That’s what we face if Congress passes health care “reform.” At least Charlie Rangel of the House Ways and Means Committee seems somewhat honest in this regard. His committee has issued a paper listing different options for raising $600 billion.
The Ways and Means option would raise more than half the needed revenues from limiting the tax exclusion for employer-provided benefits to 110 percent of the actuarial model of the Federal Employee Health Benefit Blue Cross/Blue Shield standard option. Coverage excluded from tax would be limited to $17,240 for families and $6,800 for individuals beginning in 2013, indexed for inflation in future years with a 50-50 blend of general and medical inflationary increases. That option alone would raise $306 billion.
The Ways and Means paper assumes the entire $600 billion in new taxes would begin to take effect on Jan. 1, 2013. A 2 percent surtax on individuals earning more than $200,000 and households with $250,000 or more in adjusted gross income would raise $256 billion.
That would be in keeping with President Obama’s pledge not to raise taxes on all but the wealthiest households, and the 2013 effective date assumes the nation would be out of recession. But many small-business owners are already chafing at seeing the top tax rates hiked to 36 percent and 39.6 percent in 2011 under Obama’s budget plan.
Rangel’s paper couples the 2 percent surtax with a 0.375 percent increase in the Medicare tax on both employers and employees, estimated to raise $344 billion — also likely to cause problems with the small business lobby and perhaps liberal interest groups that argue it is a regressive tax. Currently, employers and employees each pay a 1.45 percent tax to fund Medicare; the 1993 budget bill repealed the cap on income subject to the Medicare tax.
The options paper appears to recognize that raising the Medicare tax might be politically untenable. If that is the case, as a fallback the Ways and Means document suggests a number of revenue-replacing options, including limiting the tax exclusion and a $200 billion proposal to add a new 3 percent payroll tax on employers’ healthcare spending. The paper argues that employers would essentially come out even, because they would be saving money on employees’ health care under the overhaul bill.
President Barack Obama’s promise about not raising taxes on most Americans looks increasingly tattered. But then, it’s hard to believe that anyone ever took that promise seriously.