The Obama health plan: Taxing the rich when there are no rich to tax

The new Obama health care reform package is based on two key programs. One is the taxation of the rich over the next ten years. The other is more competitive bidding among health-care providers that want to get big blocks of business. This bidding process will bring down the revenue that health-care companies are likely to recognize over the next decade.

According toThe Wall Street Journal, "The cuts in health-care spending would affect managed-care companies, prescription-drug manufacturers and hospitals." In other words, it may be a good idea to stay out of stocks in these sectors as their margins are pushed down by the new programs.

Forcing health-care companies to drop rates if they want to keep large customers may be easier than taxing the rich. That is based on the fact that there may be fewer rich to tax. The recession has taken a huge toll on the net worth of even the most wealthy. The destruction of jobs on Wall Street has cut a portion of the highest earning population to levels that the economy has not seen in years.

The government may be assuming that in a recovery the number of people with annual incomes over $250,000 dollars will grow again. If the industries where most made their money never return to tremendous profitability, the headcount of people who are truly rich could stay depressed for more than a couple of years. You can't tax what isn't there.

Douglas A. McIntyre is an editor at 24/7 Wall St.
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