It Just Doesn't Add Up

   For Immediate Release Jul 14, 2009
   For Further Information, Contact:
   Peter J. Sepp, (703) 683-5700

Taxpayer Group Questions Arithmetic behind House's Health Care Tax Proposal

(Alexandria, VA) -- The health care reform plan unveiled today by House Democratic leaders suffers from rosy revenue assumptions and stale savings provisions, according to a preliminary analysis by the 362,000-member National Taxpayers Union. NTU Vice President for Policy and Communications Pete Sepp offered the following statement about the legislation:

With their new health care plan House Democratic leaders seem to have abandoned the 'borrow now, spend now, pay later' philosophy for a mantra that is just as dangerous to our economy: 'tax now, spend now, and tax again.' Aside from the disastrous impact of the new income surtaxes, more may be in store for America's small businesses and entrepreneurs if the savings from the health care bill don't materialize. The two initial rates of surtax will double if savings targets aren't met.

Whatever else happens, the maximum combined federal tax rate in the U.S. will surpass those in France, Ireland, Italy, Switzerland, and the United Kingdom. Our rate will tie or even exceed that which burdens citizens in the People's Republic of China. The highest rate on dividend income would triple once the Bush tax cuts expire, and the rate on capital gains would reach a 15-year high. Forget about a bull market anytime soon.

The revenue that the bill's supporters hope to reap from taxpayers may not be realistic. In 2007, when our economy was still booming, the Joint Committee on Taxation determined that a 5 percent millionaire's surtax plus a 1 percent rate increase for the top bracket would raise barely more than half the receipts that supporters are seeking today with surtaxes of 1 percent, 1.5 percent, and 5 percent on similar income levels. Even after accounting for other revenue provisions in the package, something's not adding up, and this reality gap will only grow worse as America's most productive citizens become less inclined to work and create jobs. Middle-class taxpayers shouldn't be fooled: their wallets will soon be in Congress's sights.

On the savings side of the ledger, the legislation proposes a grab bag of cost-cuts that previous Congress have rejected or delayed, including reduced physician payments under Medicare and Medicaid restructuring that could meet stiff resistance from states.

Never before have five innocuous words strung together -- 'America's Affordable Health Choices Act' -- meant something so contradictory. George Orwell is spinning in his grave.

NTU is a nonpartisan, nonprofit citizen organization founded in 1969 to work for lower taxes, smaller government, accountability from public officials, and economic freedom at all levels. Note: additional NTU analysis of health care proposals will be available at www.ntu.org.

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