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Thursday, October 01, 2009

Small Biz Health Care Daily: Breaking the Tax Promise

Hiking taxes on upper income earners – many of which just happen to be entrepreneurs and investors – is a bad idea for the economy. But that’s what President Obama has pledged to do, while also promising not to raise taxes on individuals earning less than $200,000 and families less than $250,000.

The Washington Post provided this reminder in an October 1 report:

Democrats on the Senate Finance Committee narrowly defeated amendments by GOP senators Mike Crapo of Idaho and John Ensign of Nevada, 11 to 12. But the measures attracted the votes of two moderates, Sen. Olympia J. Snowe (R-Maine) and Sen. Blanche Lincoln (D-Ark.), suggesting that the issue could prove problematic as the health-care debate moves to the House and Senate floors in the weeks to come.

Calling his amendment an effort to make sure that health-care reform lives up to Obama's promises, Crapo proposed to strip out all taxes and fees that would strike individuals who earn less than $200,000 a year and families who earn less than $250,000 a year.

Among the key provisions that would be affected, he said, are a proposed penalty of up to $1,900 a year for failing to buy insurance; a plan to make it much harder to deduct catastrophic medical expenses; and new penalties on those who use their health savings accounts for other purposes. Ensign's amendment targeted only the penalty for failing to buy insurance.

Congressional tax analysts have determined that all three provisions would fall heavily on taxpayers that Obama has defined as middle class.

The President is emphasizing that his health care reform agenda, which is focused on expanding government, will not increase the budget deficit. That’s open for debate, to say the least. But the plan will force huge tax increases – both now and in the future as costs continue to skyrocket.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

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