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Taxing the Top to Pay for Healthcare Reform

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Hallelujah. Finally someone in Congress has the courage to propose a reasonable tax on the wealthy to help improve our nation's broken health care system.

Last Friday members of the House Ways and Means Committee released a plan to introduce a graduated surcharge with stepped up rates from 1-3 percent on household incomes over $350,000 (or $280,000 for an individual) to help finance health care reform.

The proposed surcharge is wholly appropriate. For one thing, it would impact those with the greatest capacity to pay it, about 1 out of 100 taxpayers. It would raise $540-550 billion over 10 years with no impact on poor and middle class households, according to a report just released by Citizens for Tax Justice.

More importantly, plenty of people who would pay the tax recognize its importance and support it.

Right now, Wealth for the Common Good, an organization that I helped co-found, is bringing together high net worth individuals who want to promote pragmatic and progressive tax reform. They include the top CEO's in the nation as well as the small business owners that are helping their neighborhoods grow. They are leading a campaign calling for the immediate repeal of the Bush-era tax cuts, urging the President and Congress to act now, as the economic crisis deepens, before those cuts expire on January 1, 2011. They view paying more, and investing in their country, as a civic duty -- a belief shared by nearly a thousand others who have already signed Wealth for the Common Good's petition.

During the Bush years, households with incomes over $250,000 pocketed more than $700 billion in tax cuts. During that period, from 2001 to 2007, bankruptcies caused by medical problems leaped from over 46% to over 62%, according to research by Physicians for a National Health Program. By reversing Bush-era tax policies now, we could generate $43 billion annually in federal revenue, which would pay not only for critical investments in health care, but education, infrastructure and green energy systems as well.

Part of rebalancing the tax code and ensuring that all Americans share in the sacrifices of the current economy is to restore taxes on the very wealthy.

The alternatives are unacceptable. One is to do nothing and keep an inadequate health care system. Another is to pass health care reform legislation that doesn't expand coverage to include the 50 million who lack health insurance. Yet another option is to impose a tax on employer-provided health care benefits. The vast majority of Americans have voiced opposition to each.

A recent Washington Post/ABC News poll found that 70 percent of respondents opposed that. And they should: it would clobber working families during the worst economic downturn since the Great Depression.

Roger Hickey wrote in The New York Times that "160 million of us get our health insurance from employers. And in these difficult times, millions of workers have repeatedly given up wage increases in order to keep their health benefits."

Meanwhile, a poll by CBS News and the New York Times found that 74 percent of respondents approved raising federal income taxes on those making more than $250,000 to pay for health reform.

Congress will tussle over the various mechanisms to cover the President's health agenda.

Yes, we need to contain costs and wring more savings out of the existing system -- reducing the costs of prescription drugs and long-term care would be a good start. But part of how we cover the cost of transitioning to a new system also needs to begin with a tax surcharge on those of us who disproportionately benefited from the boom economy of the last decade.

"The bottom line is, it's got to be paid for," as Health and Human Services Secretary Kathleen Sebelius told CNN this weekend. "And we all have a shared responsibility that we all need to play a role."

Increasing taxes on those of us at the top should not only be part of the solution, but is the fair and right thing to do. What we're hearing now from the House Ways and Means Committee is truly the meaning of progressive tax reform. Public sentiment and the response we've seen to Wealth for the Common Good both support that.

Chuck Collins is co-founder of Wealth for the Common Good and the great grandson of meatpacker Oscar Mayer. He is a senior scholar at the Institute for Policy Studies.