NCPA - National Center for Policy Analysis

THE BAUCUS BILL IS A TAX BILL

October 15, 2009

As it now stands, the health care reform plan proposed by Democrats and the Obama administration (the Baucus Bill) would not only fail to reduce the cost burden on middle-class families, it would make that burden significantly worse, says Douglas Holtz-Eakin, former director of the Congressional Budget Office (CBO).

For example:

  • The bill would impose nearly $400 billion in new taxes and fees.
  • Nearly 90 percent of that burden will be shouldered by those making $200,000 or less.
  • It might not appear that way at first, because the dollars are collected via a 40 percent tax on sales by insurers of "Cadillac" policies, fees on health insurers, drug companies and device manufacturers, and an assortment of odds and ends.

The economics are clear:

  • These costs will be passed on to consumers by either directly raising insurance premiums, or by fueling higher health care costs that inevitably lead to higher premiums.
  • Consumers will pay the excise tax on high-cost plans; the Joint Committee on Taxation indicates that 87 percent of the burden would fall on Americans making less than $200,000, and more than half on those earning under $100,000.

Industry fees are even worse because Democrats chose to make these fees nondeductible, explains Holtz-Eakin:

  • This means that insurance companies will have to raise premiums significantly just to break even. American families will bear a burden even greater than the $130 billion in fees that the bill intends to collect.
  • Premiums will rise by as much as $200 billion over the next 10 years -- and 90 percent will again fall on the middle class.

Senate Democrats are also erecting new barriers to middle-class ascent:

  • A family of four making $54,000 would pay $4,800 for health insurance, with the remainder coming from subsidies.
  • If they work harder and raise their income to $66,000, their cost of insurance rises by $2,800.
  • In other words, earning another $12,000 raises their bill by $2,800 -- a marginal tax rate of 23 percent.
  • Double-digit increases in effective tax rates will have detrimental effects on the incentives of millions of Americans.

Source: Douglas Holtz-Eakin, "The Baucus Bill is a Tax Bill," The Wall Street Journal, October 13, 2009

For text:

http://online.wsj.com/article/SB10001424052748704107204574471292249934348.html 

 

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