Should wealthy Americans be taxed to pay for health care reform?

Fellow and Writer, The Century FoundationsHealthBeat blog

Phil Kerpen:Taxes are too high already, especially on the small businesses that are the engine of job creation and economic growth. The House proposal of a 5.4 percent surtax on high income earners will, combined with Obamas repeal of the Bush tax cuts, push the top federal rate above 45 percent. Most so-called wealthy Americans are simply small business people who pay their business taxes on their regular tax returns. With payroll tax and state and local income taxes added in, there would be a huge disincentive to invest, grow, and hire new employees. That would prolong the recession and actually result in less revenue for the federal government. Taxes on so-called wealthy Americansas proposed in the House billwould also slam seniors when they sell their homes, calling them rich even if they have little or no other income just for realizing the value of their homes built up over decades. Thats not right.Maggie Mahar:Why is it fair to ask very wealthy Americans to help pay for health care reform? Take a look at thiseye-popping chart, showing the effective tax rate for Americas wealthiest households from 1993 to 2006.Note that today, thanks to the Bush administrations tax cuts for the rich, the wealthiest 1 percent pay five percent less than they did in 1995. Unfortunately, we really couldnt afford Bushs largessethe deficit ballooned. Now, reformers hope to finance universal health care without adding to a potentially ruinous deficit. This is why they proposehiking taxes on the wealthiest 1.2 percentof all Americans.The House bill asks households reporting joint income over $350,000 to pay an extra 1 percent on earnings over $350,000; those earning over $500,000 would pay 1.5 percent; millionaires would pay a 5.4 percent surtax on earnings over $1 million. Over the past decade, the very rich enjoyed a windfall that added to a burgeoning deficit. It makes sense to ask them to help ensure that reform is deficit neutral.

Phil Kerpen:Its true that the effective tax rates for the rich have come down since 1993. Over the same period, however, the share of income taxes paid by the top 1 percent has skyrocketed, asthis chart from the Tax Foundation 2007, the top 1 percent paid an astonishing 40.4 percent of all federal income taxes, more than the bottom 95 percent combined. According to the OECD, that makes our income tax more progressive than European social welfare states. This huge increase in taxes paid by the rich occurred over a period in which their effective tax rate fell. This is not coincidental: lower tax rates encouraged economic growth that led to big income gains for the Americans most productive at creating wealth, and that also helped flood the coffers of the U.S. Treasury. This occurred over a period of falling effective tax rates. Raising those rates could undermine the incentives to produce wealth, yield lower revenues and, ironically, make the U.S. income tax system less progressive.Maggie Mahar:The health care surtax, which ranges from 1 percent to 5.4 percentchart from first statement, will affect only 4.1 percent of small business owners according to the House Ways and Means Committeequoting the non-partisanJoint Committee on Taxation (JCT)Moreover, 4.1 percent would be affected only if you use the broadest definition of a small business owner (i.e., anyone with as little as $1 of business income.) JCT notes.Taking a close look at the 4.1%, JTC found that half earned less than one-third of their income from the small business.As for an elderly couple selling their home, they pay no tax on the first $500,000 of profits. They would pay a 5.4 percent surtax only if their total income, including profits in excess of $500,000, equaled more than $1 million. Then they would pay 5.4 percent on the amount over $1 million.Ultimately the surtax will hit the wealthiest 1.2 percent, and they can afford it: From 2002 to 2006, theirincomes rose by roughly 42 percent.

