Will Obamacare lower taxes?
General Reference (not clearly pro or con)
The Internal Revenue Service (IRS) provided the following in its “Affordable Care Act Tax Provisions” page on www.irs.gov (accessed July 27, 2010):
“The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that take effect this year and more that will be implemented during the next several years. The following is a list of provisions now in effect…
Therapeutic Discovery Project Program
This program is designed to provide tax credits and grants to small firms that show significant potential to produce new and cost-saving therapies, support jobs and increase U.S. competitiveness…
Excise Tax on Indoor Tanning Services
A 10-percent excise tax on indoor UV tanning services goes into effect on July 1, 2010…
Medicare Part D Coverage Gap ‘donut hole’ Rebate
The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable…
Small Business Health Care Tax Credit
This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers…
Health Coverage for Older Children
Health coverage for an employee’s children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans…
Additional Requirements for Tax-Exempt Hospitals
The Affordable Care Act adds requirements in the Internal Revenue Code that tax-exempt hospitals must meet to maintain their tax-exempt status.”
July 27, 2010
The American Medical Association (AMA) provided the following in its resource “Taxes and Credits in the Health System Reform Law” provided on www.ama-assn.org (accessed July 26, 2010):
“Beginning in 2013, an annual excise tax of 2.3 percent will also be imposed on the sale of Class I medical devices by manufacturers, producers or importers. Class I includes the vast majority of orthotics and prosthetics, as well as durable medical equipment. Exemptions are provided for eyeglasses, contact lenses, hearing aids and any device that is generally purchased at retail for individual use…
Effective 2013, employers that currently sponsor retiree prescription drug plans will no longer be able to deduct amounts contributed to them. However, future Medicare Part D subsidies will continue to be tax-free to the employer…
Effective 2013, the deduction for executive and employee compensation for health insurance providers is limited to $500,000 per applicable individual. The limit applies to all officers, employees, directors and other workers…
Individuals must obtain minimum essential coverage for themselves and their dependents, effective 2014, with certain exemptions (i.e., hardship, religious reasons). Those without coverage will pay a tax penalty…
Effective 2013, the hospital insurance (Medicare Part A) payroll tax will increase by 0.9 percent on high-income workers earning more than $200,000 and joint flers earning more than $250,000. In addition, a 3.8 percent Medicare tax will be imposed on net investment income from interest, dividends, annuities, royalties, rents and taxable net gain for these same individuals…
Effective 2013, the threshold for claiming the itemized tax deduction for unreimbursed medical expenses will increase from 7.5 percent to 10 percent for taxpayers under 65. The increased threshold applies to individuals 65 years and older in 2017…
Effective 2011, the tax on distributions from an HSA or Archer MSA that are not used for qualifed medical expenses is raised to 20 percent. Also effective 2011, the cost of over-the-counter medicines may not be reimbursed through an FSA, HSA, Archer MSA, or Health Reimbursement Arrangements, unless obtained with a prescription…
Payments made under any state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health care services in underserved or health professional shortage areas will be excluded from gross income.”
July 26, 2010
[Editor’s Note: The Congressional Budget Office (CBO), in its Mar. 20, 2010 reportregarding the cost estimate for the health reform bills (HR 4872 in combination with HR 3590), estimated that from 2010-2019 small business tax credits will total $40 billion. It also estimated that for the same time period tax revenues collected from employers, uninsured individuals, excise tax on high-premium insurance plans, and other tax revenues resulting from health coverage provisions in the health reform bills will total $149 billion.]
PRO (yes)
Pro
Dan Pfeiffer, White House Communications Director, wrote the following in his Apr. 13, 2010 post “Health Reform and the Recovery Act: Unprecedented Tax Cuts for the Middle Class” on the White House blog at www.whitehouse.gov:
“The health reform legislation signed into law by President Obama includes the largest health care tax cut in history for middle class families, helping to make insurance much more affordable for millions of families…
The Small Business Health Care Tax Credit can cover up to 35 percent of the premiums a small business pays to cover its workers. In 2014, the rate will increase to 50 percent…”
Apr. 13, 2010
Pro
The US Department of Health and Human Services (HHS) provided the following in its “Provisions of the Affordable Care Act, by Year” page on www.healthcare.gov (accessed July 22, 2010):
• “Up to 4 million small businesses are eligible for tax credits to help them provide insurance benefits to their workers. The first phase of this provision provides a credit worth up to 35 percent of the employer’s contribution to the employees’ health insurance. Small non-profit organizations may receive up to a 25 percent credit. Effective now…
• Tax credits to make it easier for the middle class to afford insurance will become available for people with incomes above 133 percent and below 400 percent of poverty ($43,000 for an individual or $88,000 for a family of four in 2010) who are not eligible for or offered other affordable coverage. These individuals may also qualify for reduced cost-sharing (e.g. copayments, coinsurance, and deductibles). Effective January 1, 2014…
• The law implements the second phase of the small business tax credit for qualified small businesses and small non-profit organizations. In this phase, the credit is up to 50 percent of the employer’s contribution to provide health insurance for employees. There is also up to a 35 percent credit for small non-profit organizations. Effective January 1, 2014.”
