--Capping the employee exclusion.
--Adding a surtax to incomes above $250,000, or was it $500,000, or maybe it was $1 million.
--The Senate Finance Committee even considered—and maybe it still is—a 10 percent tax on non-medically necessary cosmetic surgery.
In the midst of all the newly proposed taxes to pay for the Democrats’ health care reform efforts, the pundits have largely ignored one of the biggest new taxes: the “pay or play” mandate on employers.
The proposal requires employers to provide health insurance coverage or pay a penalty of 8 percent of payroll. Employers with payroll between $250,000 and $400,000 would pay on a sliding scale of between 2 percent and 8 percent.
This could be one of the biggest corporate tax increases in history.
According to the Tax Foundation, the U.S. corporate tax rate is 39.1 percent, when federal and average state income taxes are combined. That’s second only to Japan. The health insurance tax adds at least 8 percent of payroll to all businesses with 50 or more employees.
Thus, for high labor-cost, low-profit margin companies, the Democrats’ insurance tax could cost them more than their corporate income taxes.
Of course, many larger employers that already provide health insurance may not mind too much. It may be little or no extra cost to them, and their smaller competitors that didn’t provide coverage would be a little less competitive.
And imposing this new tax on employers will likely drive up the prices of their goods or services, which will make them even less competitive with their overseas competitors. That would normally mean that consumers would buy fewer goods and services from U.S. firms and more from their less-expensive overseas businesses.
Not to worry, though. The administration is increasingly embracing a “buy American” philosophy. So it probably won't have any problem buying into a little more protectionism to discourage the off-shore buying its own policies are exacerbating.
As in traditional Washington fashion, the politicians want to be praised for handing out freebies (i.e., health insurance) to millions, while passing the bill on to business.
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Today's TaxByte was written by Dr. Merrill Matthews, IPI Resident Scholar