If doctor salaries are in the $200,000 to $500,000 range, then most of them will be hit by Obama’s plan to raise top income tax rates. Even doctors with salaries in the lower $200,000 range would be hit if they have spouses that work or if they have investment income that pushes their overall income into the president’s punishment range.
Raising taxes on doctors would damage the economy because doctors will work less and they will have less money to reinvest in their practices. Doctors are exactly the type of workers who have large behavioral responses to tax increases. Facing higher marginal tax rates, a substantial number of doctors will reduce their hours worked or they will retire earlier. In the long run, fewer people will want to go into this difficult profession if the government reduces the after-tax rewards.
The Washington Post story focused on the expected shortages of doctors in coming years. Raising taxes on doctors will make such shortages worse. Just at a time when the nation needs more doctors because of the aging of the population, liberal punish-the-productive policies threaten to exacerbate doctor shortages in our health care system.
Chris Edwards is the director of tax policy studies at the Cato Institute, and editor of www.DownsizingGovernment.org. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation.
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