Health Care Reform

Floor Speech

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Mr. CRAPO. Mr. President, I would like to focus my remarks today on health care as many others have done. Actually, I am very glad to see the debate today was focused on small businesses and the impact of what we do on them.

I am surprised, however, to see those who are discussing the current legislation that is before us are discussing it as something that will benefit small businesses and will help to drive down the cost curve because, as remarkable as it may seem, this legislation that both the House and the Senate have had under consideration--hopefully what we will now see in the near future as the final product that we will be able to review--will drive up the cost curve and increase the cost of health care, not only for small businesses but for everybody in America.

If we ask most Americans what they want in health care reform, they will tell us they want to stop the spiraling cost of health care insurance. Yet the legislation we see does exactly the opposite. Over the last few weeks I have come to this floor to discuss tax increases that were contained in the health care legislation passed by the Senate Finance Committee, both in terms of the big picture and, more specifically, in terms of what it means to middle-income Americans and to small businesses and to any American who wants to answer the question: How would this bill affect me and my family?

We have already heard the answer to that question in a number of different contexts, but I think it bears repeating. Under the Senate Finance bill, if you have insurance, you get taxed. If you do not have insurance, you get taxed. If you don't want to purchase insurance, you get taxed. If you have a job, you get taxed. If you need medical devices, you get taxed. If you take prescription drugs, you get taxed. If you have high out-of-pocket medical expenses, you get taxed.

The list goes on. The reason is this legislation will create new, brandnew massive entitlement programs to the tune of what we do not clearly know yet but which will almost certainly be in the neighborhood of $2 trillion. It pays for them--or offsets the cost of those on the Treasury--by increasing taxes on the American people by hundreds of billions of dollars and by cutting Medicare by hundreds of billions of dollars.

We still do not have the ``merged'' Senate bill before us to review and debate, but we do have the House-passed bill to review. There have been a number of rumors and discussions in the media about what kind of new tax increases the Senate bill will have when it is finally disclosed. In fact, we hear we may find out, as a country--the people of America may find out tonight what this bill that has been negotiated and created behind closed doors actually contains. I would like to take a few minutes to review some of the provisions that we expect to be there.

The House version of the health bill contains more than $752 billion of tax increases. Some of these tax increases are the same ones we have already seen in the Finance Committee bill, such as the medical device tax, the $2,500 cap on flexible spending accounts, the prohibition on prepurchase health care accounts--FSAs and HRAs--and the doubling of tax penalties for those in emergency situations who must use a portion of their health savings account to pay for nonmedical bills.

There are many other new tax increases in the House bill which we have not seen in the Senate finance bill that we also need to review. From the beginning of this process the chairman of the Finance Committee has stated his intention to use only health-related offsets to pay for health-related spending. If there is to be new health-related spending, that is definitely the right approach. We all know what a difficult circumstance our country faces today when it comes to jobs. The current unemployment rate is 10.2 percent. The last thing we need to do is to enact policies that would make it even tougher for U.S. companies, particularly small businesses, to create new jobs. But, amazingly, the House bill contains more than $80 billion in tax increases on domestic U.S. job-creating companies that have no involvement in the health care industry.

Not only do these provisions violate the idea that we should be staying within the health care arena to find offsets on the health care bill, but these antijob tax increases are the last thing we need in this fragile economy. The largest tax increase in the House bill would also have a devastating effect on the job creators in our country, particularly small businesses, that are the top job creators. This $460 billion so-called ``millionaire surtax'' is bad policy for many reasons.

First, like the $80 billion tax increase on domestic companies that I just mentioned, this tax increase grabs hundreds of billions of dollars from outside the health care arena to pay for a massive expansion of a new health care entitlement.

Second, although this provision is being billed as a tax increase on millionaires, the Joint Tax Committee reports that one-third of the revenue it will generate is not from individual income of millionaires but from small businesses. As we know, many small businesses file their taxes as individuals, and it would be these small businesses, the job creators of our economy, that would be facing this new punitive surtax.

Third, although you would think we would have learned our lesson from the alternative minimum tax, like the AMT, this new surtax would also not be indexed for inflation. That means, over time, this would creep further and further down the income scale, and more and more small businesses and middle-income families would be suddenly hit by this surtax.

