1. Healthcare Reform – Really? Rose Hammond Delaney, RN, MAPW, MBA, DrPH, MA/ILR

2. Funding ObamaCare  Love it or hate it, ObamaCare was signed into law by President Obama on March 23, 2010.  The 2,700+ page bill contains many new and creative ways to pay for the legislation.  All of them are tax hikes, except for the $500 billion dollars to be carved out of Medicare over the next 10 years.

3. Funding ObamaCare  The worst of the tax hikes, is that for the first time in our country’s history, the combined employer-worker 2.9% Medicare payroll tax will apply to “unearned income”.  That means the Medicare rate would extend beyond wages to interest, dividends, capital gains, annuities, royalties and rents for individuals with adjusted gross income above $200,000 and joint filers over $250,000, effective 2013.

4. Funding ObamaCare  The White House plan also raises the ordinary Medicare payroll tax by 0.9% points for the same filers, bringing it to 3.8%.  Earning even a single dollar more than $200,000 in adjusted gross income will slap the 3.8% tax on every dollar of a taxpayer’s investment income, creating a huge marginal-rate spike that will hurt middle-class earners, as opposed to the superrich.

5. Funding ObamaCare  This two-tier tax fundamentally alters the social insurance model that has governed Medicare for more than a half-century. Medicare is suppose to be a universal entitlement with at least some connection between taxes paid on wages in return for benefits. The investment tax severs this link by redirecting Medicare’s “dedicated” revenues toward a new entitlement.  Also, the CBO (Congressional Budget Office) stated that the claim that this tax will reduce the deficit AND extend the life of Medicare, is just plain wrong. It will either reduce the deficit OR extend the life of Medicare, but not both. You cannot spend the same Medicare dollar twice.

6. Funding ObamaCare  There will be a new 40% excise tax on health insurance plans (“Cadillac” plans) valued in excess of $10,200 for individuals and $27,500 for families, to take effect in 2018.  Many families making far less than $250,000 a year have high-end plans and will be subject to the excise tax when it goes into effect.

7. Funding ObamaCare  The mandate to purchase health insurance will raise taxes on families. When fully implemented in 2016, the individual penalty for not complying will reach up to $695 per person (for up to 3 people, or $2,085 per household) or 2.5% of taxable income.  This added cost-whether as new premiums or as a penalty for not purchasing insurance-is a de facto tax increase for these individuals.

8. Funding ObamaCare  Employers also have a new mandate to provide health insurance for their employees.  Employers with more than 50 employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit will pay a fine of $2,000 per employee (excluding the first 30) or $3,000 per employee receiving the premium tax credit.

9. Funding ObamaCare  This mandate may have unintended consequences.  According to the Kaiser Family Foundation’s Survey of Employer-Sponsored Health Benefits for 1999 to 2009, the average annual cost of health insurance, as part of a group plan, is: Individual $4,824 and Family $13,375.  In either case, the cost of the fine is less than the cost of providing insurance, which may be an incentive for companies to stop offering health insurance as a benefit.

12. Funding ObamaCare  Families will feel the bite of these tax increases in two ways: 1. If an employer begins to offer insurance, the wages of those covered will be dropped by the amount the insurance costs the employer. 2. If the employer fails to offer coverage, it will pay the tax, and the employee’s compensation will drop by that amount.  The workers’ total compensation does not change, only its composition. Workers will be forced to take more of their compensation in the form of health insurance, and their cash wages will fall. Lower cash income will negatively affect middle and lower income families.

13. Funding ObamaCare  There are also a number of smaller tax hikes that will fall on middle and lower income Americans. These hikes include: –A reduction in the number of medical products that taxpayers can purchase using health savings accounts (HSAs) and flexible spending accounts (FSAs). –An increase in the penalty for purchasing disallowed products with HSAs to 20%. –A limit on the amount that taxpayers can deposit in FSAs to $2,500 a year after 2013.

14. Funding ObamaCare  Other tax hikes include:  Higher corporate taxes through stricter enforcement by requiring them to report more information on their business activities.  An annual fee on manufacturers and importers of branded drugs based on each individual company’s share of the total market.  A 2.3% excise tax on manufacturers and importers of certain medical devices.  An annual fee on health insurance providers based on each company’s share of the total market.  Elimination of the corporation deduction for prescription expenses for retirees. This provision has caused many large companies to announce write-downs of their future earnings. For example, Caterpillar, Verizon, AT&T, John Deere have all made such announcements.

15. Funding ObamaCare  Increase the 7.5% floor on medical expense deductions to 10%.  Increase taxes on health insurance companies by limiting the amount of compensation paid to certain employees they can deduct from their taxes.  Repeal special deduction for Blue Cross/Blue Shield organizations.  A 10% excise tax on indoor tanning services.  Exclusion of unprocessed fuels from existing cellulosic biofuel producer credit.

16. Funding ObamaCare  Several of the taxes listed above, while not targeting middle income families, will ultimately be passed on to them through higher prices. These include the fees on medical device manufacturers, health insurance companies, pharmaceutical companies and the tax on tanning services.  Restricting how much taxpayers can set aside in HSAs and FSAs will increase income taxes paid by middle and low income families.

17. Funding ObamaCare  The mandate on individuals to purchase health insurance will function as a tax on middle and low income families that are currently not covered. Even those who have coverage will be forced to buy more expensive coverage because of mandates that require certain levels of coverage.

18. Funding ObamaCare  Over time, the new taxes will substantially slow economic growth and affect taxpayers from all walks of life. This will become most apparent in lost wages and international competitiveness.  These lost wages, largely out of the pockets of middle and low income families, represent a huge cost of this legislation that does not show up in any official table, but this cost is real. It reduces families’ incomes just as surely as an income tax hike would.

20. References  Curtis S. Dubay, “Obamacare:Impact on Taxpayers”, Heritage Foundation, April 14, 2010, at http://report.heritage.org/bg2402. http://report.heritage.org/bg2402  Kaiser Family Foundation, “Summary of New Health Reform Law,” March 26, 2010, at http://kff.org/healthreform/upload/8061.p df (April 5, 2010). http://kff.org/healthreform/upload/8061.p df http://kff.org/healthreform/upload/8061.p df  “ObamaCare’s Worst Tax Hike,” Wall Street Journal, March 17, 2010.