President Obama’s health reform proposal is fully offset and to do it borrows heavily from jobs legislation created by Senate Finance Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa).
Like the jobs bill crafted by Finance leaders, Obama health reform proposal rescinds the “black liquor” tax break abused by paper companies that claim undeserved alternative fuel tax credits.
The original “black liquor” loophole expired in December, but late last year Rep. Chris Van Hollen (D-Md.) expanded upon the original provision by restricting the paper industry from capitalizing on cellulosic biofuel tax credits, which past estimates say could raise $24 billion over 10 years.
It also puts into law specifics on what constitutes an abusive tax shelter, known as the “economic substance doctrine.” Courts have used the doctrine to determine whether a tax shelter was created for legitimate business reasons or solely devised to avoid paying taxes.
But since the doctrine was not in law, courts had considerable leeway in determining the legality of a tax shelter. Codifying the doctrine could raise as much as $10 billion over ten years.
These offsets were rendered useless to jobs legislation after Senate Majority Leader Harry Reid (D-Nev.) cut the Finance bill to four provisions. A procedural vote on the majority leader’s bill is slated for this evening.
Obama’s health reform plan also expands corporate information reporting requirement
In addition, the president’s proposal also broadens the Medicare tax to unearned income that includes capital gains, business lobbyists say. The inclusion of capital gains will be highly controversial as lobbyists have already vowed to do everything in their power to keep the tax from affecting this type of investment.