by Karl Stark | November 21, 2011
The Joint Select Committee on Deficit Reduction (commonly referred to as the Super Committee) was scheduled to complete its work this week and potentially issue recommendations to reduce the deficit. Instead, it’s disbanding without any recommendations. Reaching any compromise was an uphill battle from the start, but the proposal by Sen. Pat Toomey (R-PA) showed just how much he and the other Republicans on the committee were willing to move toward compromise: not even an inch.
Sen. Toomey’s proposal—stolen from the Draconian, House-passed Paul Ryan Budget—would end or limit tax exclusions for employer-sponsored health insurance (ESI), an idea that has been rejected by both Democrats and Republicans in Congress because it would raise taxes on workers and undermine their health coverage.
Roughly 156 million Americans receive health coverage through their employers, making ESI the lynchpin of America’s health care framework. If Congress imposes a new tax on such health benefits, it would not only undermine this framework and erode Americans’ health coverage, it would unfairly target lower- and middle-income families. According to a report from the Center on Budget and Policy Priorities (CBPP), “89 percent of the revenue generated by effectively taxing ESI comes from households [with incomes] below $200,000.”
The idea has been panned by Republicans and Democrats in Congress alike. Recently 160 members of Congress, led by Reps. Joe Courtney (D-CT) and Tom Cole (R-OK), signed on to a bipartisan letter urging the protection of workplace health benefits. AFSCME worked to support this letter in coalition with labor, health care, consumer and aging organizations. Signatories to the letter were extremely ideologically diverse, including both current Republican P
residential candidate Ron Paul (R-TX) and former Democratic Presidential candidate Dennis Kucinich (D-OH). Reps. Courtney and Cole wrote in Roll Call that taxing ESI “would run completely counter to the stated goal of deficit reduction,” and that it “reduces health coverage for millions of Americans and would increase long-term federal spending obligations.”
But what makes the Toomey proposal even more outrageous is that it reduces the top marginal tax rate on individual earned income from 35 percent to 28 percent while exempting from taxation income gained through stock market and financial activities, such as capital gains and dividend income. The Toomey plan would exempt the super-rich from contributing to deficit reduction and leave Wall Street bankers free to do their bidding, instead targeting what Representatives Courtney and Cole called “a core pillar of compensation for the middle class.” Analysis by CBPP found that the Toomey proposal would result in “a substantial shift in tax burdens from households at the top of the income scale to low- and middle-income households. Far from being a balanced deficit reduction plan—one that doesn’t unfairly burden working families—Sen. Toomey’s proposal manipulates tax breaks for the middle class in order to protect Wall Street bankers and the super-rich.