The WSJ reports that Democrats are now contemplating plan to apply the Medicare payroll tax to investment income:
House and Senate negotiators are considering applying for the first time the Medicare payroll tax to investment income as part of a compromise to pay for a health overhaul.
The extra Medicare tax would apply only to the wealthy and could allow congressional Democrats to reduce the sting of a tax on high-cost insurance plans, said Democratic aides and others briefed on the negotiations.
The proposal is intended to mollify Big Labor’s anger over the Cadillac plan tax:
Labor leaders complained directly to President Barack Obama on Monday about the tax on high-value plans, which would hit some union members who have negotiated generous health benefits.
At least one union is threatening to oppose the underlying legislation if the tax remains, and the president of the AFL-CIO suggested in a speech that Democrats who took unions for granted risked losing support in congressional elections later this year.
“Politicians who think that working people have it too good … are inviting a repeat of 1994,” when Republicans took control of the House after decades in the minority, said AFL-CIO chief Richard Trumka.
So, only the “wealthy” would pay the new tax?
Under the proposal now being considered, people making more than those amounts would also pay the Medicare tax on dividends and other income from investments, the people familiar with the talks said. Income from pensions and retirement accounts, including 401(k) accounts, would be exempt.
People familiar with the talks cautioned that the idea was still in the study stage along with other ideas, and that it was too early to say whether it would find favor among Democrats.
A version of the broader Medicare tax, put forward by Sen. Debbie Stabenow (D., Mich.), would raise $111 billion over 10 years, according to a December estimate from the congressional Joint Committee on Taxation.
The proposal would also bring the Senate closer to the House version of the health bill, which contains a 5.4% income surtax on the wealthy. That surtax would apply to income above $500,000 for individuals and $1 million for couples.
The extra Medicare tax might bring in enough to scale back the tax on high-cost health plans and still have some left over to beef up subsidies to help the poor buy health insurance — a key goal of House negotiators in the talks.
“It’s an obvious compromise,” said Chuck Marr, director of federal tax policy at the left-leaning Center on Budget and Policy Priorities. “They need to find something between the House and Senate versions. The advantage of this proposal is that, like the House surtax, it is broad-based.”
Speaking of punitive Demcare measures, Phyllis Schlafly spotlights the government health care takeover’s marriage penalty:
Here is the cost in the House bill for an unmarried couple who each earn $25,000 a year (total: $50,000). When they both buy health insurance (which will be mandatory), the combined premiums they pay will be capped at $3,076 a year.
But if the couple gets married and has the same combined income of $50,000, they will pay annual premiums up to a cap of $5,160 a year. That means they have to fork over a marriage penalty of $2,084.
The marriage penalty is the result of the fact that government subsidies for buying health insurance are pegged to the federal poverty guidelines. Couples that remain unmarried are rewarded with a separate health care subsidy for each income.
When the Wall Street Journal reporter quizzed the Democratic authors of the health-care bill, they made it clear that this differential was deliberate. The staffer justified the discriminatory treatment because “you have to decide what your goals are.”
Indeed, the Democrats have decided what their goals are. They know that 70 percent of unmarried women voted for Obama in 2008, and the Democrats plan to reward this group with health insurance subsidies.