Our SCHMOTUS is right, this is a Big “F-ing” deal. With the President’s signature on the Obamacare bill yesterday, your taxes went up by over $500 Billion. And if the reconciliation bill being debated in the Senate passes, taxes will go up even further. Despite the pledges of repealing the bill, and the cases filed yesterday by the stats, those brand new taxes are going to be around to hurt your pocket book and slow down the economy for a very long time. Each of those efforts to blunt the bill are long-shots at best and even if they are successful a victory will take years.
If you are making less than $250,000 your taxes are going up despite the promises made by Obama. Chances are you will be hit by one of these taxes no matter what the income:
- Individual Mandate Excise Tax (Page 324/Sec. 1501/Jan 2014*): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS).
- Employer Mandate Tax (Page 348/Sec. 1513/Jan 2014*): Small business owners pay their business taxes on their personal 1040 forms. This tax does not exempt startup small business owners even if they make less than $250,000. If the 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 $750 for all full-time employees. Applies to all employers with 50 or more employees.f 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).
- Medicine Cabinet Tax (Page 1997/Sec. 9003/$5 bil/Jan 2011): Americans would no longer be 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 (Page 1998/Sec. 9004/$1.3 bil/Jan 2011): 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” (Page 1999/Sec. 9005/$14 bil/Jan 2011): Imposes cap on FSAs of $2500 (now unlimited). Indexed to inflation after 2011 (added on page 363 of manager’s amendment). 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. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.
- Medical Itemized Deductions Cap (Page 2034/Sec. 9013/$15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction if the total cost of the expenses reduces the filer’s income by 7.5%. The new provision would impose a threshold of 10%. This new tax will most adversely affect early retirees and the catastrophically ill. Waived for 65+ taxpayers in 2013-2016 only.Tax on Indoor Tanning Services (Page 373 of Manager’s amendment/$2.7 billion/July 1, 2010): New 10% excise tax on Americans using indoor tanning salons
NONE OF THE ABOVE PROVISIONS EXEMPTS FAMILIES MAKING LESS THAN $250,000
That is just the Senate version of bill that became law yesterday, just when you thought it was safe to go to the cash machine, there is Obamacare II The Revenge of Reconciliation. If the senate passes reconciliation taxes will go up by another $55 Billion. Here’s how:
- 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 following top tax rates on investment income (Tax hike of $123 billion):
|2011-2012 (current law)||20%||39.6%||39.6%|
|2011-2012 (Obama budget)||20%||20%||39.6%|
|2013+ (current law)||23.8%||43.4%||43.4%|
|2013+ (Obama budget)||23.8%||23.8%||43.4%|
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*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations. It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income. It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans. The 3.8% surtax does not apply to non-resident aliens.
- Increase the employer mandate tax from $750 per employee to $2000 per employee (disregarding the first 30 employees). This tax would apply to any employer who does not offer insurance and who has at least one employee eligible for a tax credit to purchase insurance inside the exchange. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. (Tax increase of $26 billion when combined with individual mandate)
- Increase the individual mandate tax from the greater of 2% of adjusted gross income (AGI) or a dollar amount to the greater of the following (See employer mandate score):
|1 Adult||2 Adults||3+ Adults|
|2014||1% AGI/$95||1% AGI/$190||1% AGI/$285|
|2015||2% AGI/$325||2% AGI/$650||2% AGI/$975|
|2016 +||2.5% AGI/$695||2.5% AGI/$1390||2.5% AGI/$2085|
- Decrease Cadillac plan excise tax by delaying the implementation date from 2013 to 2018. It also increases the threshold for this 40% excise tax from $8500 single/$23,000 family to $10,200 single/$27,500 family. (Tax reduction of $117 billion)
- Delays “Special Needs Kids Tax” (FSA Cap) until 2013. Delays the $2500 FSA cap (2011 under current law) until 2013. This provision delays the $2500 cap called for in the healthcare bill signed by the President. It will fall most-heavily on parents who use their FSAs to pay for expensive special-needs tuition pre-tax. (Tax reduction of $1 billion)
- Raises “PhRMA Tax” from $22.2 billion to $27 billion from 2010-2019 (Tax hike of $4.8 billion). This is a simple money-grab from the pharmaceutical industry.
- Changes medical device manufacturing excise tax from flat dollar amount to 2.9 percent excise tax (Tax hike of $800 million). This switches the money-grab in this industry from a dollar amount to a more conventional excise tax.
- Raises health insurance tax from $59.6 billion to $60.1 billion from 2010-2019 (Tax hike of $500 million). This is a simple money-grab from the health insurance industry.
- Delays tax hike on employer-provided retiree Rx drug coverage from 2011 to 2013 (Tax cut of $900 million). Under the bill the President signed, employers who provide retiree prescription drug coverage in coordination with Medicare would no longer be able to deduct their costs as a business expense. This moves forward that tax hike.
- “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” (Tax hike of $4.5 billion). 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.
- Exchange premium credits made more generous (Tax cut of $1 billion). This is more statistical scoring noise than anything else.
- Associated effects on tax revenues (Tax cut of $11 billion).
It has been said that the power to tax is indeed the power to destroy. Looking at these taxes you can see it us not about health care, it is about centralizing power in Washington and redistribution of Income. And the IRS who will not be enforcing the tax law but the health care bill will be making a list and checking it twice to see who’s being naughty and who’s being nice. Except unlike Santa, they will be taking presents from you and giving to others.