Wednesday, May 7, 2014
ObamaCare and the Tax Man Cometh
Not only did President Obama promise that “If you like your doctor, and like your insurance plan, you can keep it’ there was another promise that , “middle income families would not see their taxes go up one single dime as a result of ObamaCare”.
Investor’s Business Daily May 5, 2014 (Grace Marie Turner and Tyler Hartsfield)
But millions of such Americans are indeed paying to finance the gargantuan health overhaul law through hidden taxes and fees, many of which already are driving up the cost of their medical care and health insurance.
In total, the 21 taxes in ObamaCare will extract $1 trillion over a decade, nearly double the $569 billion that Congress' Joint Committee on Taxation estimated at the time the law passed in 2010.
During the next several years,
The first wave hits many higher-income people who got a rude awakening about the health law's new and higher taxes when they filed their tax forms this year.
First, is a new surtax on investment income that went into effect in January 2013. This new, 3.8% surtax is paid by households making at least $250,000 (or $200,000, single) with investment income.
In addition, households in these same income categories face an increase in their Medicare payroll taxes of 0.9%, raising their tax rate to 2.35% from 1.45% to help finance ObamaCare's subsidies. These two taxes together are estimated to cost taxpayers an additional $317 billion over the decade.
Parents of children with special needs face an added ObamaCare tax. The law caps at $2,500 a year the amount of income that employees can put tax free into their Flexible Spending Accounts. Thousands of families with special-needs children who have large medical and educational costs now must pay expenses above the cap with after-tax dollars.
People with high medical bills also face a new limit on what they can deduct for medical expenses — a threshold of 10% of their adjusted gross income instead of the old 7.5% trigger. Together, these taxes will raise about $43 billion over 10 years. (Does that make sense to tax people who have higher medical expenses to penalize them for having better coverage?)
ObamaCare also imposes a new sales tax on health insurance companies that already is increasing health insurance premiums. The tax is assessed on insurers based upon the premiums the companies collected in the previous year.
The tax will raise $8 billion in 2014, increasing to $14.3 billion in 2018, and rising thereafter based on premium trend. The Joint Committee on Taxation estimates the health insurance tax will exceed $100 billion over the next 10 years, virtually all of which will be passed along to consumers in the form of higher premiums.
The tax will increase premiums for consumers in the individual insurance market by an average of $2,150 and $5,080 for family coverage over 10 years. The average expected increase in the cost of Medicare Advantage coverage is $3,590 over the decade. ObamaCare calls for a "transitional reinsurance tax" that amounts to a $63-a-year fee on every person with private health insurance to cushion the cost of covering people with pre-existing conditions in the exchanges. The assessment is supposed to be levied for three years starting in 2014 and is designed to raise $25 billion.
An early ObamaCare tax is already hitting innovator drug companies, collecting $34 billion from the pharmaceutical industry over 10 years — passed along to consumers in higher prices and, more often, reduced investment in research for new medicines.
A tax on medical device manufacturers took effect last year, siphoning another $29 billion from creators of surgical instruments, artificial joints and even routine medical devices. The 2.3% excise tax is imposed on revenues and must be paid by companies whether or not they have any profit. Many companies say this tax is reducing significantly their investment in research for the next generation of medical devices.
It may come as a shock to middle-income Americans that the majority of these taxes hit them either directly or through higher prices they have to pay for health insurance and medical care to finance ObamaCare.”
Author (Gary M Levin M.D.)
The political ramifications of these new taxes will be apparent during the mid-term election, spotlighting the new taxes and stimulating dialogue amongst the electorate. Following this election the pump will have been primed and the next 18 months will tell if the law is repealed or amended by the next Congress and President.