Obama wants to raise taxes on rich to fund health care
Obama wants to raise taxes on rich to fund health care
WASHINGTON (AP) — It’s probably never a bad time to be rich. But the good times for America’s wealthy could soon be a little less so.
President Barack Obama wants to boost income taxes for the wealthy to pay for tax cuts for everybody else. He wants to limit the deductions that high-income families take for mortgage interest and charity contributions to help pay for providing more people with health insurance.
House Democrats are planning to hit the wealthy with even higher income taxes to pay for their version of a health-care overhaul.
Between the plans, a family of four with an income of $5 million a year would see its annual income taxes skyrocket by more than $440,000. A similar family making $800,000 a year would get a tax increase of $30,000, according to an analysis by the financial services firm Deloitte Tax.
“I still think being wealthy is better than being poor,” Clint Stretch, who heads tax policy at Deloitte Tax, said with a touch of understatement. “But this is a pretty high proposed tax burden.”
Taxing the rich to pay for health insurance would represent a significant departure from the way Americans have financed safety-net programs in the past.
Both Social Security and Medicare are supported by broad based payroll taxes. Although the rich pay more — they have bigger incomes — the burden is shared by the middle class and even the working poor.
By contrast, the health-care plan working its way through the House would impose $544 billion in new taxes over the next decade on just 1.2 percent of households — joint filers making more than $350,000 a year.
The bill would impose a new 5.4 percent income surtax on couples making more than $1 million a year, starting in 2011. Couples making more than $350,000 would have to pay a surtax of 1 percent tax, and those making more than $500,000 would pay a 1.5 percent surtax.
If certain savings in the health-care system are not achieved by 2013, the surtax would rise to 2 percent for families making more than $350,000 and to 3 percent for those making more than $500,000.
For a family of four making $450,000 a year, the initial tax increase would be $1,000, according to the Deloitte analysis. But for the super-rich, such as a single filer making $5 million a year, the tax increase would be $452,000. The analysis assumes a typical mix of earned income, capital gains and itemized deductions for each income level.
Democrats said that for most of the affected taxpayers, the surtax would be far smaller.
“What we’re talking about is frankly very, very small amounts for the overwhelming majority of people who will pay it,” said Rep. Artur Davis, D-Ala.
The top marginal income-tax rate now is 35 percent, on income above $372,950. Obama wants to boost the top rate to 39.6 percent in 2011 by allowing some of the tax cuts enacted under former President George W. Bush to expire.