Obamacare’s New Taxes, And How You May Be Affected

A week ago today, the Supreme Court ruled that Obamacare’s individual mandate is a legitimate use of Congress’ power to taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. (see our response here). In the wake of the ruling, the House Committee on Ways and Means produced this useful chart (reproduced below), which outlines this and 20 other taxes comprised in the law. Collectively, these new revenue measures are expected to increase taxes/penalties by at least $800 billion over the next 10 years, according to the Joint Committee on Taxation (JCT).

This estimate has increased dramatically since the law was passed in 2010 because now more of the taxes fall within the 10 year budget window. For instance, the “Cadillac tax” doesn’t go into effect until 2018, meaning even the current estimate understates the fully phased-in tax increase. Combined with the fact that the individual mandate, employer mandate and other revenue effects have not yet been re-estimated since 2010, it means that fully phased-in Obamacare likely amounts to a tax increase of more than a $1 trillion over 10 years.

Provision	March 2010 Estimate, 2010-2019, $US billion	June 2012 Re-Estimate, 2013-2022, $US billion
Additional 0.9 percent payroll tax on wages and self-employment income and new 3.8 percent tax on dividends, capital gains, and other investment income for taxpayers earning over $200,000 (singles) / $250,000 (married)	210.2	317.7
“Cadillac tax” on high-cost plans *	32	111
Annual tax on health insurance providers *	60.1	101.7
Annual tax on drug manufacturers/importers *	27	34.2
2.3 percent excise tax on medical device manufacturers/importers*	20	29.1
Limit FSAs in cafeteria plans *	13	24
Raise 7.5 percent AGI floor on medical expense deduction to 10 percent *	15.2	18.7
Deny eligibility of “black liquor” for cellulosic biofuel producer credit	23.6	15.5
Codify economic substance doctrine	4.5	5.3
Increase penalty for nonqualified HSA distributions *	1.4	4.5
Impose limitations on the use of HSAs, FSAs, HRAs, and Archer MSAs to purchase over-the-counter medicines *	5.0	4
Impose fee on insured and self-insured health plans; patient-centered outcomes research trust fund *	2.6	3.8
Eliminate deduction for expenses allocable to Medicare Part D subsidy	4.5	3.1
Impose 10 percent tax on tanning services *	2.7	1.5
Limit deduction for compensation to officers, employees, directors, and service providers of certain health insurance providers	0.6	0.8
Modify section 833 treatment of certain health organizations	0.4	0.4
Additional requirements for section 501(c)(3) hospitals	Negligible	Negligible
Employer W-2 reporting of value of health benefits	Negligible	Negligible
Employer mandate *	52	Pending
Individual mandate *	17	Pending
Other Revenue Effects	60.3	Pending
Total Gross Tax Increase:	569.2	804.6**
* Provision targets households earning less than $250,000. ** Based on 2010 estimates for the individual mandate, employer mandate and other revenue effects.
Source: Joint Committee on Taxation Estimates, prepared by Ways and Means Committee Staff

Though Obama vowed not to raise taxes on low-to-middle income Americans, various provisions will most certainly fall on lower income groups. For example, new annual taxes on health insurance providers, drug manufacturers, and the medical device industry will be passed on to all consumers in the form of higher prices and premiums. More direct are new taxes on high-cost “Cadillac” health plans, the tax on tanning services that is already in effect, and the individual mandate tax/penalty.

Regarding the tax/penalty for not purchasing health insurance, Tax Foundation analysis indicates that many low and middle-income households will experience tax increases of substantial magnitude. For example, starting in 2016, an uninsured family of four with income of $50,000 will owe $2,085—or 4.17 percent of income. For the complete distributional breakdown, click here.

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