Phil Kerpen:The Joint Committee on Taxation is notoriously biased in favor ofhigher taxes, and the 4.1 percent number is out of returns thatinclude even one dollarof business incomea misleadingly large denominator. The Tax Foundation analyzedIRA dataand found that those 4 percent of small businesses account for 60 percent of total business income, and that the surtax would hike business taxes $51.3 billion, a 24 percent increase. Billions of dollars cannot be extracted from small businesses without a substantial negative effect on wages and jobs.An elderly single woman selling her home can exclude only $250,000 from tax. The new surtax starts at $280,000. This means a tax hike if her net-proceeds from her home (even if she has zero other income) exceed $530,000, a modest amount in many areas of the country, especially considering that it may be her only asset. Thats a frighteningly expansive definition of the rich.It just goes to show that when Washington wants to spend trillions of dollars, they cant wring much more out of the top 1 percent that already pay 40 percent of the taxes. One way or another, it will come from the middle class.Maggie Mahar:Yes, the top 1 percent pays a larger share of income taxes because their share of the nations income has sky-rocketed. In 1993 they enjoyed 14 percent of the total; by 2006, theytook 20 percent.For over three decades, income has been redistributed upward.Since 1975, the bottom 90 percent of the population has watched its income inch up by only 10 percent while the wealthiest 1 percent sawa 232 percent gain.Not because they are more productive, but thanks to the explosion of stock options for CEOs, a near halving of the top income tax rate, and cuts in inheritance and capital gains taxes. The top 1 percent now owns more than the bottom 95 percent combined yet pays only 40 percent of income taxes.Finally, while elite Americans may pay more income taxes, wealthy Europeans pay VAT taxes as well as higher inheritance taxes and transfer taxes. The last two make their system more progressive.

Health Care Reform DebatesWill There Be Rationing?Can It Reduce Costs?Whats Best for Seniors?

Commenter:navesmall businesses are not the source of wealth the large corporations; the insurance companies banks ect. are in our country. i work for a small business and they are not anywhere near 250000 a year not to mention the reform will grant subsidies to small businesses so they can afford to provide health insurance to their employees and will encourage hiring other than that it will not affect them. the fact of the matter is this is what we need to do with 32 million uninsured due not only to the amount of money one has but pre-existing conditions as well, i have a brother who is 26 with blood clots in his leg hes been denied health care. the fundamental flaw is that insurance companies make money when people dont need medical care this is wrong and the reform will attempt to stop this by requiring 80 to 85 percent of insurance company revenues off monthly premiums to be spent on medical care and they will be required to rebate the difference to the people. furthermore if you make 200000 individual or 250000 joint annual income then why shouldnt you pay more, you are not the majority, and you can spare the womping jump from .9 to 1.3 percent increase. this country was founded not by rich nobles but by the middle class working men who wanted to be free from the extortion of the english rule, if your are one of these people do not try to say you want to preserve and conserve the constitution you want to protect your wallets and its a disgrace to this country that you assume that position. the founding fathers believed that the constitution is living document which needs to be able to evolve with the times. by this nov. you will see this reform will either help you if you are poor, not affect you if you are middle class and be a minor inconvenience to the super rich.

It is greed to do all the talking but not to want to listen at all-Democritus (Greek philosopher, 460-370bc)

something is wrong with this country and it does not surprise me that that the top 1 percent of the population who control and make almost double of what the bottom 65 percent earns by just shifting money through the economy is against change. At every crossroads on the path that leads to the future, tradition has placed 10,000 men to guard the past.

this is the first day of our generation, history has been made and it is our duty to guide it through

answering laura bill gates began building computers in his garage now look where he is and how many he employs.

Commenter:Solrac IrteipIf they are wealthy because people have made them rich by purchasing their products,this money should be rechanelled back to the poeple who bought their goods.

Commenter:bob in lebanonIs health care a national goal/benifit if so, tax a percentage of wealth.

We know what happens when $ make this not too uncommon decision, is this what we want.

Commenter:IngolvdA higher taxing on the So called rich(most of which are not rich at all) is rediculous………

Who are you to tell someone else who worked hard for their money to give it a away to federal programs for the poor whom they dont even know…..

