By Tom Curry National affairs writer
msnbc.com
updated 11/17/2009 2:07:41 PM ET 2009-11-17T19:07:41

Claim: The House bill's tax on upper-income people will gradually hit a growing number who aren't rich.

In order to raise some of the revenue to pay for providing health care to uninsured people, the House bill would impose a 5.4 percent surtax on joint tax returns with adjusted gross income of $1 million or more, or $500,000 for single people. This tax increase would raise $460 billion over ten years, according an estimate by the nonpartisan staff of the Joint Congressional Committee on Taxation. It would provide about 40 percent of the money needed to pay for the House Democrats' insurance proposal.

Fact or fiction?
Fact. According to the Tax Policy Center, the surtax would initially apply to 0.5 percent of all tax returns. For the top 1 percent, it would result in an average tax increase of nearly $53,000 a year, cutting their after-tax income by 3 percent. But since the tax isn't indexed to inflation, as average incomes increased over time, it would hit more people, unless Congress froze it at the 2019 level. It would resemble the alternative minimum tax (AMT) which Congress enacted to guarantee that high-income people paid some tax. Since the AMT isn't inflation-indexed, it has gradually hit more middle-class people. The surtax "would become similar to the creep of the AMT, but given the income levels it starts at, it would be a long time before a Democrat-controlled Congress cared much," said Ken Kies, a tax lawyer-lobbyist with the Federal Policy Group in Washington.

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