The financing of Obamacare has the Democrats twisted in knots.
Earlier in the week, the Congressional Budget Office found that the still incomplete Kennedy-Dodd health care bill would cost $1.3 trillion, while only covering an additional 16 million individuals. This news was so bad, the administration, which owes its existence in part to Senator Kennedy’s primary support, retreated from the ailing Chairman’s bill.
To pay for their reforms, Democrats at the House Ways and Means Committee are now considering a Value Added Tax, which would undermine Obama’s promise of tax cuts for 95% of Americans.
Democrats at the Senate Finance Committee are considering a tax on employer-provided health care benefits, anathema to the unions.
The President has proposed further cuts in Medicare and Medicaid, enraging the hospitals.
And today the Senate Finance Committee announced it is delaying a markup of its bill until after the July 4 recess. No doubt, this decision was made following a CBO estimate that put the price tag of the Democrats’ Finance Committee product at more than $1.6 trillion, presumably with politically problematic offsets.
Only a week ago, the conventional wisdom was that the President’s respect for Congress and the legislative process – in contrast to his predecessors Clinton and Bush – had elevated the prospects for comprehensive health care reform. While not an inevitability, the President appeared to have cracked the code when it came to passing his sweeping overhaul of the nation’s health care delivery system.
Today, the likelihood that the Democrats will be able to rush through a health care package before the August recess is increasingly in doubt. And as with the 2007 immigration debate, sunshine on these bills is the last thing proponents of reform need.
What a difference a week makes.
6 responses so far
1 ottovbvs // Jun 17, 2009 at 3:34 pm
It’s only in doubt in your mind.
2 John // Jun 17, 2009 at 6:27 pm
It is hard to imagine something hitting lower-income Americans harder than a Value Added Tax. Even if one were to exempt food, it’s nothin less than a massive, regressive tax increase. Can’t imagine it would be too popular in Chairman Rangel’s district.
3 midcon // Jun 18, 2009 at 4:51 am
A VAT is the most democratic of all taxes in that it taxes consumption. What you pay depends on what you spend. What could be more liberating than that? If Obama wants to cut my income tax and instead impose a tax on what I choose to spend, that’s just fine by me. There are many things I can do without.
If you are suggesting that lower income Americans buy more than upper income folks, I would like to see the source of the data.
If I don’t want to pay the tax, I simply do not purchase that 60 inch plasma tv. Now if they want to tax long walks in the park or reading books at the library, well ok, let’s talk about a revolt.
4 ottovbvs // Jun 18, 2009 at 6:08 am
midcon
4:51 AMA VAT is the most democratic of all taxes in that it taxes consumption.
……..Actually it isn’t because it’s massively regressive. The guy earning $50k a year pays the same for a pair of shoes as the guy earing $150k a year. The likelihood of them introducing VAT to pay for healthare reform is zero. All that said if you want a purchase tax VAT is a sensible way to go about it and produces masses of revenue. It’s not going to happen because firstly Americans are relatively lightly taxed at the income level and tweaking marginal rates would be much easier than trying to reengineer the entire tax system as would be required if VAT were introduced. It is an enormously complex system.
5 sinz54 // Jun 18, 2009 at 6:36 am
ottovbvs: The congressional proponents of VAT have come up with a solution to regressivity.
What they would do is ask you to report your income for the year (as you already do on your Form 1040), and then report your purchases of consumer goods for the year (which in these days of computerized online bills is easy to do). The difference between what you earn and what you spend would go into a formula which would provide a multiplicative factor for the VAT on your purchases. The more income that’s not spent on purchases, the higher the multiplicative factor. That makes the VAT progressive.
6 sinz54 // Jun 18, 2009 at 6:38 am
The bigger problem with a lot of these measures, like the VAT, is that they will end up taxing middle-income and even working-class people. That violates Obama’s campaign pledge not to raise taxes on those making less than $200,000 a year.
If Obama is forced to raise taxes on auto workers AFTER their employers have already gone bankrupt and forced them into givebacks, he’s in deep doo-doo.
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