July To Be Most Expensive Month Ever!

In the next six weeks the Obama administration will attempt to pass sweeping health care reform before the August legislative break. If they succeed it will mean higher taxes have been passed to pay for the reform. If they fail health care reform may not happen during this president's tenure. Either case is expensive.

The Rock-
In order to pay for the additional $1.2 trillion in government health care programs that the administration is proposing, there will have to be either more debt or more taxes. More debt is a poor option; the bailout programs have already maxxed out our national credit line. More taxes are a political problem, as it will be nearly impossible to raise enough money to fund the program without taxing the middle class. Raising middle class taxes would break Obama's campaign promise of tax cuts for 95% of Americans. Ouch.

The Hard Place-
On the other hand, if health care reform fails to pass before the August break, there is a good chance that it will be a dead issue for Obama's current term. This might sound like a victory to some Obama haters that would love to see him fail, but ultimately the high cost of medical care growing in the same fashion that it has over the last decade will cost us all a lot of money.

So here we sit, in between a rock and a hard place. The hard truth is in front of us: health care reform will require higher taxes for all but the poorest tax payers. Everyone making over $50,000 (as a family) stands to see higher taxes bills, from hundreds to thousands of dollars per year.

One Example:
-A family of 4 claims $110,000 of income (all together)
-The effective tax rate this family pays is 21%, or $23,100 per year
-This family gets health benefits from one employer
-The employer-paid benefits cost $1,600 per month (young, child-bearing family rates)
-$1,600 per month times twelve months equals $19,200 per year
-If these health benefits are to be taxed at the same rate as income, the additional tax burden would be equal to their tax rate times the benefits they receive, or 21% * $19,200, which equals $4,032 in new taxes.

A family making $110,000 is by no means rich. They work hard to pay their bills and pray that they don't get laid off. They have small savings, and pour everything they make into their children. Giving them a $4,032 tax increase ($336 per month) will not sound like a solution, it will sound like a burden, which it is. Middle class families will be the ones caught in the rocky hard place, battered by waves of taxes, unable to afford the lobbying effort it would require to reverse the new laws.

Middle class families, if taxed at the newly proposed rate, will turn on Democrats in a big way in the next elections. It is time to learn how badly this administration wants health care reform.