• Taxing products that undermine good health and raise health care costs. The average American consumes nearly three times as many high-sugar soft drinks as a few decades ago. This helps raise the nation’s obesity rate and health care costs. A tax on soda, heavily sweetened “sport drinks” and similar products would help both finance health reform and fight obesity.
Congress also can address the erosion in alcohol taxes, which have fallen 37 percent in inflation-adjusted terms since Congress last raised them in 1991. Alcohol abuse costs the country hundreds of billions of dollars a year in direct medical costs, lost productivity and earnings, and increased crime. Restoring the tax to its inflation-adjusted 1991 level would barely affect people who drink in moderation.
Supplementing these measures, Congress can close tax shelters, curb wasteful and inefficient tax subsidies, and consider a variant of the president’s proposal to cap itemized deductions at a 28 percent rate. If, for instance, the top income-tax rate returns to 39.6 percent in 2011, Congress could cap deductions at the current top deduction rate of 35 percent. That would generate savings without changing the current tax incentives to give to charity.
These proposals won’t please many. Many liberals won’t like measures like capping tax-exempt health benefits and raising regressive taxes on soda and alcohol. Many conservatives won’t like scaling back Medicare Advantage and limiting itemized deductions.
But unless both parties make these sorts of tough choices, either Congress will not enact health reform or it will do so without offsetting the costs, thus imposing even larger deficits and debt on future generations.
• Robert Greenstein is executive director of the Center on Budget and Policy Priorities.