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1 Gerald Prante, New House Health Care Plan: Income Surtax Is Modified in $1.05 Trillion Bill 1 (2009)

handle is hein.taxfoundation/ffcaaxz0001 and id is 1 raw text is: FOUNDATION . October 30, 2009 No. 200-. , , , New House Health Care Plan: Income Surtax is Modified in $1.05 Trillion Bill By Gerald Prante Speaker Nancy Pelosi released a new version of the House health care reform bill, H.R. 3962, on the morning of Thursday, October 29, 2009. That afternoon, the Congressional Budget Office (CBO) put the total cost at $1.055 trillion. By comparison, CBO has scored Senate Finance Committee Chairman Max Baucus's plan at $829 billion. Here we compare the financing provisions of the two health care plans; there are similarities and major differences. Both bills would impose a financial penalty on individuals if they do not buy health insurance, although the House penalty is higher. In both plans, employers would have to pay a penalty to either the government or to new health exchanges if they do not provide a government-approved health insurance plan to employees, and once again, the penalty is larger in the House bill. Also, both health care plans are financed by large net cuts to the Medicare program, mostly by lowering what the federal government is willing to pay doctors, hospitals and other health providers. Economists expect such Medicare cuts to be felt by both the health care industry and patients covered by Medicare. Each plan has one large new tax, but those are quite different. Sen. Baucus's bill raises substantial revenue with a 40-percent excise tax on the value of so-called Cadillac health insurance plans. Democrats in the House shun the 'Cadillac tax, agreeing with labor unions who have often bargained for the most expensive health insurance coverage. Instead, they propose a surtax on high- income tax returns. Single filers earning over $500,000 in adjusted gross income (AGI) and couples earning over $1 million would pay 5.4 percent of any additional dollar of income.2 That surtax 1Letter to the Honorable Charles Rangel, Chairman, Ways and Means Committee, from Douglas Elmendorf, Director, Congressional Budget Otfice, dated October 29, 2009. See http: :iiwww~bogo)y ftpdocsi l06xxidoc 10688ihr3962Range!,pdf 2 The surtax would apply not only to regular taxable income but to modified adjusted gross income which includes capital gains, dividends and other types of income that are not taxed by the regular income tax rates. Gerald Prante is Senior Economist at the Tax Foundation.

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