U.S. Chamber of Commerce Ad says health reform plan would mean big tax increases

The Campaign for Responsible Health Reform, sponsored by the U.S. Chamber of Commerce, released a 30-second TV commercial that warns the health plans kicking around in Congress will translate to "big tax increases."

With the visual of a red balloon expanding until it pops, the announcer says: "Washington's latest health reform idea: a trillion-dollar health plan, and a government-run public option, with big tax increases, even on health benefits. And the federal deficit? The nonpartisan Congressional Budget Office says the deficit will grow $239 billion. Inflated taxes. Swelling deficits. And expanded government control over your health. Tell Congress, 'Let's slow down and reform health care the right way.'"

There's no denying the health care plans being considered in Congress would be expensive. In order to meet the plan's goal of reducing the number of uninsured, the government would be providing more in health care subsidies. That costs money. According to the nonpartisan Congressional Budget Office, the plan would cost in the neighborhood of $1 trillion over 10 years.

But would it mean "big tax increases, even on health benefits?"

The answer: It depends. There is not a single health care plan, there are several versions kicking around various committees in the House and Senate. And they have different approaches on how the plan would be paid for.

Most of the discussion has focused on the the House plans because there is not a detailed Senate version yet. In the House plan, the tax increases are targeted at the wealthy. So if you make $1 million a year, yes, the plan would mean a big tax increase.

We can be even more precise. The House versions of the bill would help pay for the health plan with a surtax on high earners that would break down as follows: for couples making between $350,000 and $500,000 (or $280,000 to $400,000 for individuals), a new 1 percent tax; between $500,000 and $1 million ($400,000 to $800,000 for individuals), 1.5 percent; and over $1 million (or over $800,000 for individuals), 5.4 percent. In other words, a family making $1 million would have to pay $9,000.

Small businesses filing as individuals would face the same levies at those income levels.

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"That hits the very top earners," said Bob Williams of the nonpartisan Tax Policy Center. "But that proposal would not affect many people."

In fact, he said, less than 2 percent of the population fall into those income categories.

But according to the Chamber, the high earners aren't the only ones who will see tax increases.

In the House versions of the health plan, there's a tax penalty — anywhere from 2 percent to 8 percent on payroll taxes — for large companies that do not provide government-approved health care plans. There's also a tax penalty on uninsured people who refuse to buy insurance (that's the incentive to get everyone on some health plan).

As for the Chamber of Commerce claim that the plans would even include taxes on health benefits, you need to go to the Senate side for that discussion. Although there's nothing currently in writing in a bill, the Senate Finance Committee is mulling a tax on so-called "Cadillac" or "gold-plated" health plans, plans that cost well above average. Essentially it would tax any amount paid for insurance plans over a certain threshold — perhaps $8,000 for an individual, or $21,000 for a family, said James Galfand, senior manager of health policy for the U.S. Chamber of Commerce. While it would not directly tax employees' health benefits, he said, it would amount to the same thing, as those costs would be passed on by the insurance company or employer.

We think the Chamber of Commerce ad is a bit premature in warning that the health plan would include taxes on health benefits. It might, but so far, that's not in any published version of the bill, and the House specifically did not include it in its plan.

The Chamber of Commerce ad does raise some legitimate concerns about how the health care plan would be paid for. But we think it's slightly misleading to say it would lead to "big tax increases." That's true for some high earners. But it's not true for the vast majority of people who do not make that level of income. Uninsured people who decline to purchase insurance will see a tax hit, but that's also expected to be a small minority.

Things may change as these bills seek to solve the question of paying for the plan, but as the plans are now, some people would see a big tax increase, but most would not. That leaves us at a Half True.