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House health care bill seeks 5.4% tax increase on $1 million earners

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House Democratic leaders, with the blessing of President Obama, Tuesday proposed a sweeping health care reform package designed to lower costs and encouraging employers to offer coverage to all employees, Bloomberg News reported Tuesday, adding that they plan to pass the historic legislation before the August recess.

A key revenue item in the bill: a 5.4% income tax increase on couples earning more than $1 million per year, and a 1% increase on incomes over $350,000 per year. Capital gains would also be subject to the tax, the Associated Press reported Tuesday. The bill would raise an estimate $500 billion over the next decade to help pay for universal health care.




Bill contains extensive cuts

The bill would also initiate hundreds of billions of dollars in cuts in projected Medicare and Medicaid spending. Employers would also face a charge of 8% of an employee's salary for each uninsured worker, although there would be exemptions for small businesses.

The legislation would also establish a government run health insurance program to compete with private insurance companies, The AP reported.

Political/Economic Analysis: As I outlined earlier, the generally cooperative stance of hospitals, doctors, pharmaceutical companies, and health insurers -- driven by the specter of even larger Democratic Party majorities in 2011 -- helped provide the constructive climate needed to move health care reform legislation forward this year. However, the Democratic Party's less-cohesive, ideologically-wide coalition meant that there is still a chance for the Dems to 'snatch defeat from the jaws of victory.' But this bill's emphasis on prevention and wellness, and on taxing those who've benefited the most from the American free enterprise system, should pass the House; several modifications are expected in the Senate.

Further, in exchange for modest concessions, the Obama administration should try to recruit selected Republican Senators to vote for the bill -- particularly those who are up for re-election in 2010 and are vulnerable to losing their Senate seat. However, if that's not possible, or if Senate Republicans are just as obstructionist as House Republicans (all of whom will undoubtedly vote against the bill), the administration should simply implement filibuster-proof, numerical democracy and concentrate on having the bill pass with just the 60 Democratic Senators and a few others.

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Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.

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Last updated: November 27, 2009: 10:46 AM

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