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Congressman Jared Polis (D-CO) makes an impression on health care

07/20/2009

You have to hand it to Jared Polis: For a freshman Congressman to be quoted in the the NY Times and the Wall Street Journal within 24 hours (and not for some misdeed) is an achievement.

Polis, who represents my district, is no doubt a “Boulder liberal", but I nevertheless give him credit for having a better-than-average (for a Democrat, at least) understanding of economics and a willingness to stand up for his views. It took some courage for Polis, along with 21 other Democrats, to sign a letter (which I believe Polis wrote) explaining to Nancy Pelosi that trying to pay for health care “reform” with large surcharges on personal income taxes for incomes above $350,000, $500,000, and an especially large tax on income over $1,000,000 could be extremely damaging economically because so many American businesses are organized as S-Corporations which pay tax based on the personal, rather than the corporate, income tax schedules.

While it is unfortunate that Congressman Polis begins his letter to Pelosi by saying that the Democrats’ health care bill “could not come at a better time” (obviously false, since any later time would be a better time, with never being the best time) and ends his letter by saying that with some modifications the bill “should be good for small business” (in the way that cancer is good for a human?), it’s too much to expect a Boulder Democrat (much less a freshman) to call out ObamaCare for the fascist enterprise it really is.

Still, despite his flawed premise about the value of government-run health care overall, Polis makes some accurate and very important points in his letter (the following are all quotes from the letter):

• Small businesses create 60 to 80 percent of new jobs, which is even more important when times are tough.
• According to the IRS, 64 percent of households filing individual tax forms with AGI (Adjusted Gross Income) above $250,000 filed as an S-Corporation or partnership or filed a Schedule C sole proprietor tax form. Further, of all small businesses, 75 percent are S-Corporations where the business income is passed through to the businesses owners’ individual tax return, increasing the chances that it will be impacted by the proposed surcharge.
• The proposed surcharge will also have a direct negative impact on manufacturers…
• A surcharge would tax income above $1 million at a new rate of 45 percent. Combined with state taxes, many successful small businesses – the very kind of business that should lead in creating new jobs and help us emerge from this recession – will be taxed at over 50 percent.
• (And finally, this extremely important point) The proposed surcharge would put successful family-owned companies and closely held midsize S-Corp businesses at a major tax disadvantage to their larger corporate competitors which would continue to enjoy the favorable 35 (sic) corporate tax rate. Multinational corporations will be paying 35 percent for the same economic activity and profit that a family owned S-Corp would be paying nearly 45 percent federal taxes on.

Think about that. The US has the second highest corporate tax rate in the OECD (and only about 1/4% from being the highest) and Polis can accurately say that if Pelosi’s plan passes as written, US corporations paying that exorbitant rate will have an advantage over other American businesses!

Consider this “Fiscal Fact” from the Tax Foundation (from August, 2008), with emphasis added by me):

Amid rising concerns about the state of the U.S. economy, new data compiled by economists at the OECD shows that for the 17th consecutive year the average rate of corporate taxes in non-U.S. countries fell while the U.S. corporate tax rate stayed the same. As a result, the overall U.S. corporate tax rate is now 50 percent higher than the OECD average.

Combined with another new OECD study that calls the corporate income tax the most harmful type of tax for economic growth, the implications for U.S. policy are clear. The long-term prospects of the U.S. economy are at risk as long as our corporate tax rate remains out of step with the rest of the world.

The U.S. continues to have the second-highest combined federal-state corporate tax rate among industrialized countries at 39.3 percent. Only Japan has a higher overall corporate tax rate at 39.5 percent. By contrast, the average corporate tax rate among OECD countries has fallen a full percentage point in the past year, from 27.6 percent to 26.6 percent.

So not only would Pelosi’s proposed surcharge make many thousands of US small and mid-sized businesses uncompetitive versus larger American C-corporations (the standard type of stock-based ownership structure, including almost all companies which trade on stock exchanges), but it would also make these thousands of mostly family-owned businesses absolutely uncompetitive versus foreign competition.

I presume Congressman Polis is sincere when he begins and ends his letter with praise for the concept of government-run medicine. And I surely hope I have the opportunity to discuss the issue with him and disabuse him of the notion that what is essentially a massive increase of our Medicare system – a system that is already well on the way to bankrupting the nation – is in any way a good idea.

But I have to give him credit, not least because he’s a freshman from a rather left-wing district despite the fact that the district includes me, for leading a charge against the most job-destroying aspects of the current Democratic plan and for having the courage to vote his convictions, being one of only three Democrats on the House Education and Labor Committee to vote against the bill as written. (Three Democrats on the Ways and Means Committee also defied Pelosi.)

Jared Polis’ policy positions are far from perfect, but I’m pleased to see his leadership on this extremely important issue. It’s probably too much to hope that his uber-liberal Boulder constituency will see the critical economic arguments Polis is making rather than being blinded, as Boulderites tend to be, by a desire to “soak the rich.” Seeing “soaking the rich” as a lofty ideal is one thing; but destroying your own job opportunities in the pursuit of that soaking is just senseless.