Scorse argues that Obama could pay for most of the cost of health care reform by doing what Reagan did in 1986: Raise the tax on long-term capital gains and use the same rate as for taxing earned income.

 

Currently, short-term capital gains are taxed at the same rate as earned income 33-35%, but long-term capital gains are taxed at only 15%. When Bill Clinton became president, he cut the long-term rate to 20%, and then George W. Bush dropped it to 15%. Bush’s tax cuts are due to expire at the end of 2010, at which time the rate will return to 20%. But if Reagan’s tax equality was restored, the IRS could collect tens of billions of dollars extra.

 

“The policy is equal taxes on income from wealth and income from work,” says Scorse. “Returning to an equal-tax policy would come close, all by itself, to paying for the health care bill now before Congress.”

-Noel Brinkerhoff, David Wallechinsky

 

Tax Equity Could Pay for Health Care (by Gerald Scorse, Talking Points Memo)