The national research group, Citizens for Tax Justice (CTJ), is out with two new reports (and a series of state by state reports) that examine the impact of two proposals under consideration in Congress to help pay for health care reform: “the President’s proposal to limit itemized deduction for high-income taxpayers and a proposal formulated by CTJ to make the Medicare tax fairer and more progressive.”
The conclusion: both would provide progressive new ways to fund health care reform without significantly impacting struggling families. Here are some excerpts from the North Carolina report entitled “Two Proposals to Pay for Health Care Reform without Hurting Struggling Families in North Carolina”:
Health care reform can save us all money in the long-run by bringing all Americans into the health insurance system and rooting out the inefficiencies that drive up costs. But to make that happen, Congress will first need to raise revenue to finance an overhauled health care system.
There are several ways to raise this revenue that would not hurt working families in North Carolina or in any other state. One is to make the Medicare tax a more progressive tax that investors pay just like everyone else. Another is to limit, as President Obama has proposed, the value of itemized deductions, which currently benefit rich families more than middle-income families.
If Congress enacts the Medicare tax expansion described here, the richest one percent of taxpayers in North Carolina would have an average tax increase of $12,721 while the middle fifth of taxpayers would have an average tax increase of just $41.
If Congress instead enacts the President’s proposal to limit itemized deductions for the wealthy, the richest one percent of North Carolina taxpayers will have an average tax increase of $7,417 while the middle fifth of taxpayers will have no tax increase at all.”
The report goes on to, among other things, help debunk the contention advanced in some circles that the President’s proposal would significantly reduce giving to nonprofits.
Some lawmakers have expressed concern that this proposal would hurt non-profits because it would reduce the tax subsidy for charitable donations by wealthy taxpayers. But a recent report from the Center on Budget and Policy Priorities concludes that this proposal would only reduce charitable giving by around 1.9 percent.
That’s partly because only a small group of wealthy taxpayers are affected, and they only account for a fraction of the total charitable giving (about 17 percent) in the United States. Using previous studies on the way tax rates impact charitable giving, they estimate that this fraction of charitable giving will be reduced somewhat, but the overall impact on donations will be a reduction of only 1.9 percent.
The report also points out that non-profits could gain enormously if Congress uses this proposal to fund reform of the health care system, making it easier for non-profits and other entities to make sure their employees have adequate coverage.”