In order to pay for his vision of Health Care Reform, if you can even call it that, senator Reid is championing several new taxes, and that may not sit well with many. First, he intends for the government to levy a 40 percent tax on the value of insurance exceeding $8,500 for individual coverage and $23,000 for family coverage.
Economists argue that the tax could slow the growth of health spending by having the unintended consequence of employers paring back health benefits. Labor unions unsurprisingly oppose the tax, arguing that it would impact many workers who have passed on wage increases in exchange for added health benefits.
Senator Reid is also proposing an increase in the Medicare payroll tax. Currently, employers and employees each pay a tax equal to 1.45 percent of wages. Under Mr. Reid’s plan, there will be an increase in the rate to 1.95 percent for individuals, if the individual earns more than $200,000 annually. Couples are on the hook if in aggregate, they bring home over $250,000 annually. The employers escape unscathed, as the tax on them would be unchanged.
The democrats claim that the payroll tax increase would raise $54 billion over 10 years. Unlike the Senate’s version, the House bill plans on seeking additional new revenue by taxing the high-income people. Anything exceeding $500,000 for individuals, or $1 million for couples would be taxed at 5.4 percent under the House plan.
Senator Reid’s bill also plans to extract revenue by levying annual fees on health insurance companies, as well as pharmaceutical manufacturers. Senator Reid plans to impose fees of $2 billion annually.