Soon the IRS tax form will be two lines and two lines only. First will be how much did you make, second will simply be the instructions to send it all in. The tax plans coming out of Congress to pay for the health proposals are punitive and confiscatory (but are likely to kill any chances that the bill would be enacted into law).
Currently the "wealthy" pay a top rate of 35%. That is scheduled to increase to 39.5% when the Bush tax cuts expire. Surcharges will add up to 5.4% more. That would make the average marginal Federal/State tax rate about 52%. That would be the fourth-highest in the 30 OECD countries recently surveyed in the Wall Street Journal.
We would lag only Denmark (60%), Sweden (56.44%), and Belgium (53.77%). All economic powerhouses, every one. And even though the Democrats are allegedly the party of "the people," six out of ten taxpayers that would be hit by the surcharges are small to mid-size businessmen. I know we want to get the fat cat Wall Street financiers, but this misses and hits the area of principal job creation.
Five states — Oregon (57.54%), Hawaii (57.22%), New Jersey (57.07%), New York (56.92%), and California (56.81%) — would all be above the Swedish tax rate. In addition, the financial geniuses in the House have figured, notwithstanding a 9.5% unemployment rate that is likely to go higher, an 8% payroll tax on employees that don't provide health insurance is a good idea. So, says The Economist Magazine, "companies with payrolls bigger than $250,000 per year must provide health insurance or face a hefty fine." This would be on the top of the existing 15% payroll tax and a new 2.5% tax on individuals who don't buy health insurance.
The final Congressional job killer will be the scheduled July 24th minimum wage increase to $7.25 from $6.55. It's hard to make a case when teenage unemployment is 24% and African-American teenage unemployment 38% that raising the minimum wage makes any sense. Proponents argue that millions of workers will benefit from bigger paychecks. The key is, of course, you must have a job.
Economists David Neumark of the University of California, Irvine, and William Wascher, of the Federal Reserve Bank, have figured that an increase at this time will have very negative effects on unemployment, and those negative effects will be focused on the least-skilled groups (teens and welfare mothers). Mr. Neumark, as quoted in the Wall Street Journal, estimates the $0.70/hr wage hike will kill "about 300,000 jobs for those between the ages 16-24" and that single, working moms would be among the most affected.
Maybe the House knows a lot of this stuff can't get passed, but that it sounds so good for re-election campaigning that they just go ahead with it. I don't think there's many among us that wouldn't want expanded health care coverage, but we have to be able to afford it. We're facing a $1.8 trillion deficit as it is, and to think we can tax our way to good health doesn't make much sense to me. President Obama has been very much hands-off on the health care plan, cap-and-trade legislation, and financial re-regulation.
Great presidents define their own agendas. They don't let a bunch of congressmen do it for them. It is past time for President Obama to focus on whatever his priority is to be and take control of the process.