House Proposes Significant Tax Increases to Pay for Health Care Reform
The Facts
Health care reform legislation introduced in the House, the America's Affordable Health Choices Act of 2009, provides key details on financing health system reform. Significant revenue-raising proposals include the following:
- A surcharge on high-income individuals of 1 percent on adjusted gross income between $350,000 and $500,000 (married filing a joint return), a 1.5 percent surcharge on incomes between $500,000 and $1 million, and a 5.4 percent surcharge on income in excess of $1 million, to raise $543.9 billion over 10 years
- Corporate and international tax proposals that have narrow application or were widely expected by the business community, or both, including a further delay in the application of worldwide interest allocation rules relevant to U.S.-based multinationals for foreign tax credit purposes, denial of treaty benefits for groups parented by non-treaty country entities, and the long-anticipated codification of the economic substance doctrine applicable to a wide range of taxpayers, to raise $37.2 billion over 10 years
What's at Stake
As the House and Senate seek to pay for health system reform, it is expected that one-third to one-half of the cost of reform will be paid for through increased revenue from the tax code. Certain companies and high-income individuals may see significant increases in their tax liability. The Senate Finance Committee is considering a range of revenue-raising options. If the Senate selects different revenue-raising provisions, then the House and Senate will have to reconcile their differences in Conference, which could make passage of a bill more difficult.
Steps to Consider
- Watch the Senate Finance Committee, which is working to craft its own revenue raising proposals for health reform. It is expected that the Senate will turn to revenue-raising provisions not included in the House bill.
- Small businesses should pay close attention to the surcharge proposal because many small businesses report profits on individual tax returns. Some members of the House are clamoring for changes to the surtax prior to House floor action.
- Thus far, tax writers have indicated that the more controversial corporate and international revenue-raising provisions in the president’s budget will not be considered as part of health care reform, but companies should monitor the situation.
