TAXING CAPITAL TO PAY FOR HEALTH REFORM
March 3, 2009
The worst idea candidate Barack Obama had during the presidential campaign was his pledge to finance health reform with taxes on capital. To be fair, he didn't word it that way. Instead, he promised to pay for universal health care in part by rescinding George Bush's "tax cuts for the rich," says John C. Goodman, President and CEO of the National Center for Policy Analysis.
Bush didn't cut taxes for the rich, however, explains Goodman:
- He lowered the tax rate on capital gains income and a substantially lowered the tax rate on dividend income for all taxpayers, many of whom have high incomes.
- Bush also lowered the top rate on wage income; but for high-income earners this is also frequently income from capital (pass-through profits to owners of small businesses, for example).
Obama is now proving that he keeps his word and then some, says Goodman:
- Overall, his new budget includes a slew of new taxes on businesses and investors totaling almost $1 trillion over the next 10 years (and that doesn't even count the $646 billion "cap and trade" tax).
- He proposes to "bank" a portion of this for health care to be matched by difficult-to-make health care spending cuts and by health care "savings" that in most cases are unlikely to materialize.
The only thing certain so far is the taxes, says Goodman. Currently he proposes to sequester $318 billion for health care reform over 10 years -- not from capital gains or dividend taxes, but from revenue produced by new limits on itemized deductions for those with incomes of $250,000 or more. Yet, since tax dollars are fungible, it really doesn't matter which revenue dollars are targeted to pay for which spending program. The damage is the same, regardless of the labeling.
Source: John C. Goodman, "Response: $634 Billion For Health Care Reform?" National Journal Expert Blogs: Health Care, March 2, 2009.
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