Our job is to read bad legislation so you don't have to, and on that score we may demand combat pay for plowing our way through the House health-care bill that passed on Saturday. This thing has economic booby traps everywhere, such as favors for the tort bar (see below) and the largest capital gains tax increase in at least a half-century.The capital gains tax increase in 1986 did not turn out so well.
House Democrats are funding their new entitlement with a 5.4% surtax on incomes above $500,000 for individuals and above $1 million for joint filers. The surcharge is intended to snag the greatest number of taxpayers to raise some $460.5 billion, and so the House has written it to apply to modified adjusted gross income. That means it includes both capital gains and dividends.
That surtax takes effect on January 1, 2011, or the day the Bush tax rates of 2001 and 2003 expire. Today's capital gains tax rate of 15% would bounce back to 20% because of the Bush repeal and then to 25.4% with the surtax. That's a 69% increase, overnight. The last time investors were hit with anything comparable was 1986, when the capital gains rate jumped to 28% from 20%, a 40% increase, as part of the Reagan tax reform that lowered income tax rates.
The 1986 experience was not a happy one. Tax revenues from capital gains surged before the increase took effect in 1987, as investors moved to cash in at the lower rate. Revenues then plummeted. Total realized capital gains didn't again reach their 1985 level of $172 billion until 1996. By 1992, the federal government was barely getting more in revenue ($29 billion) at the 28% rate than it did in 1985 ($26.5 billion) at the 20% rate.No doubt, the democrats know the historical impact of raising capital gains taxes. But it's not about raising the money for health care. It's about punishing prosperity and sticking it to the rich.
Rate reductions, as in 2003 when Republicans cut the rate to 15% from 20%, have typically had the opposite effect. Treasury receipts from capital gains climbed to an estimated $117.8 billion in 2006 from $49 billion in 2002.
The other little "booby trap" about the tort bar is exposed in an adjacent opinion piece, entitled "...And a Buried Tort Bomb."
Buried in Speaker Nancy Pelosi's 1,990-page bill is a provision that provides "incentive payments" to each state that develops an "alternative medical liability law" that encourages "fair resolution" of disputes and "maintains access to affordable liability insurance." Sounds encouraging. Read on, however, and you come to this nugget: The state only qualifies if its new law "does not limit attorneys' fees or impose caps on damages." (Emphasis mine).If you ever had any doubts that Nancy Pelosi and House liberals are in the pocket of tort lawyers, this should put them soundly to rest. This provision completely undermines the state-centered reforms already passed in many states, and discourages the "demonstration projects" that the President endorsed in his September health care speech. Remember this?
Now, finally, many in this chamber -- particularly on the Republican side of the aisle -- have long insisted that reforming our medical malpractice laws can help bring down the cost of health care. (Applause.) Now -- there you go. There you go. Now, I don't believe malpractice reform is a silver bullet, but I've talked to enough doctors to know that defensive medicine may be contributing to unnecessary costs. (Applause.) So I'm proposing that we move forward on a range of ideas about how to put patient safety first and let doctors focus on practicing medicine. (Applause.) I know that the Bush administration considered authorizing demonstration projects in individual states to test these ideas. I think it's a good idea, and I'm directing my Secretary of Health and Human Services to move forward on this initiative today. (Applause.)Ephemeral, meaningless happy talk. I guess he just wanted to hear some applause from the other side of the aisle.
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