Friday, July 31, 2009

Steven Pearlstein on Taxes

Tucker sent me an excellent Steven Pearlstein piece (here) in which he refutes the argument that the House's proposed income tax surcharge (on households earning more than $350,000 a year) would prevent small businesses from expanding and hiring new workers.

Pearlstein's analysis is a bit technical (why is it that I so frequently get lost when I try to conceptualize the incentive-effects of different tax structures/mechanisms?), but this paragraph summarizes his main point fairly concisely:

"Of the roughly 13 million taxpayers who derive most of their income from business profits, fewer than 500,000 would be subject to any surtax at all -- and of those, fewer than 100,000 subject to the full 5.4 percent surtax. That 5.4 percent rate, by the way, kicks in only after a taxpayer's income (salary and profits) rises above $1 million, which would typically be a business with more than $10 million in revenue and more than 100 employees. That's hardly the small, cash-strapped start-up that animates the Republican anti-tax fantasy."
The interesting part of Pearlstein's piece is that he starts off by stating his opinion that the tax surcharge is a bad idea. He says he's willing to defend it anyway because Congress will likely fail to muster the political will to accomplish Pearlstein's preferred option: "lowering the costs of the health-care system while redistributing its benefits."

267. To what extent is the health care reform debate skewed by the fact that the decision-makers, in both the executive and legislative branches, don't have to pay for their own health insurance? My understanding is that Congressional benefits are quite comprehensive; this reality must decrease -- particularly in the eyes of members who have not worked in the private sector for many years -- the perceived need to confront the problem of rising premiums.

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