(When I set out to write a weekly column on Obamacare, I could not have imagined what a daunting task was before me. I thought it would be simple enough to read the entire bill and then break it down, section by section, and explain it so that we could all better understand how the new healthcare legislation will ultimately affect everyone. Small business owners, health care providers, seniors, patients with chronic illnesses…everyone has a vested interest. I planned to leave the politics out of it, to the best extent possible, and just focus on the facts. However when I interviewed doctors and small business owners, I found that people are so passionate about this issue and have so much to say, that the politics always made its way back into the discussion. Still, I will do my best to present facts only. Texas PolitiChick Lara Maertans Rhea)
This week I want to address those hidden taxes in the new healthcare legislation. Get ready for at least 20 new taxes, and don’t think for a minute that you are exempt. Everyone will get hit with one or another, if not a combination of many. Remember, too, that if your employer is being hit hard, the ways that employers get that money back is two-fold- they either raise the costs of goods and services which effect all of us, and/or they cut the costs of employees by either reducing their pay, lay-offs, or cutting back hours. Remember that little secret I told you about in one of my last articles- companies won’t be fined for not providing health care to employees who work under 30 hours, so that will be a great way for companies to reduce their financial burden. Get ready America!
According to The American Spectator, 75% of ObamaTax costs will hit Americans making $120,000 a year or less when families are already stressed to the limit financially. With depleting 401K’s and other savings hit hard, job losses, lowered housing markets, and dwindling investments, it is my belief that increased taxes will be catastrophic to the fledgling economy.
The taxes included in the new healthcare legislation will amount to one of the largest tax increases in American history, totaling over $525 billion. Forbes says the new taxes will cause a terrible recession in 2013, and they also say that if Obama is re-elected, companies will sit on their money and not invest, while simultaneously individuals will be taxed at the highest rates ever for investing causing them to sit on their money, as well. All of this reconfirms that this is very bad news for an economy that’s already been hit hard.
Some of the new taxes from Obamacare have already taken place, and the rest will be implemented through 2018. The following is a breakdown of these taxes. This information comes from the bill itself, the Patient Protection and Affordable Care Act , the website for American Tax Reform (www.atr.org) and Townhall.com.
1. Indoor Tanning Tax: This is a 10 percent tax for using indoor tanning salons ($2.7 billion).
2. Blue Corss/Blue Shield Tax Increase: Takes away a tax deduction unless 85% or more of premium revenues are spent on clinical services ($.4 billion).
3. “Black liquor” Tax Increase: This is a biofuel tax ($23.6 billion).
4. Innovator Drug Companies Tax: An annual tax imposed on drug companies relative to each company’s share of sales made in a year ($22.2 billion).
5. ***Codification of the “Economic Substance Doctrine”- This one is very serious. It allows the IRS to disallow ANY completely LEGAL deductions it wants. How scary is that? Pay close attention to this one (at least $4.5 billion).
6. Charitable Hospitals Excise Tax: $50,000 per hospital if they fail to meet certain requirements set out in the legislation.
7. Medicine Cabinet Tax: Americans no longer able to use HSA’s, FSA’s or health reimbursement pre-tax dollars to purchase over-the-counter medications except insulin ($5 billion).
8. HSA Withdrawal Tax Increase: Tax hike on non-medical early withdrawals from HSA’s from 10-20%, while IRA’s and others remain at only 10% ($1.4 billion).
9. W-2 Reporting of Insurance: Health benefits are to be reported on individual tax returns as a preamble for taxing those benefits.
10. ***Surtax on Investment Income: This is another BIG one to watch. This is a new 3.8% surtax on investment income earned on households making $250,000 per couple or $200,000 for singles. Capital gains go from 15-23.8%, Dividends from 15-43.4%, and all other unearned income rates jump from 35-43.4% ($123 billion). ***
11. Medicare Payroll Tax Increase: After earning $200,000 for individuals or $250,000 per couple, payroll taxes increase from 1.45% per employee to 2.35% per employee. Those who are self-employed will go from 2.9% to 3.8% ($86.8 billion).
12. Medical Device Manufacturers Tax: A 2.3% excise tax on approximately 6000 plants across the U.S. ($20 billion).
13. Medical Deductions: Changes current deduction for medical expenses from 7.5% of adjusted gross income to 10% of adjusted gross income ($15.2 billion). This will hit seniors, retirees, and middle-class families the hardest.
