Dems’ New Taxes Wouldn’t Just Hit Billionaires

Dems’ New Taxes Wouldn’t Just Hit Billionaires

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Plus, House votes to push shutdown deadline to December
Tuesday, November 19, 2019

House Votes to Push Shutdown Deadline to December

The House on Tuesday passed a stopgap measure to fund the government through December 20. The Senate is set to take up the bill before current short-term funding expires on Thursday night, and the White House has signaled that President Trump will sign it to avert a potential government shutdown.

The 231-192 vote in the House fell largely along party lines, with some Republicans who voted against the continuing resolution expressing concerns about the harmful effects of repeated stopgap bills on the military. "Once again, our servicemembers are being held hostage by political games,” Rep. Mac Thornberry (R-TX) said. “Every CR is wasteful and damages the ability of our military to carry out their vital missions."

The stopgap measure was necessary because appropriators have failed to make substantial progress on 12 required full-year funding bills, largely as a result of partisan differences over Trump’s demand for $5 billion in border-wall funding. “This is an admission of failure, it’s a recognition of failure,” Majority Leader Steny Hoyer (D-MD) said, according to The Washington Post. “The alternative is shutting down government on midnight of the 21st. That’s not an acceptable alternative.”

The bottom line: Appropriators now have another month to try to iron out their differences on wall funding. But recent optimism that they could reach an agreement before Thanksgiving on how to allocate funding across agencies has largely vanished, with little indication that the two sides can reach any compromise. The state of negotiations leaves open the possibility of a shutdown just before Christmas, even as lawmakers in both parties want to avoid a full-year stopgap that would fund the government at current levels, wiping out budget increases Congress agreed to over the summer.

Dems' New Taxes Wouldn't Just Hit Billionaires

Some Democratic tax proposals are focused on making millionaires and billionaires pay more, but other households would be affected as well. Neil Irwin of The New York Times points out Tuesday that many affluent professionals, far from billionaire status but earning incomes well above average, face “the biggest tax increase in recent memory” if some of the proposals were to take effect.

For example, the removal of the cap on Social Security payroll taxes, as proposed by both Elizabeth Warren and Bernie Sanders, would potentially create a double-digit tax hike for some households earning six-figure incomes.

In Warren’s version, income over $250,000 would be taxed at a 14.8% rate (including both employee and employer contributions), providing revenues to extend the program’s fiscal viability while also boosting monthly benefits by about $200.

“Under Ms. Warren’s Social Security plan, and not incorporating any other changes to the tax code, a family with one wage earner making $300,000 a year, for example, would pay an extra $7,400 in tax each year,” Irwin writes. “For each additional dollar earned over that level, total federal tax obligations would rise to 39 cents, up from 27 cents today.”

Moody’s chief economist Mark Zandi said the higher marginal tax rate would affect about 4.6% of earners, far more than would be affected by a wealth tax. “The wealth tax is a mind shift, opening up a new source of revenue,” Zandi told Irwin. “In terms of the number of people impacted, this is much bigger.”

That could be a political problem for Democrats. The increased tax would fall disproportionately on households in Democratic-leaning states, according to Moody’s, with residents of New Jersey, Connecticut and Massachusetts hit the hardest.

Tweet of the Day

Billionaire John D. Arnold, a former energy trader and hedge fund manager turned philanthropist with a focus on health care, says Big Pharma appears to have a powerful hold on members of Congress.

Arnold pointed out that PhRMA, the main pharmaceutical industry lobbying group, had revenue of $459 million in 2018, and that total lobbying on behalf of the sector probably came to about $1 billion last year. “I guess $1 bil each year is an intractable force in our political system,” he concluded.

How the Deficit Looms Over the Democratic Presidential Race

Democrats are set to hold another presidential primary debate Wednesday night, and if the pattern from past debates holds true, we’ll likely hear the 10 candidates on stage talk a lot about health care, environmental policy and social issues — and nary a word about the national debt and federal deficit.

Yet as The Wall Street Journal’s Kate Davidson and Tarini Parti wrote Monday, debt and deficit concerns have colored the Democratic presidential contest in a perhaps surprising way:

“Economists warned for years that persistent deficits would lead to higher inflation and rising interest rates, which would boost the cost of debt and weigh on economic growth. That hasn’t happened because U.S. bonds have remained a global safe haven for investors, leading some economists to say the government can keep up with the cost of financing more debt over time as long as the economy keeps growing.

“It is a message the Democratic presidential candidates haven’t embraced. While they aren’t actively arguing to reduce deficits, they are trying to pay for any new programs they propose, which effectively leaves budget deficits on their current path.”

Davidson and Parti note that Democratic presidential contenders have consistently pressed their rivals on how they’d pay for various proposals, even if those financing plans might not matter much to voters, who now appear to place far less importance on deficit reduction than they did six or eight years ago.

The bottom line: The deficit concerns might not carry over from the campaign trail to the Capitol, as Davidson and Parti note that politicians are likely to keep adding to the debt near-term to finance higher spending or tax cuts — with relatively little fear that voters will knock them for it. Economist Jared Bernstein told the Journal that the campaign concerns about paying for proposals was simply political theater. “None of this will really matter much until interest rates start going up,” he said. “As long as politicians can put spending on the credit card with no obvious economic consequences, it’s hard to see what keeps them from doing more of the same.”

Medicare Improper Payments Fall to Lowest Level Since 2010

The Centers for Medicare & Medicaid Services announced Monday that the improper payment rate for traditional Medicare fell in fiscal year 2019 to 7.25%, down from 8.12% in fiscal year 2018 and its lowest level since 2010. Improper payments by the Medicare fee-for-service program were $28.9 billion, down $7 billion from fiscal 2017.

CMS attributed the decline to its policy clarifications and changes to required documentation along with aggressive efforts to reduce fraud. CMS also noted that improper payments are not necessarily a measure of fraud. The term refers to government payments that should not have been made or were made in incorrect amounts (both overpayments and underpayments).

“CMS has taken a multifaceted approach that includes provider enrollment and screening standards to keep bad actors out of the program, enforcement against bad actors, provider education on our rules and requirements, and advanced data analytics to stop improper payments before they happen,” CMS Administrator Seema Verma said. “These initiatives strike an important balance between preventing improper payments and reducing the administrative burden on legitimate providers and suppliers.”

CMS estimated that improper Medicaid payments for fiscal 2019 totaled $57.4 billion (a 14.9% rate) and $2.7 billion for the Children’s Health Insurance Program (a 15.8% rate). Its report warned of “high levels of observed eligibility errors,” noting that the data raised concerns about the number of people enrolled in Medicaid who might not qualify for the program or have not provided sufficient documentation.

Number of the Day: 288 Million

That’s an estimate of how many robocalls marketing health insurance were made in October, the time of year when many Americans are choosing coverage for the coming year. Lawmakers are expected to unveil new legislation soon empowering law enforcement to crack down on the worst robocall offenders, The Washington Post reported Tuesday. “The act of automated dialing isn’t illegal,” the Post said, but scammers “aren’t inclined to follow the rules or adhere to other restrictions, such as the federal ‘Do Not Call’ list, which is supposed to protect people from receiving unwanted telemarketing messages.”


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