Daily Tax Update - February 22, 2010

PRESIDENT UNVEILS NEW HEALTH CARE REFORM PROPOSAL: Today, in advance of the bipartisan health care meeting on February 25, President Obama released a health care proposal designed to “bridge the gap" between the House and Senate bills that includes "new provisions to crack down on waste, fraud and abuse.” The President’s proposal is expected to cost approximately $950 billion over ten years. The proposal, which is similar to the Senate-passed bill, does not contain a public insurance option, but does include the “Cadillac” tax on high-cost health insurance plans.

  • According to the White House, “One key improvement, for example, is eliminating the Nebraska FMAP (Federal Medical Assistance Percentages) provision and providing significant additional Federal financing to all States for the expansion of Medicaid. For America’s seniors, the proposal completely closes the Medicare prescription drug ‘donut hole’ coverage gap. It strengthens the Senate bill’s provisions that make insurance affordable for individuals and families, while also strengthening the provisions to fight fraud, waste, and abuse in Medicare and Medicaid to save taxpayer dollars. The threshold for the excise tax on the most expensive health plans will be raised from $23,000 for a family plan to $27,500 and will start in 2018 for all such plans. And another important idea included is improving insurance protections for consumers and creating a new Health Insurance Rate Authority to review and rein in unreasonable rate increases and other unfair practices of insurance plans.”
  • The revenue provisions include: "(i) expanding corporate information reporting requirements, (ii) closing the loophole that allows certain byproducts of paper production to be eligible for the cellulosic biofuels producer credit, and (iii) helping prevent tax shelters by clarifying the definition of when activities have true 'economic substance' beyond evading taxes.” The President also proposes to incorporate a Senate provision to raise the Medicare payroll tax to 2.35 percent on those making more than $200,000 ($250,000 for joint filers) and add a 2.9-percent tax on other income such as interest, dividends, and royalties for those same high-income taxpayers.
  • Additional details can be accessed here
  • Senate Minority Leader Mitch McConnell issued a statement on the President’s plan. McConnell’s statement said, “It’s disappointing that Democrats in Washington either aren't listening, or are completely ignoring what Americans across the country have been saying. Our constituents don't want yet another partisan, back-room bill that slashes Medicare for our seniors, raises a half-trillion dollars in new taxes, fines them if they don't buy the right insurance and further expands the role of government in their personal decisions. Republicans will continue to offer the kind of step-by-step reforms to lower costs that our constituents have been asking for in the hundreds of town halls and constituent meetings we have had across the country. But the longer Washington sticks with its failed approach to health care, the longer Americans have to wait for the real, step-by-step reforms that will actually lower costs and lead to a better system. That’s what Americans have wanted all along.”
  • White House Communications Director Dan Pfeiffer said, “We view this as the opening bid for the health meeting.” Pfeiffer said that the President will come to the health summit with “an open mind to additional ideas.” However, Pfeiffer added, “The President expects and believes the American people deserve an up or down vote on health care reform.” He said that reconciliation is still an option “if the opposition decides to take the extraordinary step of filibustering.”

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