Commenter:Kathryn GreesonYes, the wealthy should pay more because, often time, they seem to have created their wealth by squeezing the rest of us. Last spring, I was helping my multi-million dollar neighbor and was bitten by her dog. Guess who got stuck with the emergency medical bills: me! You see, normally home owners insurance would pay, but since she has vicious dogs who most likely have bitten before, she does not cover her dogs and Colorado does not require dog owners to insure their dogs. My only recourse is to sue her in small claims court. This woman has a battery of attornerys on retainer: whould you try to sue? Im sure it was my fault: I was too close to her dog.

Now I know all rich people are not greedy cold blooded reptiles, but it seems to me that most of them consider themselves to be superior to the rest of us. They often view us as simply resources instead of humans. With their wealth, they can change the laws to their favor, influence our officials with gifts, and legally pick pocket the rest of us.

They could help a lot of people as well, for what they spend on one dinner could feed many. They could releieve so much suffering in the world, if only they would.

Commenter:JCIllExpand Medicare to everyone???????????????

Medicare is rapidly going broke. There is more fraud and corruption in medicare payments than any other program. Come on, everybody knows that whenever the government gives away anything, there are thousands of people who abuse the system, and the government is powerless to stop it. Im sure there is fraud in private programs also, but the profit motive will always provide more incentive to rein it in. The health care system is broken, but why should we throw the whole thing out and start over, especially with a government-run program which will never never work. Use your heads, folks.

Commenter:RickIm on the fence with this issue. Im retired, fixed income $39K, have cancer and pay 10% of my income for non-profit BCBS coverage. I consider this a fair price for health insurance coverage. Im a responsible adult and dont expect government or taxpayers to babysit my life. Now CEO of BCBS says my cost would increase $3,300. under Senate plan. Ouch, that hurts. I believe State non-profit health care pools to cover (safety net) needy folks are proper and appropriate. The States must balance their budget, while feds do it through deficit spending of taxpayer money. Since debt is dumb who pays for it becomes moot, as all taxpayers would be en-slaved to for years to come under current proposed congressional plans. Also under our form of government, States have unlimited power and authority to tackle health care in a rational manner. Remember, feds only have limited powers by constitution and that creates much of this chaos we see in congress today.

Commenter:Howard CottonEveryone should be taxed for universal health care. However, the wealthy should be taxed much more. I think it important that everyone feel they are participants in the cost and reception of health care.The burden should be spread by the ability to pay.

The previous administration chose to fight two wars on the cuff,but that was bad policy and health care on the cuff is bad policy.

Commenter:JoyMedicare needs to allow payment to Alternative Healing Doctors who usually charge less and with greater benefits to patients. That would solve a lot of the humongous payouts seniors have to give to drug companies. Retired seniors who have been given Blue Cross should be allowed to use that in addition to Medicare as a supplement to cover all those gaps.

Commenter:margaret kennedyI grew up in Scotland with the National Health Service available. My son was born in 1955 and was hospitalized from 3 1/2 weeks old till 18 months. He came home then and was fed, via a tube directly into the stomach, every 4 hours from 8a.m. to 8p.m. My son is alive and well today – I hate to think how much this treatment would have cost if we had been resident in the U.S.A.

I know this isnt a perfect Service, BUT IT IS THERE.

Commenter:edieWe should ask Congress people to give up their national health insurance advantage if they cant give ordinary Americans the same choices they have paid for with taxpayer money for their health insurance. If it is good enough for them than it should be good enough for the rest of us to have national health care paid for by taxpayers.

Commenter:Howard HarrisThe top 1% of Americans earn more than 65% of the bottom half. Since they earn disportionaly more, they should pay disportionaly more in taxes. Why is it that Republicans seem to forget the teachings of the old and new testament in caring for the less well off?

Commenter:James BradyI was astonished to see the poll results! Clearly NOW online readers cant see through the sham statistics proffered by Mr. Kerpen. Not only has worker income stagnated, it has dropped in effective wages. Little surprise the share a worker income tax payments.

If we want a tax fairness discussion hows this?

