... With Taxes Galore
Posted 11/19/2009 07:27 PM ET
Health Care: That thump in Washington was the 2,047 pages of the Senate overhaul bill landing on the chamber floor. The ripping noise that followed is the sound of money being yanked from Americans' wallets.
No question, most Democrats like to tax, and this legislation, unveiled Wednesday by Majority Leader Harry Reid, provides them a grand opportunity to indulge that urge.
According to Americans for Tax Reform, Reid's Senate bill uses the word "tax" no fewer than 183 times, "taxable" 164 times, "taxes" 17 times, "fee" 152 times and "penalty" 115 times.
The repeated references are clear indications of how bill supporters plan to fund an overhaul that, we are supposed to believe, will bring health care costs down.
Of course it won't. This bill will cost far more than the $848 billion over 10 years it's projected to. (Cato's Michael Cannon says as much as $2.5 trillion.) And a good part of those costs will be paid by adding to Americans' already painful tax burden.
Perhaps the ugliest tax is a levy on "Cadillac" health insurance plans. The Senate bill places a punitive 40% — yes, 40% — excise tax on health care plans valued at $8,850 and more for individuals, $23,000 and beyond for families. The margins for early retirees and high-risk professionals would be a bit more generous — $9,850 for single coverage and $26,000 for family plans.
The Senate bill will also wring fees from companies that manufacture and import branded drugs, as well as those that make and import certain medical devices. The amount of each company's fees will be based on the company's share of sales for the tax year.
Some Americans will eagerly support the idea of Congress sticking it to "greedy" firms. But this tax is particularly foolish, as it will curb innovations in the pharmaceutical and medical equipment industries. The companies that make the lifesaving and life-enhancing products that we should all be thankful for are not likely to respond to the fees by becoming more aggressive in their R&D.
Other taxes in the bill include:
• A 0.5% hike on the Medicare payroll tax — to 1.95% from 1.45% of wages — for those earning $200,000 or more a year. The margin will be set at $250,000 for joint filers.
• A 5% tax levied on elective cosmetic surgery, defined as surgery that doesn't "meaningfully promote" proper body function or "prevent or treat illness or disease." It will be paid by the patient.
• A tax on insurance companies that is estimated to raise $19 billion. Like the taxes on drug and medical device companies, it will be based on revenue share — premiums collected in this case — during the tax year.
• A limit on the amount of medical expenses that can be deducted from taxes.
It seems a little more than ironic to us that legislation that will supposedly improve health care could actually tax some of us to death. Let's hope enough senators see it the same way.