Yesterday was Tax Day, and former Defense Secretary Donald Rumsfeld shared a letter he sent to the IRS with his Twitter followers. Rumsfeld said he did his best to fill out his taxes but says he's not sure he got it...
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- Estimating the Tax Costs of 'Obamacare'
Estimating the Tax Costs of 'Obamacare'
Over at The Foundry, Kathryn Nix and Alyene Senger consider the tax impact of the Patient Protection and Affordable Care Act – known as “Obamacare” to its critics and supporters alike. Many recent sources have pointed out that “the wealthy” would be better off if PPACA were found unconstitutional, because of the 3.8% surtax included in the law for those earning more than $200,000 a year. Nix and Segner argue, however, that the tax burden of Obamacare will end up being quite widespread and fall on the majority of the U.S. population, not just a handful of high-income earners.
They emphasize that, over time, the normal process of inflation will pull an ever-larger number of Americans into the pool of individuals subject to higher payroll taxes:
Obamacare raises taxes by more than $500 billion in a decade, and a number of these will hit Americans at all levels of the income scale.
Beginning in 2013, the law increases the Hospital Insurance (HI) payroll tax from 2.9 percent to 3.8 percent for individuals earning above $200,000 and couples earning more than $250,000. The payroll tax is also applied to these earners’ investment income for the first time. But since the increased tax rates aimed at these higher income brackets are not indexed to inflation, they will impact more middle-class Americans every year.
In fact, the higher payroll tax rate will eventually hit a huge majority of Americans.
If you’re wondering how the tax law changes in Obamacare will affect your household in particular, make your way to the Health Care Tax Calculator, where you can get a quick estimate of how much your tax burden will rise as the law phases in.
For more information on the constitutionality of the law itself, see the Tax Foundation’s Supreme Court brief, The Health Care Individual Mandate is Beyond Congress’s Taxing Power, by Joseph Henchman and Laura Lieberman.
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