The Case Against the (House health care) Millionaire Surtax

American Enterprise Institute ^ | December 21, 2009 | Alan D. Viard

[reaganaut1]

On November 7, 2009, the House passed H.R. 3962, the Affordable Health Care for America Act. The bill would expand Medicaid, grant subsidies to moderate-income households buying health insurance on newly established exchanges, and provide health insurance tax credits to some small businesses. These expenditures would be financed, in part, by a new 5.4 percent surtax on households with very high incomes, including married couples with incomes above $1 million.

The proposed millionaire surtax is politically attractive because its direct burden would fall on a very small group, roughly 0.3 percent of the population. Moreover, this group is extremely wealthy and could undoubtedly afford to pay additional taxes. For three reasons, however, the proposed surtax would be bad tax policy.

First, it would significantly increase marginal tax rates for the affected households, giving them greater incentives to reduce their taxable income through various avoidance strategies. Even with moderate responsiveness to incentives, the revenue generated by the surtax would be significantly smaller than the burden that it would impose on affected taxpayers.

Second, the surtax would significantly increase the marginal tax rate on saving and investment by the affected households, whether done through corporate or noncorporate firms. [...]

Third, the proposed surtax reflects an unsustainable approach to tax and fiscal policy. As commentators across the political spectrum have recognized, the existing fiscal imbalance cannot be addressed without imposing sacrifices on a broad segment of the population. Any new spending programs, such as those in H.R. 3962, will impose additional burdens. By linking these programs to a tax imposed on only 0.3 percent of the population, the bill obscures that fiscal reality. If the programs in H.R. 3962 are worthwhile, they are worth paying for in an open and broad-based manner.

[reaganaut1]

The article goes on to say that the House health care surtax would likely raise only about 1/2 of the revenue that the "static" analysis (which assumes that pre-tax income would be unchanged) employed by the House and the CBO assumes.

The moral question is important as well. If government is just a way to confiscate money from some people and redistribute it to others, it loses its legitimacy and becomes just a form of organized theft. Ayn Rand had her flaws, goodness knows, but she is one of the prominent intellectuals in recent times to make the moral argument against big government.

[flintsilver7]

Never expect a Democrat to have any knowledge of logic or economics. The average braindead Democrat thinks that if they need to increase their funds by 5%, they can just raise taxes by 5%. Here in the real world, most of us are aware that actions have consequences. If you raise somebody’s income tax by 5%, they will do everything they can to avoid paying it.

Of course, if you explain this to a Democrat, they might just say “well, then let’s raise taxes 10%.”

[DennisR]

When it comes to fair treatment of all Americans, the Federal government is the absolute worst. They should NOT be able to treat “the rich” different than “the poor.” We need to push back until that happens. See the mandates at http://pushbackuntil.com/Mandates.htm. In particular, there should only be one tax rate. And absolutely everyone should pay taxes. No more progressive rates and free rides because you do not make enough money.

And be in D.C. for a massive protest during the State of the Union Address! http://pushbackuntil.com/Strategies/B.htm.

[DrC]

“becomes just a form of organized theft.”

The notion of taxation as organized theft has a lengthy history going back to Lysander Spooner in the 19th century through libertarians such as Murray Rothbard today. http://mises.org/rothbard/ethics/twentytwo.asp

I personally view the imposition of taxes to support a “night watchman” state legitimate, but concur that once redistribution enters the picture, taxation to achieve this objective has no more obvious legitimacy than a private criminal enterprise that sought to use theft to secure the identical objectives.

The fact that the U.S. now hovers so close to the “tipping point” at which a majority of citizens pay no taxes but nevertheless receive substantial personal benefits (as opposed to collective benefits such as national defense) makes me fear for the future of the country.

[gunnyg]

Millionaire tax?

What about the peon tax?????

http://madashelland.wordpress.com/2009/12/29/whats-this-about-fast-food-eat-in-and-take-outtaxcharges/