous major revenue enhancers such as raising the taxable portion of Social Security to 85% of benefits from 50% for seniors who saved or kept working. Yet individual tax revenues were only 7.8% of GDP in 1993, 8.1% in 1994, and did not get back to the 1989 level until 1995.

Punitive tax rates on high-income individuals do not increase revenue. Successful people are not docile sheep just waiting to be shorn.

Read the rest of the column.

From Real Clear Markets

By Steven Malanga

Last week’s cynical deal between the Obama administration and organized labor to exempt unionized workers from the so-called Cadillac health plan tax was portrayed as a victory for organized labor. In truth, the deal was a gift to public-sector unions by a president who is himself a member of what I call the New New Left, that is, the party of Americans who always benefit from a growing government. This New New Left rules the Democratic Party and significant parts of the GOP in some states, and public sector workers are anchor tenants in the New New Left’s mall.

To understand the true nature of the White House deal, look at who actually comprises organized labor in America today. First of all, since both the country’s private sector economy and the portion of private workers who are unionized have slumped in recent years, we have finally reached the point where there are more unionized government workers in America than organized private laborers. Moreover, in the private sector the composition of the union movement has changed dramatically by shifting away from high-wage manufacturing jobs and toward low-wage service jobs in industries like health care and building services. Many of these private service sector workers have only modest health insurance packages whose annual premium costs don’t approach the point at which the health tax kicks in, so exempting them from the tax is meaningless.

By contrast, government unionized workers often have gold-plated health benefits packages that are among the most expensive in America. Several years ago, for instance, the Employee Benefit Research Institute noted in a report the growing gap in both salaries and benefits between the private and public sector, estimating that state and local governments paid on average about 120 percent more on an hourly basis for employee health premiums than private employers. That’s why although the entire notion of a Cadillac tax began as a way to restrain pricey executive health plans in the private sector, Democrats in Washington soon realized that the tax would mainly hit their allies in public sector unions.

In places where government unions have the most influence, like California, New York and New Jersey, the cost of public health plans is well beyond what’s typical in the private sector because public workers in these places make little or no contribution toward premiums, often don’t have co-pays for doctor visits, and have a rich array of supplemental benefits that are rare in the private sector and drive the cost of health coverage skyward (and which the Cadillac tax was supposed to help restrain).

Many of these benefits, by the way, don’t merely apply to current government workers but also to retirees because many states and cities now offer public workers attractive retirement packages that start at 50 for public safety workers and 55 for everyone else and which include full-health benefits until retirees reach the age that Medicare kicks in. Even then, government pays for retirees’ supplemental Medicare coverage in many places. That’s one reason why New York City, for instance, is currently paying health premiums for nearly as many retirees as current workers.

The health care deal, then, represents an unprecedented victory for public sector unions, and the deal shows where the next front in the growing battle between taxpayers and those who devour tax revenues will be fought. The burden these outsized public worker salaries and benefits costs have placed on government budgets everywhere has sparked a crisis and a search for new revenues. By exempting public employees from a significant revenue raiser, Washington has pointed the way. Expect more creative deals at the state and local level where government workers will be relieved of paying new taxes or otherwise have their tax obligations subsidized.

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From Obama.com

By Michael F. Cannon: The writer, of Washington, D.C., is director of health policy studies at the Cato Institute. He is co-author of “Healthy Competition: What’s Holding Back Health Care and How to Free It.”

Amid double-digit unemployment, a record $1.6 trillion federal deficit and a national debt projected to double in 10 years, U.S. Sen. Ben Nelson, D-Neb., voted to bring to the floor of the Senate a health care overhaul with so many job-killing tax increases that it’s hard to fit them all into one column. But let’s give it a shot.

For starters, consider the $500 billion in explicit tax increases.

One levy would take $15 billion from sick patients with high out-of-pocket medical expenses, including elderly and low-income patients.

If you have a health savings account or flexible spending arrangement, there are taxes specific to those health plans, plus a third tax that would apply to all “consumer-directed” plans.

Another levy would tax medical devices, and another would tax prescription drugs. Those two taxes would increase health insurance premiums by about 1 percent, according to the nonpartisan Congressional Budget Office. There’s another $60 billion tax that would drive health premiums higher still.

If your premiums climb high enough, you’ll become subject to a $149 billion tax on those with high health insurance premiums. Yet many face high premiums simply because they have expensive medical needs, making this yet another tax on the sick.

The legislation would increase the Medicare tax on wages above $200,000, yet divert the revenue toward new entitlement spending.

And lest any corner of the health care sector go untaxed, the bill would even impose a 5 percent tax on cosmetic surgeries.

Yet those are just the explicit tax increases. There are trillions of dollars in hidden tax increases, too.

