First let’s read about the new bills the dems have announced:
WASHINGTON — House Democrats scrambling for ways to pay for overhauling health care would raise taxes on the wealthiest Americans to levels not seen since the 1980s, breaking one of President Barack Obama’s campaign pledges.
The tax increase would be limited to the top 1.2 percent of earners — families that make more than $350,000 a year. But it would raise a total of $544 billion over the next decade, covering a little more than half the cost of the health care plan.
The bill unveiled by House Democratic leaders Tuesday would create three new tax brackets for high earners, with a top rate of 45 percent for families making more than $1 million. That would be the highest income tax rate since 1986, when the top rate was 50 percent.
The plan would honor Obama’s campaign promise not to raise taxes on families making less than $250,000. But it would break an Obama pledge that no one — including the wealthy — would pay higher taxes than they did in the 1990s. The pledge, as listed on Obama’s campaign Web site, was: “No family will pay higher tax rates than they would have paid in the 1990s.”
Democrats argue that high-income families fared well under President George W. Bush’s two terms as their taxes dropped and their incomes soared, giving them the ability to absorb higher taxes. Republicans argue that the tax increases would hurt small business owners who typically pay their business taxes on their individual returns.
Rep. Charles Rangel, chairman of tax-writing House Ways and Means Committee, called the plan “the moral thing to do.”
“This innovative bill provides a uniquely American solution to control costs and put patients first without burdening future generations with debt,” the New York Democrat said.
Obama’s strategy throughout the health care debate has been to publicly encourage the efforts of congressional Democrats even as they debate proposals that would break his campaign promises. The goal is to keep lawmakers working toward a package that expands coverage and slows the growth in costs.
On Wednesday, Obama said that both the House bill and a separate measure passed by a Senate committee would “take what’s best about our system today and make it the basis of our system tomorrow — reducing costs, raising quality, and ensuring fair treatment of consumers by the insurance industry.”
House Democratic leaders hope to pass the health care bill before Congress goes on vacation in August. Under the House plan, the federal government would be responsible for ensuring that all people, regardless of income or the state of their health, have access to an affordable insurance plan. Individuals and employers would have new obligations to get coverage, or face hefty penalties.
The bill would add a 5.4 percent income tax “surcharge” on families making more than $1 million a year, starting in 2011. Families making more than $350,000 would get a 1 percent tax and those making more than $500,000 would get a 1.5 percent tax.
If certain savings in the health care system are not achieved by 2013, the new tax on families making more than $350,000 would increase to 2 percent, and the tax on those making more than $500,000 would go to 3 percent.
Currently, the top marginal income tax rate is 35 percent. Obama wants to let some tax cuts enacted under Bush expire, boosting the top rate to 39.6 percent in 2011. The new health care taxes would increase the top rate to 45 percent.
House Republican leader John Boehner, R-Ohio, called the bill a job killer that would result in rationed care, fewer choices for patients and diminished quality.
“If this isn’t bad enough, this new maze of government bureaucracy will be funded by a new small business tax that will cost more American jobs,” Boehner said. “During a time of economic recession, the last thing Congress should be doing is punishing small businesses that create a majority of the jobs in this country.”
Democrats argue that the tax increases would affect only 4.1 percent of tax filers who report small business income. Those small businesses, however tend to be the ones that employ the most workers, according to data from the National Federation of Independent Business.
The National Association of Manufacturers said the new taxes would make it harder for small businesses to grow, invest and create jobs.
“These new taxes will have longstanding negative consequences to the U.S. economy and cost jobs,” Jay Timmons, the association’s executive vice president, wrote in a letter to members of Congress.
Now if you want to see what is going to happen read below:
July 15, 2009 – 09:44 ET by vrwc13
Suppose that every day ten men go out for lunch and the tab for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
All for the same meal.
So, that’s what they decided to do. The ten men ate lunch every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. He said, “Since you are all such good customers, I’m going to reduce the cost of your daily lunches by $20. Food for the ten will now cost just $80.”
The group still wanted to pay their bill the same way we pay our taxes, so the first four men were unaffected. They would still eat for free. But what about the other six men — the actual ‘paying’ customers? How could they divide the $20 windfall so that everyone would get his “fair share”? They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being “paid” to eat his lunch. So the restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same formula based on what was paid, and he proceeded to work out the amounts each should pay!
And so: The first four continued to eat lunch for free (no change)
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $50 instead of $59 (15% savings).
Each of the six who had been paying was now better off than before, and they all still ate the same meal. But once outside the restaurant, the men began to compare their savings. “I only got a dollar back out of the $20 savings,” declared the sixth man. He pointed to the tenth man, “but he got $9”! “Yeah, that’s right,’ exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got back nine times more than I!” “That’s true!!”shouted the seventh man. “Why should he get $9 back when I got only $2? The wealthy get all the breaks!” “Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. This payment system exploits the poor!”
So the nine men surrounded the tenth guy and beat him up. The next day the tenth man didn’t show up for lunch, but the other men sat down and ate without him, anyway. When it came time to pay the bill, they discovered something interesting. Between them all they didn’t even have enough money to pay half the bill!
And that, boys and girls, presidential candidates and economic pundits, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much or attack them for being wealthy and they might not show up to eat with us any more. In fact, they could start eating lunch some other place where the atmosphere turns out to be a lot friendlier.