Senate Democrats are weighing yet another "soak the rich" proposal to pay for their government-run health insurance program.
CNN reports that Senate Majority Leader Harry Reid (D-Nevada) is considering a provision to raise payroll taxes for the wealthy as part of a healthcare reform bill. Reid is said to be considering an increase in the Medicare tax for individuals with income exceeding $250,000. Curtis Dubay, senior tax policy analyst at The Heritage Foundation, says Reid is desperate to raise revenue to pay for a "mammoth new entitlement that threatens to bankrupt the nation." He notes the increase in the Medicare payroll tax is very similar to the surtax being proposed in the House. "It will raise rates on high earners to levels we haven't seen in the United States for many years. It will raise rates actually higher than in countries like Italy, France, and Germany. It will discourage work, of course, [as] people who work hard for a living will think twice about working to send half their income to the government, and it will also lower wages," Dubay explains. "Employers will likely have to pay an equal portion that employees will have to pay, and that will reduce take-home pay for many workers, in addition to the extra taxes they have to pay." The Senate Finance Committee has already approved a proposal to slap an excise tax on so-called "Cadillac" health insurance plans, but the plan has angered union members, many of whom are Democratic Party supporters and enjoy expensive healthcare plans. That is why Dubay says if Reid decides to replace the tax on Cadillac plans with a Medicare payroll tax hike, it will be a move out of "pure political expediency."
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