Read the rest of the column

From The Hill

By Rep. Michele Bachmann — As unemployment surpasses 10 percent, Congress continues to vow that job creation is a top priority. After the $1.1 trillion stimulus failed to prevent unemployment from rising above 8 percent as its proponents promised, lawmakers are feeling the heat from American families as they struggle to pay for their mortgage, college tuition, and healthcare.

Just last month, 190,000 jobs were lost. All year long, Democrats in Washington have been on a spending spree, claiming that the only way to save the economy from ruin was by spending big. Now House Democrats are using the same excuse to allow the government to take over our nation’s healthcare industry at the steep price tag of $1.3 trillion.

As the House debated the controversial bill late on a Saturday night, Democrats promised that their healthcare reform would help small businesses, lower their premiums, and offer affordable healthcare for all Americans. One of my colleagues on the other side of the aisle said it would “strengthen small businesses so they will be critical engines of growth in our communities.” Another lawmaker even went so far as to promise that the government takeover would reduce insurance costs for 14,800 small businesses in his district.

Many supporters of Pelosicare seemed to sympathize with small businesses and the strain that healthcare premiums place on these job creators. This is a noble goal and one that I share. But, it’s exactly why I oppose any legislation that would place the central control of our nation’s healthcare industry into the hands of the federal government. If costs and job growth is their top concern as my colleagues adamantly proclaimed on the House floor, they should also oppose Pelosicare.

Unfortunately, the rhetoric we are hearing does not reflect reality. Research shows that Speaker Nancy Pelosi’s (D-Calif.) healthcare would not decrease costs for American families and small businesses.  How can it when $729.5 billion of new taxes are imposed on the same small businesses and individuals who are already struggling to afford health coverage?

This government takeover of healthcare allows an unprecedented level of government interference. Section 202 of the House bill requires individuals to enroll in a qualified plan.  Meanwhile, Section 303 explains this bill does not design the qualified plan. However, small businesses and American families can be certain this bill does design the new taxes and fines to which they will be subjected. Essentially, the American people are being forced to sign on the dotted line and pay for a product they have not yet seen. 

Section 202 also provides a “grace period” for businesses to meet the qualified plan. Under this bill, businesses will be forced to reevaluate the benefits they are currently providing and adjust them to the standards created by a new bureaucracy that is unfamiliar with the needs of the company’s employees. If these businesses are unable to afford the new government mandates, they will be subject to an 8 percent payroll tax.

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From the Washington Examiner

As the Senate prepares to vote on its version of health care legislation, one of the most contentious issues will be a provision requiring employers to provide insurance coverage.

With the jobless rate at 10.2 percent and expected to climb, penalties for employers who don’t offer insurance benefits will make it difficult for moderate Senate Democrats to support the plan.

While most big companies provide workers with health insurance, many smaller employers do not, and they would end up having to come up with the money to either buy coverage or pay a penalty.

“There is no question it will result in job loss and it will encourage employers not to hire employees,” said John Goodman, president of the conservative National Center for Policy Analysis.

In the Senate, Democratic leaders are considering a $750-per-worker tax on companies that employ more than 50 people but don’t offer benefits.

The House bill passed narrowly on Saturday night requires employers to pay a tax of 8 percent of total payroll if they do not provide health care coverage that meets federal standards. The House bill requires companies to pay 72.5 percent of a single worker’s health care premiums and 65 percent of a family’s coverage.

Goodman called the proposal “a huge tax on labor,” especially if it is coupled with the 2.5 percent income tax that would be levied on an individual who went without coverage under the House bill.

The House bill would also assess a graduated payroll tax beginning at 2 percent for companies earning $500,000 annually and rising to 6 percent for those making between $670,000 and $750,000 per year.

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From NFIB

Legislation Increases Costs, Limits Choices and Kills Competition

Below is the National Federation of Independent Business’, the nation’s leading small business association, top 15 list why H.R. 3962 is a non-starter for small business.

1.  Employer Mandate – The bill includes an employer mandate that will require employers to offer healthcare to full-time and part-time employees.  An employer mandate is a job killer and does not address the No. 1 issue facing small businesses: unsustainable costs.

2.  Payroll Tax Penalty – Payroll taxes are an especially onerous tax because they tax labor.  No matter how profitable or unprofitable a business might be, they are forced to pay this tax.  The legislation requires that all employers with a payroll of $500,000 or more pay a payroll tax of up to 8 percent if they do not provide “qualified” health insurance to their employees. Simply put: this is a tax on jobs.

