Published: Thursday, 29 Oct 2009 | 6:23 PM ET

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The House health care bill released Thursday raises most revenue by taxing individuals making $500,000 or more, but also tightens rules for corporate accounting and takes aim at foreign companies working in tax havens.

Weeks of closed-door negotiations to merge three House health care plans produced a 1,990-page bill that would cost a net $894 billion over 10 years — just below President Barack Obama's target of $900 billion — and reduce the deficit by $104 billion over the same period, budget analysts estimated.

"Today we are about to deliver on the promise of making affordable, quality health care available for all Americans," House Speaker Nancy Pelosi said in a ceremony on the steps of the U.S. Capitol.

Americans earning more than $500,000, or couples taking in more than $1 million annually, would face a 5.4 percent tax, to raise $460.5 billion. There is no such tax in the Senate versions and the idea is expected to be a much tougher sell in the upper chamber.

"We do not believe a tax on individuals making over $500,000 or families making over $1 million will fly in the Senate," said Ipsita Smolinski, an analyst for investors at consulting firm Capitol Street.

The provision would impact 0.3 percent of all U.S. households, according to a joint House-Senate tax panel. Another provision would collect $26.1 billion over 10 years by putting off a liberalized way for multinational companies to allocate interest expense, until 2020.

The bill also limits tax benefits for foreign multinational companies incorporated in tax havens which may be using offshore structures to evade U.S. taxes.

Large U.S. employers not providing health insurance would face a tax equivalent to 8 percent of wages. No revenue estimate was provided for this provision.

Medical device makers would be slapped with a 2.5 percent tax, imposed on the sale of any medical device except those sold to the general public, raising $20 billion. Devices sold for further use in manufacturing are also exempted.

The bill would also codify into law the doctrine of economic substance — that tax benefits are not allowed for a transaction without an economic or business purpose.

It imposes fines of between 20 percent to 40 percent on those who understate income in a transaction with no economic substance, depending on whether the transaction was reported.

If a company ends up being guilty of violating the economic substance rule, it is subject to a strict liability standard under the bill, according to Clint Stretch, managing principal for tax policy at Deloitte in Washington, who was previously legislative counsel for the congressional Joint Committee on Taxation.

"This will lead to a shift of power between taxpayers and IRS agents," Stretch added. "The IRS can always argue that a transaction lacks economic substance."

The bill's release was another step forward in Obama's drive for health care reform that would rein in costs, reform the insurance industry and expand coverage to many of the 46 million uninsured living in the United States.

Obama has made an overhaul of the $2.5 trillion industry, which constitutes one-sixth of the economy, his top domestic priority.

The bill was met with unanimous opposition from Republicans and grumbling from some Democrats. Party liberals had sought a stronger public insurance option and party moderates want assurances that federal funds will not be used to pay for abortions under the measure.

The legislation could be debated in the House as soon as next week. The Senate is putting together its own version, and the House and Senate bills eventually must be combined before being sent to Obama for his signature.

Obama praised House Democratic leaders for the insurance industry reforms and said he was pleased the bill featured a public insurance option and was fiscally responsible.

"The House bill clearly meets two of the fundamental criteria I have set out: it is fully paid for and will reduce the deficit in the long term," he said in a statement.

Republicans have battled Obama and Democrats at every juncture in the health care debate, and they criticized the size, cost and scope of the House legislation.

'Behind Closed Doors'

"Americans' health care is too important and too complex to risk on one gigantic bill that has been written behind closed doors," said Representative Dave Camp, the senior Republican on the House Ways and Means Committee.

House Republican leader John Boehner urged Democrats to slow down the process and allow a full floor debate. "This huge bill is designed to be so complex that nobody would ever know for sure what's in it," he said.

The House bill would expand coverage to 36 million uninsured people living in the United States, the Congressional Budget Office said. It would offer subsidies to help the uninsured purchase insurance through newly created exchanges.

It would require individuals to buy insurance and all but the smallest employers to offer health coverage to workers. It also would bar insurers from refusing to cover people with pre-existing medical conditions and eliminate the industry's exemption from federal antitrust laws.

The health care measure being prepared for debate in the Senate also includes a public option based on negotiated reimbursement rates but, unlike the House bill, it would allow states to decline to participate.

The House bill does not include the Senate's proposal to tax high-cost "Cadillac" insurance plans, which has been opposed by House Democrats and labor unions who fear it will hurt too many middle-income workers.

The lobbying group for the insurance industry, America's Health Insurance Plans, criticized the proposed government-run insurance program, arguing it would cause people to lose their existing coverage.

"A new government-run plan would bankrupt hospitals, dismantle employer coverage ... and ultimately increase the federal deficit," Karen Ignagni, the group's president, said in a statement.

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