The Supreme Court ruling on Obamacare has many ramifications which are unknown to the majority of Americans. I believe that it is imperative for Republicans to get the word out about exactly what this bill will mean.
The Individual Mandate Tax (no longer a penalty) will require a couple to pay the higher of a base tax of $1,360 per year or 2.5% of adjusted growth income starting with lower tax base and rising to this level by 2016. Individuals will see a base tax of $695 and families a base tax of $2,085 per year by 2016.
The Medicine Cabinet Tax took effect in 2011 and prohibits reimbursement of expenses for over the counter medicine with the lone exception of insulin from an employee’s pre-tax dollar funded Health Saving Account (HSA), Flexible Spending Account (FSA) or Health Reimbursement Account (HRA).
The Flexible Spending Account (FSA) Cap, which begins in 2013 imposes a cap of $2500 per year (currently unlimited) on the amount of pre-tax dollars that can be deposited into these accounts. Funds in these accounts may be used to pay for special needs education for special needs children in the United States. Since tuition rates for this type of special education can easily exceed $14,000 per year the use of pre-tax dollars has helped many middle income families.
The Medical Itemized Deduction Hurdle is currently 7.5% of adjusted gross income. This is the hurdle to meet before medical expenses can be taken as a deduction on federal income taxes. Obamacare raises this hurdle to 10% of adjusted gross income starting in 2013.
Next is the Health Savings Account (HSA) Withdrawal Tax Hike. This provision increases the additional tax on non-medical early withdrawals from an HSA from 10% to 20% beginning in 2013. This provision sets these accounts apart from Investment Retirement Accounts (IRAs) and other accounts which remain at a a10% early withdrawal tax.
The Indoor Tanning Services Tax started in 2010 and places a 10% excise tax on people using tanning salons. While this tax may not mean a lot to many people, it is a move by the government to control the behavior of citizens.
The Excise Tax on Comprehensive Health Insurance Plans (“Cadillac” Health Insurance Plan Tax) imposes a 40% excise tax on employer-paid-premium on taxpayers covered by such plans starting in 2018. The reason for this delay in implementation was to spare union members from this tax for at least a period of time.
The Employer Mandate Tax will impose an annual non-deductible tax on employers with more than 50 employees who do not provide health insurance for their employees.
Employers will face three choices.
Provide some level of health insurance and there would be no impact on employees.
Pay the penalty (probably less expensive than providing health insurance) and force employees to buy their own insurance or purchase it through federal government controlled state exchanges.Estimates are that 20 Million Americans will lose their health insurance as a result of choice #2.
Employers will lay off employees or not hire additional employees.
The Tax on Medical Device Manufacturers that begins in 2013 places a 2.3% excise tax on all items retailing for more than $100. Besides driving up the cost of various medical devices it will also impact an industry that employs 360,000 in 6,000 plants across the country.
The Surtax on Investment Income for households earning $250,000+ begins in 2013 and will raise the Capital Gains Tax from 15% to 23.8% on investment income and will raise Taxes on Dividends from 15% to 43.4% for the same households.
Aside from the impact on retired citizens dependent on dividends this provision pulls income from the private economy. Other Investment Income earned by Subchapter S Corporations will rise from 35% to 43.4%. This provision will place additional pressure on small businesses.
Except for a tax on biofuels, all remaining new taxes in Obamacare are directed at health industry businesses. Undoubtedly, the additional costs will most likely be passed on to the public.
I suggest that Republicans continue to remind everyone that Obamacare was not going to be a middle class tax hike and everyone was going to get better and cheaper health care.
Thank you for all your work.
Edelweiss Geary
Legislative Issues Chair ◼ Northern Division - CFRW