July 22, 2010
Pro
Yolanda Garcia Olivarez, Regional Administrator for the Small Business Administration (SBA) in Region VI, wrote the following in her July 19, 2010 Fort Worth Business Press article “New Health Reform Law Provides Small Business Benefits”:
“[The Patient Protection and Affordable Care Act] offers tax credits for small employers who pay at least half of their employees’ health insurance premiums. Starting this year, businesses with less than 25 employees who make an average of $50,000 or less may be eligible for a credit of up to 35 percent of the premiums they pay on their employee’s behalf. For small nonprofits, it’s up to 25 percent.
In 2014, those credits will increase to up to 50 percent and 35 percent, respectively…
Even if a small business owner with 50 or fewer employees still decides not to buy health insurance with these incentives, there is no penalty. They’re exempt from the employer responsibility provision of the new law. In this case, small business workers will be able to use individual tax credits to shop for insurance in the exchanges. And it’s important to note that 96 percent of businesses with more than 50 employees already offer coverage.”
July 19, 2010
CON (no)
Con
Dave Camp, JD, US Representative (R-MI), wrote in his May 27, 2010 Roll Call article “Health Law Will Hurt Consumers, Business”:
“…[T]he health care law increased taxes by more than $500 billion, with much of that burden falling on the middle-class families…
[T]he so-called small-business tax credits in the law will be of little use to employers and employees. Employers with more than 50 workers — those who are mandated by the law to provide government-approved health insurance to their employees or pay a new tax — cannot even get the credit…Furthermore, the Democrats’ health care overhaul created a new Medicare tax that will hit many small-business owners, because the majority of small businesses pay taxes at the individual level.”
May 27, 2010
Con
The US Chamber of Commerce wrote the following in its Mar. 19, 2010 letter “H.R. 3590, the ‘Patient Protection and Affordable Care Act,’ and the Related Budget Reconciliation Legislation, H.R. 4872, the ‘Student Aid and Fiscal Responsibility Act of 2009′” to the US House of Representatives, available on library.uschamber.com:
“The Senate bill would: impose job-killing mandates and penalties on businesses, increase taxes and burdens on small businesses… H.R. 4872 is no ‘fix’ for the Senate-passed bill. It includes a long term hidden tax by deferring the ‘Cadillac tax’ on certain high cost health plans until 2018. The number of Americans that will ultimately suffer from this hidden tax will mushroom each year because the tax is indexed to inflation—the growth in the Consumer Price Index—rather than the much higher growth rate of healthcare costs. In the end, this new tax will ensnare a growing number of Americans, much like the growing problem of the Alternative Minimum Tax (AMT).
This bill would also impose a new 3.8 percent ‘Medicare tax’ on non-wage income that would target high income earners, income from interest, dividends, capital gains, and some profits from investments in partnerships and S-corporations. If this tax and other tax increases included in the President’s FY 2011 budget become law, certain taxpayers could expect a marginal tax rate on capital gains and qualified dividends of 23.8 percent, and a marginal tax rate on non-qualified dividends of 43.4 percent. This tax is not indexed for inflation, and will have an insidious, AMT-like affect.”
Mar. 19, 2010
Con
Douglas J. Holtz-Eakin, PhD, President of American Action Forum and former Congressional Budget Office Director, wrote in his May 2010 paper “Labor Markets and Health Care Reform: New Results” on americanactionforum.org:
“The PPAC [Patient Protection and Affordable Care Act] raises to shocking levels the effective marginal tax rates (EMTR) on lower and middle-income singles and families. The effective marginal tax rate is the answer to the question: ‘If I earn $1 more, how much less than $1 do I get to save or spend?’ If you can keep that full dollar for your disposal, the effective marginal tax rate is zero. If earning another dollar does not raise your disposable income by even a penny, the effective marginal tax rate is 100 percent…
As a family’s income rises above 133 percent of FPL [Federal Poverty Level], they will receive their subsidy to purchase health insurance in the exchanges. In turn, however, as their efforts yield higher income, subsidies are clawed back or effectively taxed away. The current law policies show that there are already some lower income families facing EMTRs above those in the middle class…
The PPAC is fiscally dangerous, raising the risk of higher labor (and other) taxes… It provides strong incentives for employers – and their employees – to drop employer-sponsored health insurance for as many as 35 million Americans, perhaps leading to widespread turmoil in labor compensation and employee insurance coverage – and raising the taxpayer cost of the subsidies to $1.4 trillion in the first 10 years.”
May 2010
