Baucus Bill Includes Massive Tax Increases for Middle-Income Families
“Very Regressive Tax, Penalizing People Who Cannot Afford to Buy Coverage”
While the bill produced by Finance Committee Chairman Baucus is being portrayed by some media outlets as a “moderate compromise,” in reality the legislation could force middle-class families to spend tens of thousands of dollars they do not have to purchase bureaucrat-approved policies as part of a government takeover of health care:
- The Finance Committee bill would require individuals with three times the federal poverty level to spend 13 percent of their income on health coverage premiums. Committee staff estimates found that in 2016—the fourth year after the bill’s mandates and insurance “reforms” would take effect—an individual making three times federal poverty (projected to be $35,400 in 2016) would be required to pay up to $4,600 in premium costs before receiving federal assistance, and a family of four making three times poverty ($72,000 in 2016) would be required to pay up to $9,400 in premium costs—equaling a year’s worth of a family’s mortgage payments in some parts of the country. In both cases, Americans would be required to spend nearly one in seven dollars of gross income to pay for government-approved insurance.
- The premium costs outlined above do not include additional expenses for cost-sharing in the form of co-payments and deductibles. The Finance Committee document found that in an “average” year, families facing cost-sharing of $4,500 would be forced by the federal government to spend nearly 20 percent of their income on health costs. However, a family subject to the bill’s maximum annual cost-sharing of $11,900 would spend 29.5 percent of its income on health costs alone.
- The Baucus plan would subject families with incomes higher than three times poverty to tax penalties of up to $3,800 per year. Senior Administration official Sherry Glied has previously written that a mandate has the potential to be a “very regressive tax, penalizing uninsured people who genuinely cannot afford to buy coverage.” Moreover, during his presidential campaign, candidate Obama pointed out that in Massachusetts, the one State with an individual mandate, “there are people who are paying fines and still can’t afford [health insurance], so now they’re worse off than they were. They don’t have health insurance and they’re paying a fine.”
- While the Baucus plan would exempt those whose health insurance premiums would exceed 10 percent of annual income from the tax penalties associated with the mandate, such “relief” would come at a steep price—as these individuals and families would still lack health coverage.
Particularly now that the White House has advocated support for high-risk pools to allow individuals with pre-existing conditions to obtain affordable coverage, many may question the wisdom and necessity of forcing individuals to purchase costly, “bureaucrat-approved” coverage they may not need—or want. Many may also advise President Obama to stick to his campaign’s “firm pledge” that “no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes”—and avoid imposing tens of thousands of dollars in tax increases on vulnerable middle-class families through costly mandates and a government takeover of health care.