A. Our effective cost per gallon of gas is ~$10.00 when one factors in the roughly $30 billion dollars in tax subsidies ANNUALLY provided to the oil and gas industry. This is the most egregious, downscale tax imaginable. Moreover, the oil and gas companies simply need to bid and secure future leases and INTENT to drill for the largess we reap upon them every year. This ponzi scheme against the American taxpayer is one of our dirtiest tax secrets.

B. Add to that tax subsidy the protectionist import rules on sugar, milk, etc. Removing sugar tariffs alone and replacing this supply with a much more efficient cane sugar ethanol source could end the corn producer/fertilizer manufacturers stranglehold on the taxpayers neck.

C. For people who dont count the payroll, FICA, SUI, etc. automatic worker payroll contributions while conveniently ignoring the bonus structure, offshore accounts, shell businesses, and other manipulative uses of the tax code by those who can afford tax attorneys, dont be so quick to condemn the extra pittance through earned income tax credits, adjusted rate schedules for wage earners and such put into the pockets of those who actually contribute a days labor for a fair wage vs. the incredible sums paid to those who move money through the system. Look where that system of rewards has put us.

C. Finally, would someone please explain to me why there is a ~$106 K cap on wage contributions to Social Security?

Commenter:Joan Schrammeckthe small businesses that are the engine of job creation and economic growth owners do NOT have incomes of $350,000 annually. Their annual incomes are much much lower and MOST will not be affected.

Commenter:Richard UreIf the health care debate in the US is supposed to be a showcase for democracy in the worlds greatest democracy, its doing a pretty poor job. The town hall meetings have been a disgrace. And how is it that so many poor people have been seduced by the self-interested ranting of rich republicans? Cant they think for themselves by swallowing the line proper health care will lead to rationing when care is rationed by means already? Why is this argument still being put?

I have tried to follow the debate closely yet I never see detailed costings nor much pressure to disclose them. Tax rates seem to be plucked from the air with no further detail? Can the Rich really carry the additional health care costs for everyone? How does this lead to the level of ownership other countries have realised is essential? Is wealth distribution so uneven or is it a ploy to think someone else is going to pay?

The rest of the world dealt with this issue, often decades ago, yet in the US you keep going back to the drawing board and attempting to craft plans on stone tablets in the mistaken belief paper hasnt been invented (by the Chinese by the way). And mention the word socialism and the debate shuts down. Instead of decrying government inefficiency, why not raise expectations and try to reform it?

Commenter:Andrew BrownFree-market ideals also work with regard to social morality. Should the wealthy pay more for health care? Yes! Should the government force them to? No! The reference to For him who has much of him much is required is a reference to moral obligation, not heavy-handed, and likely misguided, governmental obligation. The wealthy are not evil, nor should they be forced to pay more than any other citizen for services rendered. However, I believe we must lean on the idea of a collective morality in which we pressure those with to help those without. Capitalism and free-market values are brilliant in that the society determines what is worth a lot and what is worth a little. Apparently, society has determined that sports is worth a lot; if we want to change that, stop watching sports instead of awaiting government regulation. Similarly, if we want to increase the value of health care, demand effective strategies from your doctors, demand that malpractice insurance be reasonable by decrying the awarding of million dollar emotional damage settlements as absurd, and encourage a healthy diet, preventative care, and exercise instead of waiting for the government to do it for us. And pressure those with wealth to help those without by celebrating the Gates foundation and ignoring and condemning the ostentatious lifestyles lauded in the media. Using the government to set standards fuses the spine of health care and national morals, making it completely inflexible to new developments, new philosophies, and changes in collective morality. Does this mean the present system is ideal? Definitely not! Something needs to change, but its not government regulations; its the American populace.

However, you fail to mention that in our course of taxation of the people of the United States of America, in 1913 Congress passed into law a provision that was never intended to allow the Federal Government the power to expand government by taxing the public when ever, for what ever they deem important for the day.

