If you listen to Nancy Pelosi, the $1.04 trillion bill is a "starting point and a path to success to lower costs to consumers and businesses."
Believing that, however, requires ignoring quite a few facts. This is not a victimless bill, not by a long shot.
The bill is most explicit in its promise to lump a surtax onto the richest Americans' already-high rates ("The new surtax would hit individual households earning $350,000 and above. It would start at 1 percent, bumping up to 1.5 percent at $500,000 in income and to 5.4 percent at $1 million."). But they're counting on a lack of sympathy for high earners to let that slide.
Let's move on to the more P.R.-problematic victims of the health bill (aside from all of us who would soon be on the receiving end of the kind of mediocre, egalitarian health care of Ezra Klein's dreams). All but the smallest businesses (only $250K payroll and lower exempted) will be saddled with a new tax equal to a percentage of payroll if they don't provide health care for their workers. And, when I say small, I mean small.
According to 2006 data from the federation, businesses with between five and nine workers, representing about one million employers, had an average payroll of around $375,000 a year. A report from the Kaiser Family Foundation found that only about half of firms with three to nine workers offered health benefits in 2008.
The tax will be 8 percent on businesses with payrolls over $400K, and step down incrementally from there. But businesses with five to nine employees? That is some seriously small business. So, when Democrats claim they're giving the little guy a break with the exemption, please remember that you only qualify for that break if you own a shoe-shining business or a hot-dog cart with under three employees.
But, hey, these are all sacrifices we make to ensure that everyone gets coverage, right? Well, not everyone. There's a segment of the public (in the middle class), which will have to pay a fee for not buying insurance, but will not be eligible for federal subsidies:
As expected, the House bill would mandate that individuals and families have or buy health insurance.
But what if they don't buy it?
Then Section 401 kicks in. Any individual (or family) that does not have health insurance would have to pay a new tax, roughly equal to the smaller of 2.5% of your income or the cost of a health insurance plan...
I assume the bill authors would respond, "But why wouldn't you want insurance? After all, we're subsidizing it for everyone up to 400% of the poverty line."
That is true. But if you're a single person with income of $44,000 or higher, then you're above 400% of the poverty line. You would not be subsidized, but would face the punitive tax if you didn't get health insurance. This bill leaves an important gap between the subsidies and the cost of health insurance. CBO says that for about eight million people, that gap is too big to close, and they would get stuck paying higher taxes and still without health insurance.
Then, there's the fact (recognized by the WaPo editorial page), that relying on the rich so heavily just ain't gonna cut it, and may have deleterious economic effects down the road:
The traditional argument against sharp increases in the marginal tax rates of a very narrow band of Americans is that it could distort their economic behavior -- most likely by encouraging them to put more of their money into tax shelters as opposed to productive investments. This effect could be greatest in certain states, such as New York, where a higher federal rate would add to already substantial state income taxes. The deeper issue, though, is whether it is wise to pay for a far-reaching new federal social program by tapping a revenue source that would surely need to be tapped if and when Congress and the Obama administration get serious about the long-term federal deficit.
That moment may be approaching faster than they would like. Even if Congress pulls off a budget-neutral expansion of health care, the gap between federal revenue and expenditures will reach 7 percent of gross domestic product in 2020, according to the Congressional Budget Office. And that's assuming that the economy returns to full employment between now and then. The long-term deficit is driven by the aging of the population as well as by growing health-care costs, both contributing to Social Security and Medicare expenses. There is simply no way to close the gap by taxing a handful of high earners. The House actions echo President Obama's unrealistic campaign promise that he can build a larger, more progressive government while raising taxes on only the wealthiest.
Soaking the rich would be bad enough, from my point of view, but no one should believe that the costs for this plan aren't going to creep into much lower income brackets, both indirectly (through payroll cuts and loss of investment by the rich) and directly (through fees imposed by the bill).
