JCHS IPE 300

(Posted for Taxpayer Group)

Group 1: Impact on Tax Payers

The health care reform law will impose higher taxes on tax payers and violate our ability to make our own decisions to buy or not to buy insurance by requiring the purchase of medical insurance. This law will increase taxes by more than $500 billion, putting much of the burden on middle-class families. The bill imposes job-killing mandates and penalties on businesses, increases taxes, and burdens on small businesses. “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.” (ProCon.org, 2010)

In the Federal Tax Course Letter it states,

• “An additional 0.9% Medicare tax (for a total Medicare tax of 3.8%) will be imposed on taxpayers (other than corporations, estates or trusts) receiving wages with respect to employment in excess of $200,000 (250,000 in the case of joint filers and surviving spouses, and $125,000 in the case of married taxpayer filing separately [Code Sec. 3101(b)(2)].

• An additional 0.9% Medicare tax will be imposed on an individual’s net earnings from self-employment in excess of the above threshold amounts [Code Sec. 1401(b)(2)].

• Higher-income taxpayers with investment income will be subject to a new 3.8% unearned income Medicare contributions tax on their net investment income. The unearned income Medicare tax is imposed on the lesser of (1) net investment income, or (2) the excess of modified gross income over the threshold amounts [Code Sec. 1411(a)]. (Beware of Medicare Tax Increase in 2013, 2012, p. 6)

What does this mean for the taxpayer; it means that you may need to talk with a tax advisor to help shield you from the government imposing increased taxes on your earned income. Retirement plan distributions will be exposed to the 3.8% Medicare tax. If you sell your home starting in 2013 you could be subject to capital gains tax at 3.8%. Estates and trusts will be exposed to 3.8% unearned income Medicare contribution tax. Kiplinger’s states, “In 2013, employers must limit your pretax contributions to flexible spending accounts to $2,500 per year (down from $3,000 to $4,000 for many employers) and provide a summary of benefits during open enrollment.” (Lankford K, 2012, p. 13)

The IRS will have to enforce 47 new tax codes mandated by “The Affordable Care Act” and it is stated in Bloomberg BusinessWeek that, “Putting all of this into place is expected to cost $881 million through 2013, according to the Treasury Department, Douglas Shulman, the agency’s commissioner, told Congress that the IRS needs $13.1 billion in fiscal 2013, an 11% increase from 2012, to get the job done on schedule.” (Dwoskin, 2012) A sampling of these mandates include, “Patrons of tanning salons pay a 10% tax to catch fake rays, Medical device makers pay a 2.3% tax on annual sales, and by 2014 Americans who decline health coverage pay a penalty tax of $695 per year or 2.5% of household income. (Dwoskin, 2012)

No one contradicts the fact that changes need to occur in our medical system but we need a better detailed plan. Taxes will increase drastically under the current Patient Protection and Affordable Care Act and will continue to rise as the IRS struggles to implement and enforce the new tax codes. In the end everyone will be left with increased financial burdens due to this Act and possibly little change in medical outcomes.

References

ProCon.org. (2010, July 28). Will Obamacare lower taxes? HealthCare Reform.ProCon.org Retrieved from http://healthcarereform.procon.org/view.answers.php?questionID=001477

Beware of Medicare Tax Increase in 2013. (2012). Federal Tax Course Letter, 26(8), 6-10.

Dwoskin, E. (2012). Collecting America's Newest Tax. Bloomberg Businessweek(4287), 28.

Lankford K, K. S. (2012). Health Care: A Work In Progress. Kiplinger's Personal Finance, 66(9), 13-14.

This is the post from a group from another section of IPE 300. If you have the Insurance Executives group for section 2, please go ahead and post.