In US Supreme Court Cite as: New York V. United States, 505 US 144, 166 and again in 521 U.S. 898, 933 (1997)

Much of the Constitution is concerned with setting forth the form of our government, and the courts have traditionally invalidated measures deviating from that form. The result may appear formalistic in a given case to partisans of the measure at issue, because such measures are typically the product of the eras perceived necessity. But the Constitution protects us from our own best intentions: It divides power among sovereigns and among branches of government precisely so that we may resist the temptation to concentrate power in one location as an expedient solution to the crisis of the day.

Therefore, Our Federal Government shall not create ANY government agency in which the private sector can oversee. The argument is not how much have our predecessors been able to take from the citizens to redistribute according to the governments perceived needs, the questions are IS IT LEGAL, or even moral to allow our government to continue to assert its collective moral standards and limit the income of the citizens to fund programs or projects for others of their choosing?

Since went did living free in the United States of America mean that we are free to take from one and give to another? That sounds more like King George in 1776. Perhaps youd like to review the documents of the day to find out what freedom means.

name one poor person who built a business and employed lots of people???? who here has been employed by a poor person?

giving tax cuts to the rich allows them to build on their business and NOT cut back on the employees.

poor people pay bills and buy junk which doenst help in the long term

plus most taxes are paid by the rich. even when i was healthy and working i always got a tax refund

Commenter:RobertMaggie states we really couldnt afford Bushs largessethe deficit ballooned. I agree that the deficit ballooned, I contend that it ballooned due to the inability of our government to control spending. They need to learn that the taxpayer has reached the limit of what we are willing to pay and make the adjustments to their spending accordingly.

Commenter:William AlfordGovernments cannot spread wealth; it can only spread poverty. The current economic crisis was not caused by an excess of economic freedom. It was not caused by the government not having enough power. It was not caused by us keeping too much of our own money. I trust Bill Gates to decide where capital should be allocated over Barney Frank.

Commenter:MarkGFrom each according to their ability, to each according to their need. Make it a question, and youve restated, in a more general form, the question that we are voting on.

For those who dont know, the quoted slogan captures the essence of the Marxist/communist ideal. It has been tried several times and it has always failed. Sometimes it seems to work at first, but it is not sustainable. Please note that former communist titans, the Soviet Union and China, have turned away from communism and have adopted free enterprise (the dreaded capitalism). Economic freedom is raising their people out of poverty – something that communism failed to do even after many decades.

Meanwhile, we have moved towards more government control of the economy. We did this under Hoover and Roosevelt. It worked poorly then and will work poorly now.

Commenter:Sabrina YoungwolfeRead my lips…. no new taxes!!!!

Commenter:Kathleen HardyMr. Karpens link proves to me exactly the opposite of what he says it means. The top 1% are still not paying their fair share of income taxes. Their taxes have gone down, while mine have gone up. We are back to Regeanonimics, voodoo economics, supply-side economics or whatever else you want to call it. It still does not make any sense to me that people with an enormous amount of disposable income should not be paying a larger proportion of their disposable income than I do for all types of taxes.

What do they spend their money on? Their cars probably cost more than my annual income when I was working. Now that I am retired I no longer have enough income to pay my expenses. I spend approximately 25% of my income just for health insurance, co-pays, and medications. Would it hurt the ultra-rich (annual income over $100 million) to pay an extra million per year to cover the people who make too much to get Medicaid or Chip who cannot afford health insurance? Would it hurt them to reduce their standard of living by a tiny bit to help those who make significantly less than they do?

To Freedom Lover: Yes I do believe that a government option that may spend $1 trillion on health care will improve the physical health of the USA. It might even improve the fiscal health of the USA if it were to bring down the high cost of health insurance. Note that I said health insurance not health care.

