Ain't Nothin' New on Rangel's Proposed Surtax

The House bill’s timeline was slowed down—we were expecting a bill to drop Friday and, as of this writing, it still hasn’t dropped.  So perhaps Rep. Charles Rangel, chair of Ways and Means and one of the Tri-Committee with jurisdiction for health care reform, was trying to get things started.  Or perhaps he was just stating the obvious.  Rangel’s proposal to add a dedicated surtax to individuals making $280,000 and families making $350,000 may seem familiar.  That’s because it’s been cited as the obvious source of income for health care reform.  Repeatedly.

Indeed, if you go back to the presidential campaign, every Democratic candidate pledged rolling back the Bush tax cuts for the wealthiest 2-3%, or letting them expire.  That threshold is the oft-mentioned quarter-million dollar figure.  Indeed, rolling Bush’s tax cuts and ending the Iraq War seemed to be the “go to” answers for every spending project from candidates like Bill Richardson.  Since Obama survived the primary, that made him the keeper of the torch for the idea of financing health care reform by letting the tax cut for the wealthiest Americans expire, while not raising taxes on those making less than $250,000.  He’s been consistent to that thus far in his proposals, even in the face of an economy that would seem to discourage raising taxes – politically, at least.  His plan to limit charitable deductions for the top tax bracket and use that money to pay for health care is a downsized derivative of the original.

So Rangel’s proposal would seem to be the obvious choice.  He’d create three tax brackets -- $350,000, $500,000 and $1 million for couples, and $280,000, $400,000 and $800,000 for individuals – and increase them 1%, 1.5% and 3%.  Incidentally, that means people making $1 million would be paying the same rate as during the Clinton years – you know, the longest sustained period of economic growth that didn’t involve a war.  Do that, and you raise $550 billion for health care, which would get you 1/3 to 1/2 of the way there, with the rest to be filled in with finding savings in Medicare and Medicaid.  It’s a natural fit for the Obama Administration.

So why hasn’t it been mentioned ‘til now?

In part, Baucus and Grassley over at Senate Finance latched onto the idea of removing or capping the tax exclusion for benefits, and that seemed like an obvious big pot of money that you could take from one part of the health care financing system and move to another part.  Obvious, that is, until some pollster actually asked Americans what they thought, and we hated it.  Ezra Klein reported on all of the revenue options that Senate Finance is considering in its place:  up Medicare payroll tax slightly; apply new taxes to investments; add a regressive Value Added Tax or national sales tax like they have in many European countries;  or add a whole sheaf of consumption taxes.  That’s a pretty far way to go just to get around the financing scheme that every Democratic presidential candidate ran on in the first place.

There’s no question the richest 2-3% benefited well under a tax cut system that we simply couldn’t pay for and has been rendered unsustainable.  They’re traditionally more likely to take advantage of deductions and giveaways in our tax code, making fewer of them likely to pay the full percentage.  It’s a demographic that has benefited disproportionately to the billions of dollars spent bailing out the economy.  And, not to put too fine a point on it, they’re paying for the uninsured and the high costs of preventable chronic diseases already in taxes and premiums – they’re just not getting value.  It’s easy to demagogue in patently false ways.  Republicans will say it will hurt most small business owners.  It won’t.  They’ll say it’s socialism.  It’s not.  It’s the same progressive tax structure used by Eisenhower, Nixon, Ford, Reagan, Bush I and Bush II.

Looks like the first choice was the best one we’ve seen so far.

Bonus post!:

By the way – to go the Ecclesiastes route of “Ain’t nothing new under the sun,” check out this answer from John Conyers’ Web site on what we would need to do to finance HR 676, the Medicare for All bill:  “Sources of funding will include:  Maintain current federal and state funding for existing health care programs; Closing corporate tax loopholes; Repealing the Bush tax cuts for the highest income earners;  Establish employer/employee payroll tax of 4.75% (includes present 1.45% Medicare tax);  Establish a 5% health tax on the top 5% of income earners; a 10% tax on top 1% of wage earners;  One quarter of one percent stock transaction tax.”

Yup, it’s all of the options being considered by the House and the Senate.  Why has Congress been so quick to compromise away from single-payer?  Well, if taking a vote for one funding source is throwing the House and the Senate into such paroxysms of fear, imagine them screwing their courage to the sticking point to vote for all of them at the same time!

(Photo credit:  studio08denver on Flickr.)