By Jordy Yager | Posted: 07/11/09 04:28 PM [ET] - 07/11/09 04:27 PM EDT
Minority Leader John Boehner (R-Ohio) said the move could aversely affect small-businesses, since some business owners file tax returns with their professional income listed as their personal income.
“With unemployment nearing double digits nationwide, the last thing we need is a massive tax hike that will punish small businesses and cost even more American jobs,” Boehner said in a statement released Saturday.
Rangel outlined a proposal Friday that would impose surtax rates ranging from 1 percent to 3 percent on couples with annual earnings of $350,000, $500,000 and $1 million. Surtaxes are calculated by adding the relevant percentage to workers’ regular yearly tax bill.
The non-partisan Tax Foundation criticized a graduated surtax in a release sent out just before Rangel’s proposal became public, saying it was an unstable source of revenue.
“Tying federal healthcare expansion to unstable sources of funding such as these so-called millionaires taxes is a recipe for disaster,” said Scott Hodge, president of the Tax Foundation, in a statement. “As we have seen time and time again, boom-time revenue explosions inevitably give way to budget-shortfall busts.”
The group also said the proposal mean tax rates would be too high. It released a study on the impact of a graduated surtax on Americans making $250,000 or more, and concluded it would raise the top tax rates in 33 states to exceed 50 percent.
Rangel’s proposal would only kick in for Americans making more than $350,000, so it would have less of an impact. But it is clear the surtax would mean wealthier Americans would see tax rates higher than in many years.
Some liberal economists have argued that would be justified given the increasing gap between the nation’s wealthy and poor.
Congress is faced with having to raise billions of dollars over a decade to help fund the proposed plan and has entertained everything from increased taxes to trimming expenses, in order to fill the gap. They’ve also been trying to work around President Obama’s promise to not raise taxes on Americans making less than $250,000.
Proposals to tax employer-provided health benefit plans would hit those Americans, making them troublesome.
Rangel suggested the new tax would come in place of taxes on sodas, a proposal that had met adamant opposition.
One proposal would tax sugary sodas at a rate of 10 cents per can, which could generate $112 billion, according to estimates.
The American Beverage Association (ABA) plans to launch an advertising campaign on Sunday in protest of a rumored proposed tax on soda products to help fund a healthcare bill.
“We certainly support health care reform,” said Kevin Keane, a spokesman for the ABA, in an email. “But don’t believe you’re going to solve the complexities of health care with a tax on soda pop.”
Several senators declared this week that levies on sugary soft drinks and alcohol were not politically viable solutions. So did a group of vulnerable Democrats, who in a letter sent on Friday urged Ways and Means members to drop food and beverage tax language from its healthcare proposal. They said it would disproportionately impact the poor.
“This is terrible tax policy to go after [a] very specific, almost laser-like focus that isn't across the board,” freshman Rep. Michael McMahon (D-N.Y.) told The Hill on Friday. “It's bad for the people because it's regressive, and the small-store owners and small-business owners would be impacted as well.”
The ABA announced Friday it had formed a coalition – called Americans Against Food Taxes – to oppose the soda tax. It is made up of 110 organizations, or about 20,000 people, and all are opposed to raising taxes on food and beverages to pay for the health plan.
“It clearly shows a breadth of concern about taxing families and their beverage and food products in the middle of a recession,” Keane said. “And clearly shows concern amongst some other food industries about a slippery slope – once Congress reaches into the grocery cart that other foods could be next.”
On the flipside, the group Organizing for America - proponents of Obama’s health priorities – is going door-to-door this weekend in an attempt to convince Americans of the plans’ merits.
Reid Wilson contributed to this story.