I agree with Dr. Ross that we need a single payer system to eliminate the private health care insurance companies waste, fraud, and abuse

Commenter:Roger H Strube MDWealthy Americans not only should pay higher taxes they should be thankful for the opportunity being an American has provided them to become wealthy. There is much more to this view beyond the seemingly left wing liberal progressive agenda presented. One of the biggest impacts on American manufacturing and one of the principal issues driving industry off shore is the cost of labor. A major portion of this cost is now medical insurance. The current and legacy costs of health care have driven GM and Chrysler into bankruptcy and resulted in a bail out by tax payers. A properly designed and implemented federal health care program (universal coverage = Medicare for all) with appropriate mechanisms to reduce unnecessary care and promote quality medical services would benefit the wealthy (business owners) in multiple ways and stabilize the American economy. The first issue that must be addressed is the quality problems with medical decision making and the DELIVERY of care. This has to be addressed if any financial or administrative reform is to work. It can be done by requiring physicians comply with the criteria and standards of care that have been developed. This would cut the cost of care by 40% to 50%.The second issue is the cost of the ADMINISTRATION of health care. The third issue is the FINANCING of health care. Most people are not able to separate or understand the difference between these three or how to approach improvement. Working Americans are now financing the cost of all care delivered either through withholding taxes (Medicare, Medicaid, VA, etc.) or insurance premiums if privately insured. The cost of caring for the uninsured is covered by the high premiums charged by insurance companies or by inflated charges recovered from those uninsured who are able to pay out of pocket. The For Profit business structure (with marketing, actuary, excessive executive compensation, etc.) of most insurance companies has resulted in an administrative cost of 20% of the health care dollar. Admin for Medicare and Medicaid is close to 3%. Administration of claims processing (insurance stuff) must become a commodity delivered at the lowest possible cost. The financing (purchasing) of health care must be by the government. This funding in reality comes from the working taxpayer, especially the rich.

If we do nothing or simply provide insurance companies with a guarantee of income, America will loose more jobs and will ultimately go broke. It seems to me the wealthy have much more to loose than a few tax dollars when this happens.

Commenter:Greg GordonIncome is not a zero-sum game. Just because rich people have higher incomes does not mean they robbed poor people of their share of the Money Pie. Thus rich people dont owe anything to the poor or to government after the IRS has been paid off. Rich people also pay a disproportionate amount per capita to fund the operation of the government. Why should they pay more for health INSURANCE for the poor? Insurance is not a universal human right.

Commenter:ThrasherKudos to Dr. Johnathon Ross!

Why is there no discussion of single payer improved Medicare for all?

That says it all. Why wasnt simply expanding Medicare to cover everyone proposed? I guess it is TOO simple and, horrors, would give the insurance lobby little to attack!

Commenter:Victoria HillTaxing the is so socialistic it makes my skin crawl. I once heard a lib-friendly writer say that the problem with the American Dream is that everyone thinks they can have it. I would counter with..that is the GREAT thing about the American Dream. Lets not take that dream away by forcing it to move elsewhere.

Commenter:ThrasherFreedom Lover: BTW Maggie, the deficit ballooned during Bushs largesse because of the out of control spending by the progressive Republicans, not the tax cuts.

More accurately the deficit ballooned during Bushs largesse combined with those tax cuts for the wealthy. And we are not talking, for the most part about those who became rich though hard work, but Wall Street fat cats, CEOs

As an elderly lady, may I point out that it would only be a one time tax that she would pay on that income and since she is also elderly she is partaking of Medicare and all of the benefits that go with that! I for one would be happy to pay more taxes if it insured that everyone would be given health care! I have recently watched as a 40 yr old lady (who had been laid off of her job and lost her insurance) was told that the doctor found a lump in her breast. She was in shock as she was making the arrangements to go have a mammogram and biopsy..knowing that she couldnt afford either! (The office personnel did not even know that here in the state of Washington there is a program for free mammograms and pap smears). I am more than willing to pay more in taxes if it will give peace of mind and good medical care for people like that! We are after all supposed to be the UNITED States