Report: Health Costs Could Force Hike in Income Tax
If health care costs continue to grow at the same rate as the last 40 years, income tax rates will need to increase substantially by 2050 if they are the only mechanism used to pay for the additional costs, according to a Congressional Budget Office report released on Monday, CQ HealthBeat reports.
The report found that if the current rate of health spending growth -- 2.5 percentage points per year higher than the growth in the Gross Domestic Product -- continues, income tax rates would need to increase from 10% to 26% in the lowest tax bracket; from 25% to 66% in the middle tax bracket; and from 35% to 92% in the highest tax bracket.
If the cost of health care can be contained to one percentage point higher than the growth in the GDP, the lowest tax bracket would need to increase to 17%, the middle tax bracket would need to increase to 43% and the highest tax bracket would need to increase to 60%, the report found.
According to the report, "Given the nature of the nation's long-term fiscal challenge, constraining the growth of federal health care costs seems a key component of reducing the deficit over the next several decades" (CQ HealthBeat, 7/9).
Senate Budget Committee ranking member Judd Gregg (R-N.H.), who requested the report, said, "This CBO study should serve as a wake-up call to those that haven't been listening that we need responsible action now to save the ability of future generations to fund the most basic functions of its own government" (Vaughan, CongressDaily, 7/10). The report is available online. Note: You must have Adobe Acrobat Reader to view the report.