Paying For Health Care

One of the most effective ways the Party of No has in trying to defeat real health care reform is in scaring the American people into thinking we cannot afford the cost of real reform. They want Americans to think that health care reform will cost billions of dollars, and that will either bankrupt America or put its citizens under an unbearable tax load. Neither is true.

So, how do we pay for the reform needed. Citizens for Tax Justice has come up with a way. A way that is so simple and fair to everyone that every senator and representative should be ashamed of themselves for not coming up with it themselves.

Their idea involves a simple extension of the Medicare tax. Currently this tax is levied on all wages and salaries at a flat rate of 2.9%. Half is paid by the employer and half by the worker (with each paying 1.45%).

But wages and salaries are not the only types of income in this country, and the people with other types of income such as capital gains, stock dividends, taxable interest income and unearned income reported on schedule E (rents, royalties, S corporation income, passive partnership income and income from estates and trusts) are getting a free ride with the Medicare tax currently.

Citizens for Tax Justice would extend the small 1.45% tax to all types of income. But to be fair to people with lower incomes, the first $10,000 of non-wage/salary income for a single person would be exempt from the tax. For a married couple, the exemption would be $20,000.

About 73.2% of the extended tax would be paid by the top 1% of earners (that average $1,540,599). This group would pay an average tax of $9907. Another 17% of the tax would be paid by the next 4% of earners (that average $283,099). The average tax paid by this group would be $578.

That leaves 15% of the top 20% of earners. This group earns an average of $128,175, and they would pay an average of $62. That means the top 20% of earners would pay 96.9% of this extended Medicare tax. Here is the percentage and average tax paid by all groups:

INCOME GROUP...............AVG.-TAX...............%TAX

Lowest 20%............................$0............................o.0%

Second 20%............................$1.............................0.2%

Third 20%...............................$5.............................0.7%

Fourth 20%............................$14...........................2.0%

Next 15%.................................$62...........................6.9%

Next 4%...................................$578........................17.0%

Top 1%.....................................$9907......................73.2%

If the tax is instituted soon, it would raise about $19 billion in 2012, and would bring in $160 billion in the 2012 through 2019 period. All of this is new money and could be applied to the reform of health care. The money currently going to Medicare would not be affected at all.

I like this idea. It would raise a great deal of money, but put almost no burden on working folks and those with smaller incomes. In fact, it is the upper 5% of income earners that would pay 90% of the new tax. These are the people who are receiving the most from this country, and it is only right they should give some back for the good of all.

This is only one idea for paying for health care reform (although it's a very good one). I'm sure there are others that will work as well. So don't let the Party of No convince you it can't be done. They are just trying to protect their rich buddies at the insurance companies.