3.  Pay-or-Play, Pay-and-Pay and Offer-and-Pay – The legislation establishes a confusing multi-part test that hits both employers who do and do not offer health insurance.  A non-offering employer will pay a payroll tax penalty. An offering employer must meet the following criteria:
- Offer a “qualified” plan as defined by a government-appointed board
- Offer “qualified” individual and family coverage
- Meet premium contribution requirements of at least 72.5 percent for individuals and 65 percent for family plans
If an employee declines coverage from their employer, and is able to obtain coverage in the exchange, then the employer is also penalized with a payroll tax penalty of up to 8 percent.

4.  A “Minimum” Plan with a Big Price Tag and New Mandates – Today, among businesses with less than 50 employees, 82 percent who offer coverage offer only one plan. H.R. 3962 gives a political board the power to define “coverage” and will determine whether an employer plan is “acceptable.” The bill does nothing to ensure that the new plans will be less costly than what small employers are paying today and even requires some small employers to cover benefits that are not currently mandated under federal law.

5.  Government-Run Public Option – The public option in H.R. 3962 fails to deliver what small employers have long sought – a reformed, private insurance marketplace that can lead to more affordable coverage and a sustainable choice of plans. Instead, the public option will simply grow the size of government and will compete unfairly with private insurance. In the end, it could restrict choice to a single plan: the government-run plan, which will ultimately be funded on the backs of small businesses.

6.  New Onerous Reporting Requirements – H.R. 3962 places a new tax-compliance paperwork burden on all small businesses. Called “corporate reporting,” this expansion on reporting requirements (for transactions as small as more than $600) increases the cost of operating a small business and diverts resources away from growing and creating jobs. 

7.  The Surtax: A Tax on Job Creation – Seventy-five percent of small businesses are structured as pass through entities and pay their business taxes at the individual level.  More than one-third of small businesses employing 20 to 250 employees could face the proposed 5.4 percent surtax. When added to upcoming expected tax increases (like the expiration of the 2001 and 2003 tax cuts), the overall federal tax rate for these businesses will be 45 percent, which is 10 percent higher than the current corporate tax rate. Finally, since the tax is not indexed for inflation, the tax will affect more and more businesses each year.

8.  Jeopardizes Existing Solutions for Small Business – H.R. 3962 prohibits individuals from using HSA, MSA and HRA funds to purchase over-the-counter health products (except for insulin). This further limits the utility of this health insurance option, making it harder for people to “keep what they have.” 

9.  An Employer Tax Credit with Limited Value – While some small businesses can be helped by tax credits, the structure of this credit limits its potential success. The credit is only available for two years and limited to small businesses with 25 or fewer employees. To qualify for the credit the employer is required to pay for 50 percent of their employees’ premium, the firm must have an average annual compensation per worker of $20,000 or less to get the full subsidy, and the credit phases out completely at $40,000. U.S. Census data notes that the average wage of full-time employees at businesses with fewer than 10 employees is more than $30,000, meaning that in many cases the value of the credit is already cut in half. 

10.  Auto-Enroll Mandate – The auto-enroll mandate requires employers offering healthcare to auto-enroll employees into that healthcare plan. This burden means small businesses must develop a new system to ensure that employees are either enrolled in the plan or are informed about how they may opt out. Unlike larger firms, small businesses are less likely to have an HR department to handle new mandates like this, meaning that resources would need to be diverted from the day-to-day operations of the business to comply with this requirement. 

11.  All Powerful Insurance Commissioner – The unelected “Commissioner” will have unbridled authority to institute rules and regulations that greatly affect small employers, including the ability to define who is a full-time and part-time employee. Thresholds set forth by the commissioner would be subject to continual changes, leaving small business owners in constant fear of ever-changing compliance requirements.

12.  You Can’t “Keep What You Have…” – Despite assurances, H.R. 3962 sets a new standard for what qualifies as employer-based coverage and requires all employer plans to meet that standard within five years. While you may “keep what you have” now, you probably can’t keep it forever.

13.  Creates New and Expands Existing Government Programs – H.R. 3962 provides multiple examples of new government programs and expansions of current programs. This massive growth squeezes out private options, increases costs and expands reliance on the government.

14.  Small Employers Exposed to More Lawsuits – Throughout the text of H.R. 3962 there are “rules of construction” that provide “green lights” for trial lawyers seeking to file lawsuits against small employers.

15.  Studies that Paint a Grim Future For Small Employers – A number of government studies are laid out in H.R. 3962, including: a study to “recommend that laws don’t incentivize small and mid-size employers to self-insure” (p. 98), and a study allowing for recommendations to “improve and strengthen employer-based health plans sponsorship, employer responsibility…that would enhance the delivery of health care benefits between employers and employees” (p. 278). These studies are both costly and create a pathway for more government involvement in the workplace.