health insurance
WASHINGTON — The Senate majority leader, Harry Reid, is considering a proposal to increase the Medicare payroll tax on high-income workers to help offset the costs of providing health insurance to millions of Americans, Senate aides said Thursday.
The Senate majority leader, Harry Reid, has put through a health care package that could be debated as soon as next week.
The proposal is part of a legislative package that Mr. Reid has put together in secrecy and submitted to the Congressional Budget Office for analysis.
Mr. Reid, Democrat of Nevada, has said the Senate could begin debate on the legislation as soon as next week, although members of his own party do not yet know details of the bill he has assembled from pieces approved by two Senate committees.
The Medicare payroll tax is the primary source of financing for Medicare’s hospital insurance trust fund, which pays hospital bills for beneficiaries, who are 65 and older or disabled.
Employers and employees each pay a tax equal to 1.45 percent of wages. Unlike the payroll tax for Social Security, which applies to earnings up to an annual ceiling ($106,800 in 2009), the Medicare tax is levied on all of a worker’s earnings without limit.
Mr. Reid is apparently considering an increase in the Medicare payroll tax rate for workers with incomes of more than $250,000 a year, Senate aides said. One idea is to increase the tax rate by one-half of 1 percentage point, to 1.95 percent for high-income people, with an expectation that the government could raise $40 billion to $50 billion over 10 years.
As a presidential candidate, Barack Obama repeatedly said that under his administration, people making less than $250,000 a year would not see any of their taxes increased. Mr. Reid has several reasons for considering an increase in the payroll tax, a development first reported by The Associated Press on Wednesday night. He is seeking money to provide more extensive subsidies to help low- and moderate-income people buy insurance. A bill passed Saturday by the House would provide $602 billion in subsidies over 10 years, while a measure approved last month by the Senate Finance Committee would provide $461 billion.
The biggest source of new revenue proposed by the Finance Committee is a tax on high-premium group health insurance provided by employers to their employees. Mr. Reid is looking for an alternative to that tax, or a way to reduce it, because it is anathema to many labor unions, a major constituency of the Democratic Party. Labor leaders say the proposed tax on “Cadillac health plans” would hit many middle-income workers whose unions have sacrificed wage increases to secure or retain health benefits.
Steven M. Kreisberg, director of collective bargaining and health care policy at the American Federation of State, County and Municipal Employees, said an increase in the payroll tax on high-income people was “far preferable” to the excise tax on high-cost insurance plans.
“At a time of rising inequality in income and wealth,” Mr. Kreisberg said, “it is appropriate to ask those who make more to bear a greater burden.”
Democrats said an increase in the payroll tax had an additional advantage: some of the money could shore up the Medicare trust fund, which is expected to run out of money in 2017.
James P. Manley, a spokesman for Mr. Reid, said the majority leader had not decided whether to include the payroll tax increase in the bill he takes to the Senate floor.
Several Democratic senators have urged Mr. Reid to propose extending the Medicare payroll tax to income other than wages, like capital gains, dividends and rental income. Such a change could generate substantial revenue from higher-income households, who tend to derive a greater share of their income from sources other than wages.
The House also wants more money from affluent people. The House-passed bill would raise $460 billion over the next decade from a new income surtax. The surtax would equal 5.4 percent of adjusted gross income exceeding $1 million for couples and $500,000 for individuals.
Mr. Reid is not proposing to increase the payroll tax used to finance Social Security.
Economists and politicians pointed out several possible objections to Mr. Reid’s proposal. It does nothing to slow the growth of health spending, as the tax on high-cost insurance would. And, as the Congressional Budget Office pointed out recently, “higher tax rates on earnings reduce people’s incentive to work.”
Moreover, the higher payroll tax would not be sufficient in the long run. Payroll tax revenues generally grow with payroll, which is expected to increase more slowly than health costs under even the most optimistic projections.
The Business Roundtable, which represents large companies, said Thursday that more aggressive changes in the health care system could save employers as much as $3,000 per employee in 2019.
