A surtax would get the job done

A SURTAX WOULD GET THE JOB DONE…. How are Dems going to pay for health care? Here’s a thought.

House Democrats agreed yesterday to raise taxes on the wealthy to pay for a sweeping expansion of the nation’s health-care system, proposing a surtax on the highest earners that could send the top federal tax rate toward 45 percent.

Beginning in 2011, the plan would target all income over $350,000 a year for families and $280,000 a year for individuals, Democratic sources said. The surtax would start at 1 percent, rise to around 1.5 percent for families earning more than $500,000, then step up again, to around 3 percent, for families earning more than $1 million, Democrats said.

That would raise about $550 billion over the next decade, Democrats said — about half the cost of reforms that are expected to cost about $1 trillion.

Middle-class taxes would be unaffected. And while the wealthiest earners would see an increase, Rep. Allyson Y. Schwartz (D-Pa.) emphasized that the resulting policy would be in a position to significantly lower the insurance premiums the rich are currently paying.

Rep. Charlie Rangel (D-N.Y.), chairman of the House Ways and Means Committee, described the surtax as the “best way” to raise money for the reform package. The NYT added that the proposal signaled “a broader unwillingness by Ms. Pelosi and her caucus to compromise on what they see as crucially needed improvements to the system, including the creation of a government-run insurance plan that would compete against private insurers.”

What’s more, the decision to pursue the surtax as a funding solution will allow the House Democratic leadership to move forward with their plan to unveil a completed bill as early as Monday. Stay tuned.

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Steve Benen

Steve Benen is a producer at MSNBC's The Rachel Maddow Show. He was the principal contributor to the Washington Monthly's Political Animal blog from August 2008 until January 2012.