New Taxes in the Health Care Law

The Obamacare Taxes (Over $1.2 Trillion in New Taxes Collected in 10 Years).   The latest estimate is that Obamacare will cost $2.6 Trillion – Nearly $1.7 Trillion more than Obama promised.   Last update: August 22, 2012

Year Description Tax Revenue
2010 Tax on Innovator Drug Companies: $2.3 billion annual tax on the industry imposed relative to share of sales made that year. $22.2 Billion
2010 Excise Tax on Charitable Hospitals: $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS.
2010 Blue Cross/Blue Shield Tax Hike: The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services. $0.4 Billion
2010 Tax on Indoor Tanning Services: New 10 percent excise tax on Americans using indoor tanning salons. $2.7 Billion
2010 “Black liquor” tax Credit. This is a tax increase on a type of bio-fuel.  This substance, a wood-pulping byproduct, is utilized as a biofuel to generate electricity for paper-making companies throughout the U.S $23.6 Billion
2010 Codification of the “economic substance doctrine”.  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. $4.5 Billion
2011 Medicine Cabinet Tax: Americans no longer 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). $5 Billion
2011 Employer Reporting of Insurance on W-2: Preamble to taxing health benefits on individual tax returns.
2011 Increase penalty for nonqualified HSA distributions (HSA Withdrawal Tax Hike).   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. $1.4 Billion
2011 Annual tax on drug manufacturers / importers. $27 Billion
2012 Corporate 1099-MISC Information Reporting: Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers. $17.1 Billion
2013 Increase In Medicare Payroll Tax (For single employees making over $200,000/year and married employees making over $250,000/year): Payroll Tax currently at 1.45% increases to 2.9%.  Self-employed tax is increased to 3.8%. $86.8 Billion
2013 Higher Threshold for Itemized Medical Expense Deductions:  Currently, you can claim an itemized deduction for medical expenses paid for you, your spouse, and your dependents, to the extent the expenses exceed 7.5% of adjusted gross income (AGI). Starting in 2013, the hurdle is raised to 10% of AGI. However, if either you or your spouse is age 65 or older at the end of the year in 2013, the 10%-of-AGI threshold will not take effect until 2017.
2013 Surtax on Other Investment IncomeA new, 3.8 percent surtax on “Other” investment income earned in households making at least $250,000 ($200,000 single).  Taxes are increased from 39.6% to 43.4%  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.  It DOES however, include the sale of your home. $123 Billion
2013 Flexible Spending Account Cap – aka “Special Needs Kids Tax”: Imposes cap of $2500 (Indexed to inflation after 2013) on FSAs (now unlimited). . 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.

$13 Billion
2013 Tax on Medical Device Manufacturers: Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax. Exemptions include items retailing for less than $100. $20 Billion
2013 Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D. $4.5 Billion
2013 $500,000 Annual Executive Compensation Limit for Health Insurance Executives. $0.6 Billion
2013 Limit deduction for remuneration to officers, employees, directors, and service providers of certain health insurance providers. $0.6 Billion
2013 Impose fee on insured and self-insured health plans; patient-centered outcomes research trust fund. $2.6 Billion
2014 Sales tax on health insurance:   A new sales tax on health insurance that will add to the cost of coverage for people purchasing coverage on their own, for small employers, and for Medicare and Medicaid beneficiaries with private coverage. The Congressional Budget Office (CBO) said that this tax will be “largely passed through to consumers in the form of higher premiums.” And an analysis by Oliver Wyman estimates that this tax “will increase premiums in the insured market on average by 1.9% to 2.3% in 2014,” and by 2023 “will increase premiums 2.8% to 3.7%.” $73 Billion
2014 Individual Health Insurance Mandate:
Starting in 2014, you will be required to obtain “qualified” health insurance for yourself and any dependants or pay a penalty (tax) for every month you are not covered. You are allowed a coverage gap of less than 90 days every year.

The tax penalty begins in 2014 and phases up to its maximum amount in 2016. You will either have to pay a set dollar amount of $695 per year (adjusted for inflation) or 2.5% of your base household income, whichever is higher. Your base income is defined as any amount over the filing threshold for the applicable tax year.

The tax penalty is assessed for every person in your house who does not have insurance up to a cap of 300 percent of the set dollar amount. In 2016, this cap would be $2,085. If you are a dependent under 18, your set dollar amount is cut in half.
If you are required to pay a tax penalty but fail to do so, you will receive a notice from Internal Revenue Service (IRS). If you still fail to pay, the IRS can reduce the amount of your future tax refunds by the amount owed. Also, if you fail to pay, your penalty will double.

$27 Billion
2014 Employer Mandate Tax: If an 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 $2000 for every full-time employee. This provision applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If 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). $65 Billion
2014 Tax on Health Insurers: Annual tax on the industry imposed relative to health insurance premiums collected that year. The stipulation phases in gradually until 2018, and is fully-imposed on firms with $50 million in profits. $60.1 Billion
2018 Excise Tax on Comprehensive Health Insurance Plans: New 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). For early retirees and high-risk professions a higher threshold exists: ($11,500 single/$29,450 family). CPI +1 percentage point indexed. $32 Billion
Other Targets
2011 Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.
Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.
Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000. This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be “depreciated.”
The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.
Higher taxes on marriage and family. The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income. 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 the single level. The dependent care and adoption tax credits will be cut.
Federal payments (taxes) required by President Barack Obama’s health care law are being understated by as much as $68 billion per year because official budget forecasts ignore the cost of insuring many employees’ spouses and children, according to a new analysis.  This will also include the case where states do not elect to expand their Medicaid Program as described in the law. Since the states will not fund the programs (increase in state tax), the Fedral Government will collect the tax to pay for people who would otherwise be added to the Medicaid Program $680 Billion
2012 Cuts from Medicare To Help Fund Obamacare $716 Billion
2012 Cuts from Medicare Advantage To Help Fund Obamacare $132 Billion
2012 The Medicare Part B premium will increase from the present monthly fee of $96.40, rising to $104.20 in 2012, $120.20 in 2013, and $247 in 2014. That’s an increase of 156 percent in just three years. Those provisions are embedded in Obamacare but were delayed by the Democratic bill writers until after the 2012 election in order to hide them from voters.

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