Fourth, this surtax would not only apply to ordinary income, it also applies to capital gains and dividend income which are currently taxed at lower rates. The capital gains and dividend rates are currently 15 percent. If Congress doesn't act before next year, the rates will go back up to the pre-2003 levels of 20 percent for capital gains and up to a maximum of 39.6 percent for dividends.

The President has said he doesn't intend to extend the current lower rates for individuals making less than $200,000 a year or for families making less than $250,000 a year. But if we add in this new surtax in the House bill, Americans above those thresholds who are currently paying a 15-percent capital gains tax rate would see their tax rate jump to 25.4 percent in 2011, and those currently paying the 15 percent dividends rate would see their rates jump to 45 percent by 2011.

Such a tax increase would violate yet another one of President Obama's tax pledges to the American people. Most of us are very familiar with his promise.

Most of us are familiar with his promise that no individual making less than $200,000 a year or a family making less than $250,000 a year would see any increase in their taxes. In fact, in his words, ``not by one dime''--not an increase of their income tax, their payroll tax, their capital gains tax. In his words, not any of their taxes. Yet we see hundreds of billions of dollars of these taxes falling squarely on the middle class. In a speech in Dover, NH, on September 12, 2008, President Obama said:

Everyone in America--everyone--will pay lower taxes than they would under the rates Bill Clinton had in the 1990s.

This surtax clearly breaks that promise to millions of additional Americans.

Recent press reports have suggested that, in a need for even more tax revenue to pay for all of the new spending in the Senate, the Senate leader may include an increase and an expansion of the Medicare payroll tax. The Medicare payroll tax is funded by a 2.9-percent payroll tax levied on every dollar earned by employees. Half of this tax is paid by the employee and the other half by the employer, although in reality, the entire burden falls on the employee because the tax is taken from the employee's available wages. Revenue from this tax goes into the Medicare trust fund and is intended to be used for Medicare expenses when that individual enters retirement. Under this new plan, Senate Democrats are considering applying this Medicare tax to capital gains, dividends, interest, royalties, and partnerships for American families earning more than $250,000. None of this income is currently subject to the Medicare payroll tax.

In addition, Democrats are said to be contemplating raising the employee's share of this tax, currently 1.45 percent of wages, to 1.95 percent. Press reports indicate this would raise up to 40 or 50 billion new dollars in revenue. This proposal would make a bad bill even worse. It would fundamentally change the way Medicare financing occurs. By applying what has traditionally been a payroll tax to nonpayroll income and by using this money for a new non-Medicare entitlement, it breaks the link between the Medicare tax base and Medicare benefits. As the Wall Street Journal pointed out, this new tax would ``sever the link between the tax paid over a lifetime and the medical benefits received, officially making Medicare an income redistribution program.''

It would additionally hurt growth. These additional taxes on savings and investment act as disincentives for these activities which are the primary drivers of wealth creation. It would kill jobs. Imposing these new taxes would hurt small businesses. Because many small businesses pay their taxes at the individual level, imposing higher individual income taxes hurts these engines of job creation.

Finally, it doesn't fully finance health care shortfalls. According to Bloomberg, House Democrats rejected this proposal, now being considered by the Senate, ``because lawmakers concluded they may need to increase the payroll tax in the future to pay Medicare benefits that are projected to outpace revenue.'' The New York Times pointed out that ``the higher payroll tax would not be sufficient in the long run [to even protect Medicare].''

In closing, for all the talk about this need to rush the bill through so we can achieve the objective the American people seek in health care reform, the bill does not reduce the cost of medical care. It increases it. The bill does not reduce the cost curve for health care insurance. It increases it. And in accomplishing this, it also increases taxes across the board on Americans and cuts Medicare by deep rates that will cause Medicare to face insolvency even earlier than it otherwise would have.

For all these reasons, we need to slow down and start working together, step by step, to remember the original objective; that is, to bend the cost curve down and stop these spiraling increases in health care insurance that Americans are facing and that are driving American families to the edge.

I yield the floor.

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