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Health Care Bill Extends Wage Tax To Investments

STEPHEN OHLEMACHER

WASHINGTON (AP) ¿ High-income families would be hit with a tax increase on wages and a new levy on investments under President Barack Obama's health care overhaul bill.

For the first time, the Medicare payroll tax would be applied to investment income, beginning in 2013. A new 3.8 percent tax would be imposed on interest, dividends, capital gains and other investment income for individuals making more than $200,000 a year and couples making more than $250,000.

The bill also would increase the Medicare payroll tax by 0.9 percentage point to 2.35 percent on wages above $200,000 for individuals and $250,000 for married couples filing jointly.

The new tax on investment income is higher than the 2.9 percent tax proposed by Obama. House Democratic leaders increased it so they could reduce the impact of a new tax on high-cost health insurance plans strongly opposed by labor unions.

The 40 percent tax on health benefits would be delayed until 2018 and would apply only to premiums exceeding $10,200 a year for individuals and $27,500 for families.

The search for revenue to pay for health care has been made more difficult by Obama's campaign pledge not to raise taxes on the middle class. The result is a bill that would raise a total of $438 billion in new taxes over the next decade, mainly from high-income taxpayers and fees on the health care industry.

Taxing the rich to pay for health insurance would represent a significant departure from the way Americans have financed safety net programs in the past.

Both Social Security and Medicare are supported by broad-based payroll taxes. Although the rich pay more ¿ they have bigger incomes ¿ the burden is shared by the middle class and even the working poor.

"This is the problem with a $1 trillion bill," said Rep. Dave Camp of Michigan, the top Republican on the House Ways and Means Committee. "They've got to find all these ways to pay for it."

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