Citizens for Tax Justice (CTJ), a nonprofit group which targets corporations and the rich, has released a state-by-state cost-assessment of two proposals to pay for health-care reform: a White House plan to limit the benefits of itemized deductions for high-income Americans and one of its own to reform the Medicare tax.
CTJ found that both proposals would save significant funds to help cover reform but concluded that expanding the Medicare tax would save the most money. The White House plan, CTJ reported, would raise more than a quarter trillion dollars over 10 years, while it’s own would save one trillion in tax increases over the next decade.
Director of CTJ Bob McIntyre said both proposals “would be good policy even if Congress wasn’t trying to raise the money in particular for health care.”
McIntyre said critics have complained that the White House proposal “is going to be too harsh on wealthy states that have progressive income taxes,” as it involves limiting tax savings from itemized deductions to 28 cents on the dollar for everyone. Yet according to CTJ’s findings, “the range among states is really quite narrow,” he said.
For example, the report finds that in Connecticut, the state with the highest percentage of taxpayers expected to be affected, only two and a half percent of taxpayers would be impacted. In Vermont, the state with the lowest number of taxpayers expected to be affected, only four percent of taxpayers would be impacted. According to McIntyre, “that is not much of a range” to be concerned about.
The bottom line, he explained, is that the plan would save money by decreasing the amount of tax savings high-income Americans could receive, in order to help cover the cost of health-care reform.
As for CTJ’s own proposal to expand the Medicare tax?
Its plan to expand the Medicare tax would mean including Americans with unearned income, such as dividends and capital gains. Currently, the tax is limited to Americans reporting wages and earned income.
It “would impose the worker side of the Medicare tax — the 1.4 tax — to unearned income and then it would add a second rate of two and a half percent for very wealthy people and for elderly couples,” McIntyre said.
He calls it “a low-rate tax,” as the tax is lower than the total Medicare tax now, he says (2.9 percent when you account for the employer side). For most people, he believes this change would signify “virtually no tax at all.”
Eighty percent of the tax hikes would be paid for by 5 percent of all taxpayers. “We do have very small tax hikes in other income groups, but they’re not burdensome. For the bottom 60 percent for instance, the average tax hike would be less than 50 cents per week,” he said.
The report’s release is part of a broader campaign aimed at promoting cost-saving proposals to support health-care reform without burdening low-income Americans. CTJ has teamed up with the SEIU and USAction to promote its findings nationwide.
Ann Kempski, director of Health Policy at SEIU, said the numbers reported today “show members of Congress that they are fair and fiscally-responsible approaches to pay for the urgently-needed transformation that we need to make in our nation’s health-care system.”
Members of Congress “who say that we should wait, we should go slow, we should take only slow steps are actually saying to American workers to brace themselves for more hikes in their premiums, more hikes in their out-of-pocket costs, in fact, costs that could rise by 68 percent over the next 10 years if we do nothing,” she said.