WASHINGTON — The Senate majority leader, Harry Reid, is considering a proposal to increase the Medicare payroll tax on high-income workers to help offset the costs of providing health insurance to millions of Americans, Senate aides said Thursday.
The Senate majority leader, Harry Reid, has put through a health care package that could be debated as soon as next week.
The proposal is part of a legislative package that Mr. Reid has put together in secrecy and submitted to the Congressional Budget Office for analysis.
Mr. Reid, Democrat of Nevada, has said the Senate could begin debate on the legislation as soon as next week, although members of his own party do not yet know details of the bill he has assembled from pieces approved by two Senate committees.
The Medicare payroll tax is the primary source of financing for Medicare’s hospital insurance trust fund, which pays hospital bills for beneficiaries, who are 65 and older or disabled.
Employers and employees each pay a tax equal to 1.45 percent of wages. Unlike the payroll tax for Social Security, which applies to earnings up to an annual ceiling ($106,800 in 2009), the Medicare tax is levied on all of a worker’s earnings without limit.
Mr. Reid is apparently considering an increase in the Medicare payroll tax rate for workers with incomes of more than $250,000 a year, Senate aides said. One idea is to increase the tax rate by one-half of 1 percentage point, to 1.95 percent for high-income people, with an expectation that the government could raise $40 billion to $50 billion over 10 years.
As a presidential candidate, Barack Obama repeatedly said that under his administration, people making less than $250,000 a year would not see any of their taxes increased. Mr. Reid has several reasons for considering an increase in the payroll tax, a development first reported by The Associated Press on Wednesday night. He is seeking money to provide more extensive subsidies to help low- and moderate-income people buy insurance. A bill passed Saturday by the House would provide $602 billion in subsidies over 10 years, while a measure approved last month by the Senate Finance Committee would provide $461 billion.
The biggest source of new revenue proposed by the Finance Committee is a tax on high-premium group health insurance provided by employers to their employees. Mr. Reid is looking for an alternative to that tax, or a way to reduce it, because it is anathema to many labor unions, a major constituency of the Democratic Party. Labor leaders say the proposed tax on “Cadillac health plans” would hit many middle-income workers whose unions have sacrificed wage increases to secure or retain health benefits.
Steven M. Kreisberg, director of collective bargaining and health care policy at the American Federation of State, County and Municipal Employees, said an increase in the payroll tax on high-income people was “far preferable” to the excise tax on high-cost insurance plans.
“At a time of rising inequality in income and wealth,” Mr. Kreisberg said, “it is appropriate to ask those who make more to bear a greater burden.”
Democrats said an increase in the payroll tax had an additional advantage: some of the money could shore up the Medicare trust fund, which is expected to run out of money in 2017.
James P. Manley, a spokesman for Mr. Reid, said the majority leader had not decided whether to include the payroll tax increase in the bill he takes to the Senate floor.
Several Democratic senators have urged Mr. Reid to propose extending the Medicare payroll tax to income other than wages, like capital gains, dividends and rental income. Such a change could generate substantial revenue from higher-income households, who tend to derive a greater share of their income from sources other than wages.
The House also wants more money from affluent people. The House-passed bill would raise $460 billion over the next decade from a new income surtax. The surtax would equal 5.4 percent of adjusted gross income exceeding $1 million for couples and $500,000 for individuals.
Mr. Reid is not proposing to increase the payroll tax used to finance Social Security.
Economists and politicians pointed out several possible objections to Mr. Reid’s proposal. It does nothing to slow the growth of health spending, as the tax on high-cost insurance would. And, as the Congressional Budget Office pointed out recently, “higher tax rates on earnings reduce people’s incentive to work.”
Moreover, the higher payroll tax would not be sufficient in the long run. Payroll tax revenues generally grow with payroll, which is expected to increase more slowly than health costs under even the most optimistic projections.
The Business Roundtable, which represents large companies, said Thursday that more aggressive changes in the health care system could save employers as much as $3,000 per employee in 2019.
