The National Review Online has an excellent article discussing the 10 tax increases in Obama care.
Bob Vineyard of InsureBlog calls our attention to a piece in the Kiplinger letters on “thirteen tax changes on the way” due to PPACA. Describing them as “changes” is charmingly sunny, given that only two of the changes are tax credits —a fancy term for subsidies — whereas 10 are tax increases: levies intended to help raise the trillions of dollars necessary to fund these very tax credits, along with the law’s massive expansion of Medicaid.
Here are the 10 tax increases NRO discusses:
- A 10 percent excise tax on indoor tanning services (a boon to beach towns everywhere).
- Elimination of the tax deduction for employers providing Medicare prescription drug coverage. (This is a big part of why companies like 3M are dropping health coverage for their retirees.)
- Doubling the penalty for spending money from your tax-free health savings account for non-health-related purposes (as defined by PPACA) to 20 percent.
- Capping the amount that employers can contribute to your tax-free flexible spending accounts (employer-sponsored HSAs) at $2,500 a year (it was previously limited by your employer’s generosity).
- Banning the use of funds from HSAs and related accounts for the purchase of over-the-counter medications. (Now you will have to go to your doctor and get a prescription, a waste of precious health-care resources and a doctor’s time.)
- A 0.9 percent Medicare surtax to wages over $200,000 for individuals and $250,000 for married couples, along with a 3.8% Medicare tax on investment income of these individuals. (The 3.8 percent tax will actually apply to the lesser of unearned income or any excess income above $200,000/$250,000.) Because this tax is applied to pre-tax income, these taxes are equivalent to income tax rate increases of 2 percent and 8 percent respectively.
- The ability to deduct itemized medical expenses will begin after you spend 10 percent of your income on medical expenses, instead of the current 7.5 percent.
- The employer mandate, which requires that all businesses with more than 50 employees offer PPACA-approved health plans to all of their employees, or pay a tax of $2,000 per employee, excluding the first 30 employees.
- The “Cadillac tax” on high-value health plans: Beginning in 2018, plans costing more than $10,200 for individuals, or $27,500 for families, will be assessed a 40 percent excise tax. Insofar as this tax mimics the elimination of the employer tax exclusion, it is the least offensive of Obamacare’s tax increases, but unfortunately that policy goal — harmonizing the tax treatment of individually-purchased and employer-sponsored health insurance — is neutered by the employer mandate described above.
- And last, but not least, the individual mandate, which requires everyone to purchase health insurance, or pay a tax: It starts in 2014 at $95 or 1 percent of gross income, whichever is greater, and maxes out in 2016 at the greater of $695 or 2.5 percent of income.
Small businesses, THE job creators in the country are the ones that will bear most of the burden. The health care tax credit for small businesses is but a crumb compared to what they will be paying for the “new and improved, bigger” government Washington is “giving” to us!
The NRO’s article included a number of references to the Kiplinger Newsletter report and points out a couple of other cost issues in Obamacare:
Kiplinger’s 13th “change” is genuinely a change: Employers will be required to disclose on your W-2s the amount they spend on your health insurance, so as to ensure enforcement of the individual mandate, the employer mandate, and the Cadillac tax.
There’s another change that Kiplinger neglects to mention, but that Bob Vineyard does: The requirement that businesses fill out an IRS Form 1099 every time they spend more than $600 on a single vendor in a calendar year. The increased compliance burdens associated with this rule are staggering, and once again will drive up the cost of everything you buy. As Bob Vineyard puts it:
Business owners are required to generate a 1099 for any vendor where they purchase more than $600 in goods or services. That means if you own a business and buy more than $600 in gasoline, electricity, telephone, internet, cell phone, natural gas or water you must generate a 1099 for those businesses. Buy more than $600 from Office Depot or Staples?
Generate a 1099.
Do you pay a cleaning service to empty the trash in your business? Pay a landscaper? Provide a coffee service for employees and guests?
1099. 1099, 1099.
It will cost you money to generate those 1099s. Money that could have been used to create jobs.
It’s no wonder with “help” like this from OUR government, the economy is staying in the toilet!