The 'new' new tax on the rich

As Congress continues to grapple with how to pay for health care reform, taxing the wealthy is still in play. Just how wealthy is the next question.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Jeanne Sahadi, CNNMoney.com senior writer

chart_health_care_pie3.03.gif
Would you be willing to pay more in taxes for the promise of reducing your health care costs?
  • Yes
  • No

NEW YORK (CNNMoney.com) -- The definition of "rich" may be going up should lawmakers choose to impose extra taxes on the wealthy to pay for health reform.

Three committees writing the lead House bill have called for an additional tax to be imposed on income above $280,000 for singles and $350,000 for married couples. The so-called surtax would run as high as 5.4% on income over $1 million.

But House Speaker Nancy Pelosi, D-Calif., this week began pushing for the surtax to apply only to singles making more than $500,000 and couples making more than $1 million.

President Obama also gave a nod to raising the threshold.

"To me, that meets my principle that [the cost of health reform is] not being shouldered by families who are already having a tough time," Obama said at his primetime news conference Wednesday.

A surtax is a tax on top of a person's ordinary income tax. In the case of the House-proposed surtax, the income over the threshold would be taxed at both the top income tax rate -- scheduled to be 39.6% --plus the surtax rate.

The Joint Committee on Taxation estimated that the surtax under the $280,000/$350,000 proposal would raise $544 billion over 10 years.

Much of that revenue would come from households making more than $1 million, said Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center. So a higher threshold for the surtax is likely to retain most of the revenue gain, although no official estimates have been done.

The original proposal would affect 1.2% of Americans, according to the JCT. If the income thresholds were increased, the surtax likely would affect a smaller percentage of people. Data from the Tax Policy Center suggest that by 2011, fewer than 450,000 households could be subject to the surtax if the thresholds are raised.

The higher thresholds are not a forgone conclusion since the House Ways and Means Committee, which has jurisdiction over tax matters, already passed the health reform bill with the original surtax thresholds.

But with Pelosi backing higher levels and a tacit agreement from the president, the chances are good that they could make it into an amendment once the health reform bill is considered by the full House, which may or may not happen before lawmakers leave town in August.

Ultimately, though, the fate of a surtax at any threshold may be called into question once the Senate Finance Committee -- the Senate's tax-writing body -- releases its proposals to pay for health reform.

One idea that committee is considering is a tax on insurers that offer high-priced plans.

Either way, don't expect a decision any time soon.

The Senate committee hasn't even released its draft bill for health reform. So it won't be able to mark it up and vote the bill out of committee and onto the Senate floor until the fall.

And only after both the House and Senate have voted on their respective bills will the real negotiations begin as both chambers seek to reconcile their different versions. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Here are the 20 most ticketed cars in America The racy Subaru WRX tops the list, but some of the other ticket magnets will surprise you. More
Lamborghini to unveil 910 horsepower plug-in hybrid The Lamborghini Asterion concept car will have a V10 engine and three electric motors. More
The weapons of The Walking Dead Zombies are fiction, but the weapons on The Walking Dead are real. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.