Tags: health | care | taxes

Democrats Eye New Taxes to Help Pay for Obamacare

Tuesday, 25 Dec 2012 07:06 AM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
New taxes are coming Jan. 1 to help finance President Barack Obama's healthcare overhaul. Most people may not notice. But they will pay attention if Congress decides to start taxing employer-sponsored health insurance, one of the options in play if lawmakers can ever agree on a budget deal to reduce federal deficits.

The tax hikes already on the books, taking effect in 2013, fall mainly on people who make lots of money and on the healthcare industry. But about half of Americans benefit from the tax-free status of employer health insurance. Workers pay no income or payroll taxes on what their employer contributes for health insurance, and in most cases on their own share of premiums as well.

It's the single biggest tax break allowed by the government, outstripping the mortgage interest deduction, the deduction for charitable giving and other better-known benefits. If the value of job-based health insurance were taxed like regular income, it would raise nearly $150 billion in revenue in 2013, according to congressional estimates. By comparison, wiping away the mortgage interest deduction would bring in only about $90 billion.

Alert: Will Boehner, Obama Avoid the Fiscal Cliff? Vote Here

"If you are looking to raise revenue to pay for tax reform, that is the biggest pot of money of all," said Martin Sullivan, chief economist with Tax Analysts, a nonpartisan publisher of tax information.

It's hard to see how lawmakers can avoid touching health insurance if they want to eliminate loopholes and curtail deductions so as to raise revenue and lower tax rates. Congress probably wouldn't do away with the healthcare tax break, but limit it in some form. Such limits could be keyed to the cost of a particular health insurance plan, the income level of taxpayers, or a combination.

Many economists think some kind of limit would be a good thing, because it would force consumers to watch costs, and that could help keep healthcare spending in check. Obama's health law took a tentative step toward limits by imposing a tax on high-value health insurance plans. But that doesn't start until 2018.

Next spring will be three years since Congress passed the healthcare overhaul, but because of a long phase-in, many of the taxes to finance the plan are only now coming into effect. Medicare spending cuts that help pay for covering the uninsured have started to take effect, but they also are staggered. The law's main benefit, coverage for 30 million uninsured people, will take a little longer. It doesn't start until Jan. 1, 2014.

The biggest tax hike from the healthcare law has a bit of mystery to it. The legislation calls it a "Medicare contribution," but none of the revenue will go to the Medicare trust fund. Instead, it's funneled into the government's general fund, which does pay the lion's share of Medicare outpatient and prescription costs, but also covers most other things the government does.

The new tax is a 3.8 percent levy on investment income that applies to individuals making more than $200,000 or married couples above $250,000. Projected to raise $123 billion from 2013-2019, it comes on top of other taxes on investment income. And while it does apply to profits from home sales, the vast majority of sellers will not have to worry since another law allows individuals to shield up to $250,000 in gains on their home from taxation. (Married couples can exclude up to $500,000 in home sale gains.)

Alert: Will Boehner, Obama Avoid the Fiscal Cliff? Vote Here

Investors have already been taking steps to avoid the tax, selling assets this year before it takes effect. The impact of the investment tax will be compounded if Obama and Republicans can't stave off the automatic tax increases scheduled at the end of the year if there's no budget agreement.

High earners will face another new tax under the healthcare law Jan. 1. It's an additional Medicare payroll tax of 0.9 percent on wage income above $200,000 for an individual or $250,000 for couples. This one does go to the Medicare trust fund.

Donald Marron, director of the nonpartisan Tax Policy Center, calls the healthcare law tax increases medium-sized by historical standards. The center, a joint project of the Brookings Institution and the Urban Institute, provides in-depth analysis on tax issues.

They also foreshadow the current debate about raising taxes on people with high incomes. "These were an example of the president winning, and raising taxes on upper-income people," said Marron. "They are going to happen."

Other healthcare law tax increases taking effect Jan. 1:

— A 2.3 percent sales tax on medical devices used by hospitals and doctors. Industry is trying to delay or repeal the tax, saying it will lead to a loss of jobs. Several economists say manufacturers should be able to pass on most of the cost.

— A limit on the amount employees can contribute to tax-free flexible spending accounts for medical expenses. It's set at $2,500 for 2013, and indexed thereafter for inflation.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Newt Gingrich: Houston Pastor Subpoenas Part of a 'Radical Agenda'

Saturday, 25 Oct 2014 13:07 PM

Houston Mayor Annise Parker's decision to issue subpoenas for sermons from the city's Christian pastors was for much la . . .

Advocates Seek to End Tennessee's Appeal as 'Abortion Destination'

Saturday, 25 Oct 2014 11:20 AM

Anti-abortion advocates are trying to change laws in Tennessee, which they deride as being the abortion destination of . . .

Texas Candidate in GOP Address: Time To Clean Up Washington

Saturday, 25 Oct 2014 09:37 AM

The United States needs new energy to stay strong, and the government needs to clean up the mess of debt and waste mov . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved