Checking the facts on Snowe's health care tax argument


On Wednesday, Republicans in the Senate characterized the health care law as a job killer, saying the country cannot afford to spend nearly $1 trillion with the economy struggling and people needing work.

Sen. Olympia Snowe, R-Maine, pulled out a chart to help her make the case that the health care law is going to raise taxes and hurt the economy.

"Ill conceived measures that will cost our nation jobs rather than help to create them," said Snowe.

Snowe referred specifically to a capital gains tax increase on investments. The health care law hikes it from a proposed 20 percent to 23.8 percent for households making more than $250,000 a year.

"Which is a 67 percent increase in taxes on investments during these precarious times," said Snowe.

The Snowe's math a little fuzzy with that 67 percent hike. She is counting the Bush administration's tax cut which lowered the rate to 15 percent, but that expires this year. President Obama had proposed raising it to 20 percent, which is where it was when Ronald Reagan was president.

UC economist Alan Auerbach, an expert in tax policy and public finance, points out Snowe's did not mention the tax does not kick in for another three years.

"The reason why the tax increases were delayed until 2013 was because of the general recognition that the economy is still weak," said Auerbach.

Households making over a quarter million a year will also see an increase in Medicare payroll tax rate from 1.45 to 2.35 percent.

And companies with more than 50 employees will be required to provide health insurance or pay $2,000 a year per employee.

Republicans say those taxes will slow the economy. Auerbach says any tax on capital takes away from what could be invested, but that is only a part of the picture.

"We should keep in mind that we care about the economy because we care about the well being of individuals," said Auerbach.

And the health care legislation does gives subsidies to the working poor. Families making $33,000 or less will play as little as $700 to $1,400 a year for a plan that will cover 94 percent of their healthcare needs. And the law includes a tax credit for small businesses covering 35 percent of their premiums and that credit would grow to 50 percent of the premiums by 2014.

On balance the healthcare law gives to those who have less and takes from those who have more. Republicans in the Senate are arguing we cannot afford it. Democrats are arguing we cannot afford not to do it.

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