Research Briefing

First In A Series On How Obama’s Government-Run Health Care Experiment Will Harm The Economy

DEMS WANT HUGE TAX INCREASE ON SMALL BUSINESS TO PAY FOR THEIR EXPERIMENT …

Dems Propose $550 Billon Tax Hike. “Beginning in 2011, the plan would target all income over $350,000 a year for families and $280,000 a year for individuals … The surtax would start at 1 percent, rise to around 1.5 percent for families earning more than $500,000, then step up again, to around 3 percent, for families earning more than $1 million … That would raise about $550 billion over the next decade …” (Lori Montgomery, “Democrats Agree On Tax Hike To Fund Health Care,” The Washington Post, 7/13/09)

Tax Increases Would Hit Several Small Businesses And Their Employees. “In a 2007 survey, the National Federation of Independent Business found that about 15 percent of small-business owners -- and half of those with at least 20 employees -- said they expected their household income to exceed $200,000.”  (Lori Montgomery and V. Dion Hayes, “Small Businesses Brace For Tax Battle,” The Washington Post, 4/27/09)

WHICH WILL LEAD TO FEWER JOBS, HIGHER PRICES AND LESS ECONOMIC GROWTH …

Small Business Tax Hikes To Pay For Government-Run Health Care Will Kill Jobs. “This [surtax] would hit job creators especially hard because more than six of every 10 who earn that much are small business owners, operators or investors, according to a 2007 Treasury study... America’s successful small businesses would pay higher tax rates than the Fortune 500, and for that matter than most companies around the world ...” (Editorial, “The Small Business Surtax,” The Wall Street Journal, 7/14/09)

Impact On Small Businesses Would Be Felt By All Americans Through Higher Prices For Goods. “[M]iddle- and lower-income workers would indirectly bear a significant part of the burden of the surtaxes on higher-income individuals. .. Moreover, middle- and lower-income households additionally bear some of the tax as consumers, because output is reduced, and consumers of all income levels must make do with fewer, higher-priced goods and services.” (Michael Schuyler, “The Surtax: Worse Than the Alternative Minimum Tax,” National Center For Policy Analysis, 10/29/07)

Tax Increases Will Lead To $76 Billion In Lost Economic Activity In 2011 Alone. “The actual economic costs of the proposed health care surtax and the expiration of the 2001 and 2003 tax cuts will be twice the amount of revenue the government intends to collect. According to a new analysis from the Tax Foundation, the higher tax rates are estimated to raise $88 billion in 2011, but the economy will incur an additional burden of $76 billion--or ‘deadweight loss’--as a result, which raises the total cost of the tax increases to $164 billion, roughly double what lawmakers intend to raise.” (Robert Carroll, “The Excess Burden of Taxes And The Economic Cost Of High Tax Rates,” Tax Foundation, 8/14/09)

AND MONEY FROM TAX HIKE WON’T EVEN KEEP UP WITH COSTS OF THEIR EXPERIMENT

Revenue From So-Called ‘Surtax’ Won’t Cover Costs Of Government-Run Health Care Over Next Decade. “The net cost of the coverage provisions would be growing at a rate of more than 8 percent per year in nominal terms between 2017 and 2019; we would anticipate a similar trend in the subsequent decade.  … Revenue from the surcharge on high-income individuals would be growing at about 5 percent per year in nominal terms between 2017 and 2019; that component would continue to grow at a slower rate than the cost of the coverage expansion in the following decade.” (Douglas Elmendorf, CBO Director, Letter To Rep. Dave Camp, 7/26/09)