	Introduction

Several tax options have been proposed to provide financing for health care reform. President Obama initially proposed restricting itemized deductions for high-income taxpayers, along with some narrower provisions for other reforms or to reduce the tax gap. The House Ways and Means Committee has proposed financing the reform largely through a surtax on high-income individuals, which was passed by the House on November 14, 2009 ( H.R. The Senate Finance Committee reported S. 1796 relying in part on an excise tax on insurers for high-cost plans; the bill passed by the Senate on December 24, 2009, H.R. 3590 , largely reflects the revenue-raising provisions in that plan. 3590 as a starting point, but offers several changes to the revenue provisions of this bill. The President's proposal would delay the effective date for the tax on high-cost employer plans proposed in H.R. 3590 from 2013 to 2018 and raise the exemption threshold for this tax to $27,500 for families and $10,200 for individuals. In addition, the new plan offered by the Administration would broaden H.R. 3590 's proposed increase of the Medicare Hospital Insurance (HI) tax for high-income households by adding a tax on unearned income at a 3.8% rate. The President is signed H.R. 3590 ( P.L. 111-148 ) on March 23; H.R. 4872 was approved by the House and Senate on March 25 and signed by the President ( P.L. 111-152 ) on March 30. The tax proposals differ in their effects on behavior and where the burden falls in the income distribution. Note that the distributional analysis in this report refers only to the financing mechanism and not to the distributional effects of the entire health care reform proposals, as the health care benefits are likely to favor lower-income families. Thus even with a regressive revenue source, the overall proposal might redistribute in favor of lower-income individuals. More recently, most of the provisions of H.R. Some health related provisions are implemented earlier in the Senate bill. 3962 includes an additional provision to require information reporting by firms on payments to corporations. 3590 also reduced the fee on medical devices and introduced additional provisions—one of them, an increase in the payroll tax for hospital insurance (HI) for high-income earnings, was the second-largest revenue raiser, while the others (a 10% excise tax on indoor tanning facilities and a change in the treatment of Blue Cross) raised smaller amounts of revenue. The plan has a number of provisions that are in the House bill: to conform the definition of medical expenses for health savings accounts and similar accounts to those for itemized deductions for health care ($5 billion); limit health flexible spending arrangements in cafeteria plans to $2,500, but indexed to inflation ($14.6 billion); increase the penalty for nonqualified distributions from health savings accounts to 20% ($1.3 billion); and disallow the deduction for subsidies related to Medicare Part D ($5.4 billion). As is the case with the surtax, this provision would raise revenue from high-income taxpayers and be very progressive, although it would not fall on capital income, which is more important at higher income levels. The fee on branded drugs is $2.1 billion per year. 4872, the Revenue Reconciliation Act of 2010

On February 22, 2010, the Obama Administration released a new compromise proposal, which uses H.R. In particular, this new proposal adopts the tax on high-cost health insurance plans included in the Senate-passed H.R. The President's compromise proposal also includes two revenue provisions contained in the House-passed H.R. On March 22, 2010, the House passed the Senate bill, H.R. Some other commentators have proposed the elimination of the exclusion. Additional Health-Related Tax Expenditure Options

Other health-related income tax expenditures were considered and listed in the Senate Finance Committee's report.
Several tax options were proposed to provide financing for health care reform. President Obama initially proposed restricting itemized deductions for high-income taxpayers, along with some narrower provisions. H.R. 3962 passed in the House on November 14, 2009; its largest source of increased revenues was from additional income taxes for higher-income taxpayers. On December 24, 2009, the Senate adopted H.R. 3590, whose revenue provisions are similar to those in the bill reported by the Senate Finance Committee (S. 1796). Taxing insurance companies on high-cost employer plans was the largest single source of revenue in that plan. Both plans included health-related provisions, including fees or excise taxes, along with some other provisions.
On February 22, 2010, the Obama Administration released a new compromise proposal, which generally uses H.R. 3590 as a starting point, but offered several changes to the revenue provisions of this bill. The President's proposal would have delayed the effective date for the tax on high-cost employer plans proposed in H.R. 3590 from 2013 to 2018 and raised the exemption threshold for this tax to $27,500 for families and $10,200 for individuals. In addition, the new plan offered by the Administration would broaden H.R. 3590's proposed increase of the Medicare Hospital Insurance (HI) tax for high-income households by adding a tax on unearned income at a 3.8% rate. On March 22, 2010, the House passed the Senate bill, along with the revenue revisions (H.R. 4872). The President signed H.R. 3590 on March 23 (P.L. 111-148); the Senate and House agreed on H.R. 4872 on March 25, 2010, and it was signed by the President (P.L. 111-152) on March 30.
Several proposals for revenue, considered during the health care financing debate of 2009, have not been included in legislation reported out by congressional committees. These proposals include eliminating tax benefits from the exclusion of employer-provided health insurance, which has a significant revenue potential, and limiting tax savings to 28% of itemized deductions for the top two brackets, which was the centerpiece of the President's initial health reform tax proposals.
These provisions differ in their potential revenue gain, and behavioral and distributional effects. Some proposals are progressive (imposing higher relative burdens on higher income groups), some impose larger relative burdens on lower-income families, and some tend to fall on middle-class groups. The distributional analysis, however, relates only to finance: the total health care program may redistribute in favor of lower-income families even if the revenue sources do not.
The House bill (H.R. 3962) included a high-income surtax of 5.4% on income above $1 million (income levels are 50% as large for singles). The proposal would have initially raised more than $30 billion per year. One concern that has been raised about this surtax is the effect on small business, entrepreneurship, and job creation; however, much of this income is passive income or income of professions (e.g., stockbrokers, doctors). The proposal also includes some narrower, largely corporate provisions and restrictions on health-related tax expenditures. The Senate bill (H.R. 3590) would have imposed an excise tax on insurance companies for high-cost employer plans. Most of the remaining revenue is raised from restricting health-related tax expenditures; increasing the Medicare payroll tax for high-income earners; and imposing fees on medical devices, branded drugs, and health insurance providers.
One revenue raising provision that has produced some recent controversy is the requirement for information reporting by firms for all payments over $600. H.R. 5141, to repeal this provision, has been introduced.