Coalition Seeks Tax Hike for the Wealthy to Replace Medicare Catastrophic Surtax

By ROBERT A. ROSENBLATT

June 1, 1989 12 AM PT

Times Staff Writer

WASHINGTON — A coalition of influential congressional Democrats, senior citizens groups and labor unions Wednesday proposed a tax increase for the wealthiest 1% of Americans to replace the controversial surtax included in Medicare’s catastrophic care program.

The proposal indicates that the rebellion against the financing method for catastrophic care, which makes Medicare recipients pay the full cost of their new benefit, is making deeper inroads in Congress.

The latest call for a drastic change came from Democratic Sens. Carl Levin of Michigan and Tom Harkin of Iowa, and the Democrats’ chief deputy whip in the House, David E. Bonior of Michigan. Until now, Republican members of Congress were the most outspoken in attacking the surtax, which will range up to $800 a year for Medicare beneficiaries when federal taxes are paid in 1990.

“There’s a cry out there for justice,” said Levin.

The plan unveiled at a news conference Wednesday would eliminate the surtax and instead raise the maximum income tax rate for individuals making more than $109,000 per year and families with incomes above $209,000. The rate would increase from 28% to 33%.

Burden Would Shift

The financial burden for the new benefits thereby would shift from 13 million senior citizens to the wealthiest group of American taxpayers.

In an effort to solicit Bush Administration support, the plan calls for a reduction in capital gains tax, one of the President’s pet proposals. Harkin said that a maximum 33% tax rate for the top 1% of taxpayers would raise $35.2 billion over five years, enough to pay for catastrophic care and for the lost capital gains tax revenues.

Backers of the new tax plan include the United Auto Workers, the American Postal Workers Union, the International Assn. of Machinists, the National Assn. of Letter Carriers and the International Ladies Garment Workers Union.

Among groups representing the elderly, support came from the National Council of Senior Citizens, the National Committee to Preserve Social Security and Medicare, the National Council on Aging and the Gray Panthers.

Absent from the coalition was the nation’s largest senior citizen organization, the 29-million member American Assn. for Retired Persons, which campaigned actively for passage of the catastrophic care bill and has been a staunch defender of the legislation. With the growing criticism of the financing method, the AARP recently modified its position and welcomed a proposal by Sen. Lloyd Bentsen (D-Tex) to cut the surtax by as much as 16%.

Bentsen is chairman of the Senate Finance Committee, which will conduct hearings today on the catastrophic care legislation to examine whether the surtax will collect more revenues than needed for the benefits. Bentsen, whose committee prepared the legislation, wants to leave the bill intact other than to scale back the surtax.

President Bush, however, has said that the legislation should not be altered in any way, a position shared by Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, which oversees all tax and Medicare bills.

The legislation offers senior citizens unlimited days of free care in the hospital after they pay $560 for their first day, a limit on bills paid to doctors and Medicare coverage of prescription drugs for the first time.

In return, all 33 million Medicare beneficiaries--30 million persons over the age of 65 and 3 million disabled persons of all ages--would pay a premium of $4 a month for the program. Further, the surtax would be assessed on those Medicare participants who earn enough to pay federal taxes. The surtax would be $22 for every $150 in federal income taxes owed, up to the individual limit of $800--or $1,600 for a couple.

About 13 million of the 33 million Medicare recipients will earn enough to pay the supplemental premium, according to Harkin. “The fiscally responsible and fair solution is to provide real tax relief for older Americans by closing tax loopholes for wealthy Americans,” he said.

It is unfair to ask those who receive Medicare to pay the full bill, he said. “Students do not bear the total cost of education. Farmers are not burdened with the total cost of farm programs.”

Bonior said that the special catastrophic care surtax places “an undue burden on seniors.”