Healthcare Is A Taxing
Situation
Gary Gerard,
dumbhoosier.com
This week, in a largely symbolic gesture, the United States House of
Representatives repealed the health care measure passed by the last
Congress.
I say it’s symbolic because the Senate likely will not pass the bill
and even in the highly unlikely event that it did, the bill would
surely be vetoed by President Obama.
Nonetheless, I think the discussions of the healthcare bill remain
valid.
There are lots of reasons – constitutional and otherwise – to oppose
the flawed health insurance law that is commonly known as Obamacare.
But I want to focus this week on something that has not been at the
forefront of the discussion.
Aside from all its other flaws and foibles, Obamacare constitutes one
of the largest tax increases in history.
Americans for Tax Reform recently published a comprehensive list of tax
hikes in Obamacare. Following is a synopsis of their research.
The charts that I refer to are on page 2A. The numbers are the month
and year the tax takes effect, followed by the amount the tax will
raise over 10 years.
Individual Mandate Excise Tax 1/14 – Starting in 2014, anyone not
buying “qualifying” health insurance must pay an income surtax, the
higher of the two figures in Chart A, where AGI is adjustible gross
income.
Employer Mandate Tax 1/14 – If an employer does not offer health
coverage, and at least one employee qualifies for a health tax credit,
the employer must pay an additional non-deductible tax of $2,000 for
all full-time employees. This provision applies to all employers
with 50 or more employees. If any employee actually receives coverage
through the exchange, the penalty on the employer for that employee
rises to $3,000. If the employer requires a waiting period to enroll in
coverage of 30-60 days, there is a $400 tax per employee ($600 if the
period is 60 days or longer).
(Combined, the individual and employer mandates will raise $65B.)
Surtax on Investment Income 1/13 $123B – This increase involves the
creation of a new, 3.8 percent surtax on investment income earned in
households making at least $250,000 ($200,000 single). This would
result in the top tax rates on investment income shown in Chart B.
Excise Tax on Comprehensive Health Insurance Plans 1/18 $32B – This is
a new 40 percent excise tax on “Cadillac” health insurance plans
($10,200 single/$27,500 family). For early retirees and high-risk
professions exists a higher threshold ($11,500 single/$29,450
family). CPI +1 percentage point indexed.
Hike in Medicare Payroll Tax 1/13 $86.8B – Current law and changes. See
Chart C.
Medicine Cabinet Tax 1/11 $5B – Americans no longer able to use health
savings account (HSA), flexible spending account (FSA), or health
reimbursement (HRA) pre-tax dollars to purchase non-prescription,
over-the-counter medicines (except insulin)
HSA Withdrawal Tax Hike $1.4B 1/11 – Increases additional tax on
non-medical early withdrawals from an HSA from 10 to 20 percent,
disadvantaging them relative to IRAs and other tax-advantaged accounts,
which remain at 10 percent.
Flexible Spending Account Cap – aka “Special Needs Kids Tax” 1/13 $13B
– Imposes cap of $2500 (Indexed to inflation after 2013) on FSAs (now
unlimited). There is one group of FSA owners for whom this new cap
will be particularly cruel and onerous: parents of special needs
children. There are thousands of families with special needs
children in the United States, and many of them use FSAs to pay for
special needs education. Tuition rates at one leading school that
teaches special needs children in Washington, D.C. () can easily exceed
$14,000 per year. Under tax rules, FSA dollars can be used to pay
for this type of special needs education.
Tax on Medical Device Manufacturers 1/13 $20B – Medical device
manufacturers employ 360,000 people in 6000 plants across the
country. This law imposes a new 2.3% excise tax. Exemptions
include items retailing for less than $100.
Raise "Haircut" for Medical Itemized Deduction from 7.5% to 10% of AGI
1/11 $15.2B – Currently, those facing high medical expenses are allowed
a deduction for medical expenses to the extent that those expenses
exceed 7.5 percent of adjusted gross income (AGI). The new
provision imposes a threshold of 10 percent of AGI; it is waived for
65+ taxpayers in 2013-2016 only.
Tax on Indoor Tanning Services 7/10 $2.7B – New 10 percent excise tax
on Americans using indoor tanning salons
Elimination of tax deduction for employer-provided retirement Rx drug
coverage in coordination with Medicare Part D 1/13 $4.5B.
Blue Cross/Blue Shield Tax Hike 7/10 $0.4B – The special tax deduction
in current law for Blue Cross/Blue Shield companies would only be
allowed if 85 percent or more of premium revenues are spent on clinical
services
Excise Tax on Charitable Hospitals (Min$/immediate) – $50,000 per
hospital if they fail to meet new "community health assessment needs,"
"financial assistance," and "billing and collection" rules set by HHS
Tax on Innovator Drug Companies 1/10 $22.2B – $2.3 billion annual tax
on the industry imposed relative to share of sales made that year.
Tax on Health Insurers 1/14 $60.1B – Annual tax on the industry imposed
relative to health insurance premiums collected that year. The
stipulation phases in gradually until 2018, and is fully-imposed on
firms with $50 million in profits.
$500,000 Annual Executive Compensation Limit for Health Insurance
Executives 1/13 $0.6B
Employer Reporting of Insurance on W-2 1/11 Min$ – Preamble to taxing
health benefits on individual tax returns.
Corporate 1099-MISC Information Reporting 1/12 $17.1B – Requires
businesses to send 1099-MISC information tax forms to corporations
(currently limited to individuals), a huge compliance burden for small
employers
“Black liquor” tax hike (Tax hike of $23.6 billion). This is a
tax increase on a type of bio-fuel.
Codification of the “economic substance doctrine” $4.5B – This
provision allows the IRS to disallow completely-legal tax deductions
and other legal tax-minimizing plans just because the IRS deems that
the action lacks “substance” and is merely intended to reduce taxes
owed.
Archives
|
