July 29, 2003 | WebMemo on Health Care
Making prescription drugs a Medicare entitlement could be poison
for tax reform.
The costs of the $400 billion drug proposal, currently being hammered out by a Capitol Hill committee, would make proposals for a pro-growth tax system in America harder to achieve, says Heritage Foundation tax expert Daniel Mitchell in a July 25 study.
Some future tax reform ideas that would likely be scrapped include:
• Alternative minimum tax (AMT) repeal. This tax is a "Catch-22" system that forces many taxpayers to calculate their taxes twice. If this results in a higher tax liability, the taxpayer must pay more.
• Corporate tax rate reduction. America has a top corporate tax rate of 35 percent-the highest of any developed nation. This hinders the competitiveness of U.S.-based companies.
• Universal IRAs. People should not be taxed twice on income that is saved and invested, which is why individual retirement accounts should be universal.
• Ending territorial taxation. The United States taxes income earned in other nations-even though this income is already subject to foreign tax.
"Many of the reforms needed to bring the tax code closer to a simple and fair flat tax involve a reduction in tax revenue," Mitchell writes. "This will be a daunting challenge."
Read more of Mitchell's study and other Medicare research at heritage.org.
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