FINANCING PROJECTED SPENDING IN THE LONG RUN
July 13, 2007
If health care costs continue to grow at the same rate as the last 40 years and if income taxes are the only mechanism used to pay for the additional costs, tax rates will need to increase substantially by 2050, according to a Congressional Budget Office report released this week.
The report found:
- If the current rate of health spending growth -- 2.5 percentage points per year higher than the growth in the Gross Domestic Product (GDP) -- continues, income tax rates would need to increase from 10 percent to 26 percent in the lowest tax bracket; from 25 percent to 66 percent in the middle tax bracket; and from 35 percent to 92 percent in the highest tax bracket.
- If the cost of health care can be contained to one percentage point higher than the growth in GDP, the lowest tax bracket would need to increase to 17 percent, the middle tax bracket would need to increase to 43 percent and the highest tax bracket would need to increase to 60 percent, the report found.
According to the report, "Given the nature of the nation's long-term fiscal challenge, constraining the growth of federal health care costs seems a key component of reducing the deficit over the next several decades."
Source: "CBO report projects possible impact of health care spending growth on income tax rate," CQ HealthBeat/News-Medical.net, July 11, 2007; based upon: "Financing Projected Spending in the Long Run," Congressional Budget Office, July 9, 2007.
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