White House Dodges Question of Whether Obama Supports House Democrats' Plan for $540-Billion Income Tax Hike

July 13, 2009 - 6:16 PM
President Barack Obama has insisted that comprehensive health care reform be passed this year. However, the administration's chief spokesman would not say whether Obama supports a House Democratic proposal to increase taxes $540 billion to pay for the "deficit-neutral" health reform plan the president wants.

White House Press Secretary Robert Gibbs (AP Photo)

White House (CNSNews.com) – President Barack Obama has insisted that comprehensive health care reform be passed this year, but the administration’s chief spokesman would not say on Monday whether Obama supports a House Democratic proposal to increase income taxes by $540 billion to pay for the “deficit-neutral” health reform plan the president wants.
 
“I have been asked virtually every week since taking this job to comment on individual tax proposals,” White House Press Secretary Robert Gibbs told CNSNews.com.
 
“I’ll begin whatever week of my tenure this is by saying that the president has laid out what he thinks the best proposals are. You know them because I’ve said them 483 times, but the president is also going to watch what plays out on Capitol Hill and see what happens,” Gibbs said.
 
House Democrats, led by Ways and Means Committee Chairman Charles Rangel (D-N.Y.), are pushing for a "surtax" on individuals earning at least $280,000 and families earning $350,000. The tax hike is supposed to generate $540 billion in revenue. 

While Gibbs declined to say whether the president backs the $540-billion tax plan, Gibbs said that Obama thinks the top-earners in America are doing okay.  

“I don’t know how that one percent of households did over the last 10 to 15 years, but my sense is pretty well,” Gibbs said. “I think the president believes the richest one percent have had a pretty good run of it.”

House Ways and Means Chairman Charles B. Rangel (D.-N.Y.) (Congressional photo)

Before the House Democrats announced their $540-billion tax increase plan on Friday afternoon, President Obama was already planning to increase the current 33% and 35% income tax rates to 36% and 39.6%. That tax hike would hit individual earners and small businesses earning $200,000 or more. 
 
Obama would do this by letting the cuts in these two brackets that were enacted in 2001 expire at the end of 2010 without being renewed. The income “surtax” the House Democrats are now proposing would come on top of Obama’s planned increase in the top two income tax rates.

Obama's "public option” health plan would establish a government-run system that would compete with private insurance companies. It would also require employers to provide health insurance to their workers.
 
But as reports surfaced that Democratic leaders might not pass a health care bill before the August recess, as the administration wants, Obama met Monday with House and Senate Democratic leaders, including House Speaker Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.), Rangel, and Senate Finance Committee Chairman Max Baucus (D-Mont.).
 
White House officials have insisted that the health care reform package, which the Congressional Budget Office (CBO) estimates to cost at least $1 trillion, be paid for, i.e., deficit-neutral.
 
The CBO report was based on the existing Senate draft of the legislation, which is similar in many ways to Obama’s proposal, but lacks the "public option" government-run health care program, which would no doubt increase the cost of the overall bill. As it is, the Senate draft would cause 23 million people to lose their private insurance, according to the CBO report.  
 
During last year’s presidential campaign, Obama promised he would not tax employee-health benefits. Thus, some Democrats may believe a $540-billion income tax hike on the "rich" might be a more politically viable means of paying for a national health-care new program. 
 
Although Democrats hold majorities in both the House and the Senate, 52 moderate “Blue Dog” Democrats in the House have expressed reservations about Obama’s health care proposal.
 
Before announcing the nomination of Dr. Regina Benjamin to be U.S. surgeon general on Monday, Obama stressed that he was confident--in the midst of negative reports--that health care reform would pass Congress. Further, he said, it must pass Congress.
 
“We are now closer to the goal of health care reform than we have ever been,” Obama said.
 
“Over the last several weeks, key committees in the House and the Senate have made important and unprecedented progress on a plan that will lower costs, provide better care for patients, and curb the worst practices of the insurance companies. It's a plan that will not add to our deficit over the next decade,” the president said.
 
He continued, “If we step back from this challenge right now, we will leave our children a legacy of debt--a future of crushing costs that bankrupt our families, our businesses--and because we will have done nothing to bring down the cost of Medicare and Medicaid, will crush our government. Premiums will continue to skyrocket, placing what amounts to another tax on American families struggling to pay bills.”
 
The Rangel $540-billion tax hike plan--if passed--would take effect in 2011, the same year President Obama's planned increase in the top two income tax rates would take affect. The House plan for a tax increase would begin at one percent of adjusted gross income for singles earning $280,000 and couples and families earning $350,000, and, again, those rate increases would come on top of President Obama's planned rate increases.
 
If the tax is enacted, top-income earners in 33 states would pay more than half of their income in taxes--federal, state and local--according to a study by the Tax Foundation. For high earners, the new surtax would be four percent, on top of the federal rate of 39.6 percent income tax.
 
“Combining top federal and state rates and factoring in all deductions, the government would be taking over half of every additional dollar from high-income taxpayers in two-thirds of the states under this latest funding scheme,” Tax Foundation President Scott Hodge said in a statement.
 
The hardest hit states would be Hawaii, Oregon, New Jersey, California, Rhode Island, Vermont, New York, Maine, Minnesota and Idaho. Meanwhile, the cities of New York and Washington, D.C., would see their top rates go to 53.6 percent and 57.3 percent respectively.
 
If Obama’s “public option” health plan is enacted, 114 million Americans would likely leave their private health insurance, according to The Lewin Group, an independent health policy study group.
 
A Lewin Group study also says that the public option would pay health care providers in the system 20 percent to 30 percent less than what private insurance pays, prompting doctors and hospitals to charge more to those with private insurance to cover their losses.