Reports from Washington are that the health care bill will not tax the “cadillac” health care plans, or at least not all of them, and will instead tax payroll and perhaps apply the payroll tax to dividends and capitol gains. Some questions:
1. Suppose the bill does end up taxing those who have chosen to buy more expensive health care coverage. If the government taxes those plans, fewer people and businesses will choose them. The fewer such plans, the less revenue the government will collect from the tax, and the greater the deficit created by the health care bill. Those who continue to buy such plans will be predominantly those who really need more insurance. So the tax will produce less revenue than projected and get it primarily from sicker people.
2. A few weeks ago the President suggested cutting or ending the capital gains tax for small business to encourage job creation. That was a good idea. Why? Because jobs come from business expansion, business expansion requires investment, and people will make investments more readily if they can keep more of their profits — when they do make a profit. If the Administration now increases capital gains taxes, it is, on its own economic theory, killing jobs.
It’s another example of a leadership at war with the economy — and itself.
Tags: cadillac tax, health care, healthcare, Jim Talent