House eyes $540 billion high-income tax for healthcare

The House will propose income surtax on people earning more than $350,000 a year that would raise $540 billion to pay for healthcare reform, Ways and Means Committee Chairman Charlie Rangel (D-N.Y.) said Friday.

House Democrats had been weighing a plethora of other tax increases, such as levies on sugary soft drinks and alcohol, that raised hackles within their caucus.

Instead, Rangel said, Democrats will seek to enact one large tax increase targeting wealthier workers to generate the revenue they need to finance their $1 trillion-plus healthcare reform bill.

“We have decided that instead of putting pieces of different revenue raisers together, that the best that we can do [is] we would have graduated surtaxes starting at [$]350],000],” Rangel said. The tax hikes would begin in 2011 and raise $540 billion over 10 years, he said after a meeting with Democratic committee members.

The price tag of the bill is expected to be around $1 trillion. Democrats have already tentatively assembled a package of spending cuts worth around $500 billion, mostly from Medicare and Medicaid.  

The combination of the tax increase and the spending cuts would provide House Democrats with most, if not all, of the money they need to meet their pledge that healthcare reform would not add to the budget deficit over the next decade.

By targeting high-income earners, the House enables President Obama to keep his campaign promise not to raise taxes on anyone making less than $250,000 a year.

There would be different surtax rates, ranging from 1 percent to 3 percent, for workers with annual earnings of $350,000, $500,000 and $1 million, Rangel said.

House Democrats were originally scheduled to release their full healthcare reform bill Friday, including details about paying for the legislation, with markups in three committees slated to begin Monday.

Objections from centrist Democrats over spending and other issues, however, prompted House Speaker Nancy Pelosi (D-Calif.) and the committee chairmen to postpone action while they try to satisfy the centrists’ complaints.

Leaders of the centrist Blue Dog Democrats met with Pelosi Thursday night. On Friday, the Blue Dogs sat down with Majority Leader Steny Hoyer (D-Md.), Rangel, Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) and Education and Labor Committee Chairman George Miller (D-Calif.).