7 possible ways to finance health care reform

1. Limit income tax deductions

By allowing only taxpayers in the top two income tax brackets (33% and 35%) to deduct their mortgage interest, charitable contributions, and local taxes at the rate of 28%, it is suggested that the federal government could collect $ 267 billion over the next year. 10 years. This is supposedly one of the Obama administration’s main revenue-raising tactics. However, numerous Democratic leaders have already spoken out against it, claiming it would hurt charities and residents of heavily taxed areas like New York City. Although experts predict that the original proposal will likely not become law, they are suggesting that some kind of watered-down version will.

2. Taxes on benefits provided by the employer

With the support of both Republicans and moderate Democrats in Congress, and even the most influential members of the Senate Finance Committee, the concept of taxing employer-provided health benefits is something that has received a lot of attention lately. . Although House Speaker Nancy Pelosi strongly opposed any legislation on the issue, there are several recent compromises that have made the new tax more likely to become law. Commitments include limiting the value of benefits that are not taxable (for example, if the tax-free limit is $ 13,000, an employee with a policy worth $ 15,000 would pay income tax on $ 2,000) and impose an income tax surcharge on the wealthiest. contributors.

3. Tax surcharge to the rich

Speaking of tax surcharges for the wealthy, raising the tax rate for taxpayers with incomes over $ 200,000 or couples earning over $ 250,000 has also been discussed as a way to help pay for health care reform. This is the hottest proposition in the House. Current proposals would impose an additional 3-4%, with the possibility of an additional 0.6% tax on those who earn more than $ 500,000. These tax increases, if approved, are projected to generate an estimated $ 832 billion in federal revenue over the next decade.

4. Increase in “taxes on sin”

Increasing taxes on high-sugar sodas, tobacco products, and alcoholic beverages (also known as sin taxes) could provide up to $ 200 billion in additional tax revenue over the next 10 years. Taxes on alcohol were reportedly last increased in 1991 and, adjusted for inflation, are actually 37% lower today. However, with little support and opposition from dozens of industries, such increases are likely to see the light of day.

5. Repeal of tax savings accounts and deductions

While not a direct tax increase, by repealing tax-advantaged health savings accounts and repealing the medical expense deduction, the federal government could save more than $ 250 billion. However, these taxes would primarily affect seniors who are already struggling with huge medical bills and would directly break Obama’s promise not to raise taxes on families making less than $ 250,000.

6. Shared responsibility payments

Although it may seem confusing, shared responsibility payments are basically penalties for not having insurance. If Americans are required to have some form of coverage, similar to the way motorists must obtain car insurance, and enforce a $ 1,000 per year fine, the federal government could raise more than $ 36 billion during the next decade. It would likely include subsidies for low-income Americans, and the concept has received support from several key Senate Democrats.

7. Expanded Medicare taxes

One of the final taxes being considered to help pay for health care reform is an expansion of the Medicare tax. Currently, the tax only applies to earned income (your employer’s wages, etc.). By collecting tax on capital gains, dividends, and other unearned income, and raising the rate for high earners, the government could raise more than $ 500 billion over the next year. However, raising taxes on unearned income is highly unpopular with the American public, and under the current proposal, the top 5% of taxpayers would pay 80% of the tax increase.