14. Flexible Spending Account Cap- Currently there are no caps on FSA’s but there will be a cap of $2500. Some 35 million Americans currently use these accounts. Parents of special needs children typically use them to pay for tuition for schools that teach special needs and often exceed $14,000 a year, so this will definitely hurt these families a lot ($13 billion).
15. Elimination of Tax Deductions for Employer Provided Retirement RX Drug Coverage in Coordination with Medicare Part D ($4.5 billion).
16. $500,000 Annual Executive Compensation Limit for Health Insurance Executives: So now the government is setting compensation limitations ($.6 billion).
17. ***Individual Mandate Excise Tax: And yet another BIG one, and the section that caused much of the fuss and led to the Supreme Court ruling. Yearly taxes will go up to $695 per year for individuals, $1390 per couple, and $2085 per family if they do not have health insurance. There are exemptions for religious objectors, UNDOCUMENTED illegal immigrants, prisoners, members of Indian tribes and people living beneath the poverty level. So once again, the millions of illegals get to ride on everyone else’s coattails still receiving full benefits but not having to pay.***
18. Employer Mandate Tax: Employers with 50 or more employees will pay $2000 for every full-time employee if it does not offer health coverage. If any employee receives coverage through an exchange the penalty rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days there will be a $400 tax per employee and $600 if the period exceeds 60 days (combined Individual and Employer Mandates $65 billion).
19. Taxes on Health Insurers: Annual tax on the health industry relative to health insurance premiums collected in that year ($60.1 billion).
20. Comprehensive Health Insurance Plan Excise Tax: Starting in 2018, there will be a 40% tax on “Cadillac” health insurance plans ($10,200 for singles and $27,500 for families).
On January 1, 2013, the following tax increases will occur in conjunction with those listed above:
The top income tax rate will rise from 35 to 39.6%- the rate that most small business profits are also taxed. The lowest rate will rise from 10-15%. All the rates in between will rise, as well. Itemized deductions and personal exemptions will be phased out. This means EVERYONE will pay more taxes whether you are “rich” or “poor.” NO ONE IS EXEMPT!! The Democrats want everyone to believe the “middle class” is spared. They are not. In fact, the middle class is getting hit harder than almost anyone throughout all of this!
There will be narrower tax brackets for married couples and the child tax credit will be cut in half from $1000 to $500 per child. The standard deduction will no longer be doubled for married couples relative to singles.
The death tax is currently 35% with an exemption of $5 million per person and $10 million for married couples. After 2013 there will be a 55% death tax rate on estates over $1 million. So imagine if someone dies with two homes and a little in savings and wants to pass that down to their family. If the total of those properties and cash equal $1.1 million, the family will have to give the IRS $605,000. If you inherit a ranch worth $1.1 million that has been in the family for 5 generations, you better hope you have $605,000 to pay the government immediately, or you will be forced to sell it. Remember, the owner paid taxes on their income, property, and everything else in order to own that property, but now he/she cannot even leave it to a loved one without the government stepping in and demanding 55% of it. It’s highway robbery!
The capital gains tax and dividends tax will rise as stated in #10 above.
Along with all other Obmacare taxes listed, the Alternative Minimum Tax will hit over 31 million families compared to 4 million this year. These families will be hit with an extraordinary tax burden. If you have never had to pay AMT, you are in for a real treat!
Business expensing will disappear. In 2011 businesses could expense half of their equipment purchases, but in 2013, all of it will have to be depreciated.
Taxes will be raised on all types of businesses. There will no longer be a “research and experimentation tax credit” for example. These taxes will cost a ton of jobs.
Teachers and students will be hit hard. There will no longer be deductions for tuition and fees, no more tax credits for education, teachers will no longer be able to deduct classroom expenses, Coverdell Education Savings Accounts will be cut, no more employer-provided educational assistance, and the student loan interest deduction will be disallowed. Way to go, let’s tax teachers who are already facing pay-cuts and lay-offs and making dismal wages anyway compared to what they deserve.
Charitable contributions from IRA’s no longer allowed.
If you think it isn’t important who you vote for in the coming election, think again. All of these things can change if we elect a president who believes that heavy taxation will crumble the economy. Why exactly were these things included in the Obamacare legislation anyway? If we repeal the bill, we can stop some of this madness. Please vote smart in November!
For a consolidated version of the legislation, you can go to http://housedocs.house.gov/energycommerce/ppacacon.pdf and read it all for yourself online.
And here is an entertaining look at the hidden taxes in one brief video from FreedomWorks.
Read the rest of Lara Maertans Rhea’s Understanding Obamacare series: