A 25 Percent Income Tax Hike to Pay for Government Health Care?

By Max Pappas on Jul 07, 2009

Well that didn't take long.  Hours after returning from their July 4th recess, the Democrats who run Congress came out with yet another tax hike proposal to fund their $1 trillion government take-over of health care.  This time, as unemployment nears 10 percent, they are proposing raising taxes on the very small businesses that we need to create the new jobs that will bring unemployment back down. 

According to Bloomberg News:

House Ways and Means Committee members are likely to propose a surtax on high-income Americans to help pay for an overhaul of the health-care system...

The tax would be similar to, yet much smaller than, a surtax proposed in 2007 by Ways and Means Committee Chairman Charles Rangel...That plan would have added at least a 4 percent levy on incomes exceeding $200,000.

What Bloomberg doesn't note is that, while some of these taxes would be taken from "the rich", it would be small businesses that are especially hit hard because many pay the top tax rate as they pay taxes on their owner's 1040 tax returns.  With less money, they will be able to employ fewer people, it's as simple as that. 

If this new tax is 4 percentage points added on top of the 2011 income tax hike President Obama said he intends to happen by letting the 2001 and 2003 tax cuts expire, the top tax rate will be about 43.6 percent--up from the current 35 percent. 

That's a 25 percent tax hike.  That's a lot for any small business to take without laying people off, never mind creating new jobs.

House Republican Leader John Boehner rightly asks in a recent release:

At a time when unemployment is rising to levels far beyond what the Administration promised when it was selling its trillion-dollar “stimulus” spending bill that isn’t working, Democrats are prepared to make it even more difficult for small businesses to stay in business and create jobs?  Is that really the best strategy for creating jobs on behalf of the American people?  Of course not.

This latest tax hike proposal follows closely behind proposals for an alocohol tax hike, a soda tax hike, a brand new value added sales tax, and a tax on our health care benefits. 

Looks like Speaker Nancy Pelosi (D-CA) wasn't joking when she said, as far as tax hikes go, "everything is on the table".

flaco
August 17, 2009 - 5:36pm
I would rather pay that in tax, than another gift to the crooked Insurance companies, and it would be a better deal for me than paying my premiums to Insurance
Max Pappas
July 14, 2009 - 9:46am
Patinaky: If you look again at the article, I explain how it is a 25 percent increase, but I'll do so in more detail here. Above, I say, "If this new tax is 4 percentage points added on top of the 2011 income tax hike President Obama said he intends to happen by letting the 2001 and 2003 tax cuts expire, the top tax rate will be about 43.6 percent—up from the current 35 percent. That’s a 25 percent tax hike." So, start with a top income tax rate of 35 percent, add the income tax increase from the expiration of the 2001 and 2003 tax cuts, which brings the top rate to 39.6 percent, and then add on the 4 percentage points from this "sur tax" and you get a top rate of 43.6 (39.6+4=43.6). The way you figure a percent increase is by subtracting the old rate from the new rate and dividing the result by the old rate, like this: 43.6-35=8.6, 8.6/35=.25 (or 43.6 minus 35 equals: 8.6. 8.6 divided by 35 equals 25 percent.) Not fuzzy at all.
patinaky
July 12, 2009 - 3:23am
I don't follow how the 4% tax hike becomes 25%. Fuzzy math?