Health care issues: Tax increases for overhaul

AP News
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Posted: Nov 09, 2009 9:29 AM

A look at key issues in the health care debate:

THE ISSUE: What taxes will increase if Congress overhauls health care?

THE POLITICS: All of the health care packages are expensive _ the House bill is projected to cost $1.2 trillion over 10 years and the Senate Finance Committee bill is projected to cost $829 billion. But President Barack Obama has pledged that overhauling health care overhaul will not add to the growing federal budget deficit. Obama has also promised not to raise taxes on families making less than $250,000 a year. The House bill attempts to abide by Obama's tax promise, with a few notable exceptions, by largely relying on a new income tax on millionaires. The bill approved by the Senate Finance Committee takes a more Republican approach by taxing high-end health insurance plans. Republican Sen. John McCain of Arizona advocated a similar tax when he ran against Obama for president. Obama opposed the tax on health benefits when he was a candidate.

WHAT IT MEANS: Taxes will increase if any of the plans are enacted. The House bill would impose a 5.4 percent income tax on individuals making more than $500,000 and joint filers making more than $1 million. The top income tax rate is 35 percent. If existing tax cuts expire in 2011, as Obama wants, the top rate would grow to 39.6 percent. The new health care tax would further increase that to 45 percent. The House bill would also impose a 2.5 percent tax on the sale of medical devices.

The Senate Finance Committee bill would impose new taxes on insurance companies, drugmakers and medical device manufacturers. The Senate bill would impose a 40 percent tax on the portion of insurance premiums exceeding $8,000 a year for individuals and $21,000 a year for family plans. That tax would be imposed on insurance companies, though it would likely be passed on to consumers, including many middle-income families. All the plans require individuals to get qualified health insurance, and they all impose taxes on people who don't, with exemptions for financial hardships.

_ Stephen Ohlemacher