STATEMENT BY SENATOR JOHN McCAIN ON THE FLOOR OF THE UNITED STATES SENATE
October 15, 2009
“Mr. President, earlier this year I put forward a proposal to eliminate the 3.1 percent payroll tax for one year for all employees in order to put more money in every working American’s pocket during these difficult economic times. This would have been a real stimulus to our economy. Unfortunately, every Democrat in this chamber voted against this common sense proposal.
“The regressive payroll tax oppresses all Americans, especially young men and women, and burdens small businesses that must match the tax that their employees pay. About 41 percent of Americans have no income tax liability. But every wage-earner is hit by the payroll tax no matter how much or how little one earns. For 86 percent of all working Americans, the payroll tax they pay is more than their income tax liability.
“Columnist Bob Novak said it best in a piece he wrote last year when he said, ‘few politicians of either party have addressed the payroll tax. It is not the concern of K Street’s rich tax lobbyists….’
“For a long time I have been advocating for a cut to the payroll tax. I believe a payroll tax cut is a way to target tax relief to low – and middle – income workers who would spend the money to stimulate the economy.
“We know such a proposal would get the economy moving again by stimulating consumers spending. So, why we would take such a proposal off the table in such difficult economic times? Because Democrats need to pay for their health care reform.
“In a letter to Chairman Baucus this week, the Joint Committee on Taxation found that 81 percent ($163.6 billion) of the $201.4 billion raised by the increased excise taxes on health insurance in their proposal will come from increased income and payroll taxes, and only 19 percent ($37.8 billion) will come directly from the excise tax.
“The Joint Committee on Taxation released two letters analyzing who will be hurt the most by the Baucus proposal. The Committee found that the bill would create an effective marginal tax rate of almost 60 percent for low-income workers because the subsidies decrease so rapidly as income grows.
“Mr. President, we all know this is not the right time to increase taxes on all Americans. And frankly, I don’t believe there is ever a good time to raise taxes on all Americans. According to the Joint Committee letter, the 40 percent excise tax on high-value ‘Cadillac’ plans in the Baucus proposal, ‘we expect the insurer to pass along the cost of the excise tax by increasing the price of health coverage… as insurers pass along the cost to the consumer by increasing the price, the cost of employer-provided insurance will increase….’ As a result and depending on the extent the employer or the employee pays for the increased cost, the Joint Committee believes the tax will lower wages paid by the employer and reduce consumer demand for high cost insurance products.
“So, while the President claims that health reform will make things better for Americans, the experts disagree. They see increased taxes, inflated prices and more Americans struggling to pay their bills.
“The Joint Committee also reports that the effective marginal tax rate that taxpayers will face increases dramatically as the health care subsidies are phased out. So, what does this really mean? According to the Joint Committee, families earning 150 percent of the federal poverty line ($32,200) will face an effective marginal tax rate of 59 percent. This means that for every additional dollar these taxpayers earn they are losing 59 cents of it in lost subsidies and more taxes. Economists know that such a high marginal tax rate can result in substantial disincentives to work for that additional income.
“Let’s restate the obvious about the Senate Finance Committee concept proposal. As Majority Leader Reid begins his closed-door process to create the Senate bill he brings to the floor, it’s important for the American people to understand what impact these policies will have on the cost of health insurance premiums, tax rates, our economy and generations to come.
“Americans must understand the smoke and mirrors used to make the Democrat proposal appear to improve the budget over the next ten years.
“The following taxes start next year: if you have insurance, $201 billion is raised in excise taxes on health plans. If you don’t buy a plan or buy one that the government doesn’t think is good enough, the concept proposal raises $4 billion in fines on the uninsured. If you are an employer who today can’t afford to provide health insurance to your employees, the concept proposal raises $23 billion in employer penalties and contributions. If you use medical devices like hearing aids or artificial hearts, the concept proposal raises taxes by $38 billion on medical device manufacturers. If you take prescription drugs the concept proposal raises $22 billion in new taxes on medicines.
“The Congressional Budget Office (CBO) estimates that Americans will face higher health insurance premiums while waiting four years for the much hailed reform proposals to begin. This budgetary gimmickry is how the President and the Senate Democrats claim the proposal is under $1 trillion and slightly reduces the deficit over ten years. This is a joke: ten years of taxes but only five and a half years of implementation. To get the true ten year cost of implementation, you must look at the ten years beginning 2013. Using the CBO numbers, we are told that the proposal spends $1.8 trillion.
“You might be justified in wondering what Americans get for $1.8 trillion. The answer is more government with 13 million more people placed into the failed Medicaid program. Medicaid is a program that is busting federal budget and state budgets all over America. Medicaid is a program that fails in patients having access to physicians: 40 percent of doctors will not see Medicaid patients. Medicaid is a program that fails in health outcomes for low-income Americans. We aren’t going to give low-income Americans more choices or options for better health coverage – we are just giving them status quo.
“It’s bad enough that the proposal massively increases government regulation of health care and insurance, massively expands the government-sponsored Medicaid program, massively cuts Medicare and drives up insurance premiums in the process. But, the proposal completely ignores what Americans want – less government, less taxes, more freedom and more choices. Instead, the bill… no, excuse me. The concept paper in the Senate Finance Committee – it’s not even a bill – slams Americans with an entitlement program that will grow faster, according to the CBO, than the economy while at the same time dramatically increasing the tax burden on all Americans.”
