March 23, 2012

How Is the Patient Protection and Affordable Care Act Paid For?

Washington, DC, March 23, 2012—This week marks the 2nd anniversary of the Patient Protection and Affordable Care Act (PPACA), the controversial health care law signed by President Obama in 2010. Since then, its proponents have debated with its foes over the long-term impact the law will have on patients, taxpayers, and the economy. The Tax Foundation has helped inform this debate by introducing the Health Care Tax Calculator.

“The health care law was complex and included dozens of provisions impacting Americans as consumers and taxpayers, so it’s not surprising that there’s a great deal of confusion surrounding the legislation,” said Tax Foundation analyst and programmer Nick Kasprak. “We hope the Health Care Tax Calculator will help individuals get a better idea of how revenue-raising provisions of the new law will collectively impact them.”

The Health Care Tax Calculator aggregates the cost of many different taxes included in the Patient Protection and Affordable Care Act using user-provided data, giving consumers an overall view of how those costs will affect their household budget. Main components include the “Cadillac tax” on employer-provided health plans above a certain cost, new payroll taxes on high-income earners, an annual fee on prescription drug manufacturers, and a new excise tax on medical devices.

The Tax Foundation has also weighed in on the legal challenge to the Patient Protection and Affordable Care Act, soon to be heard before the U.S. Supreme Court. The brief, co-authored by Vice President of Legal Projects Joseph Henchman and Law Clerk Laura Lieberman, examines whether the cost levied on individuals who do not purchase health care insurance qualifies as a “penalty” or a tax.

In addition to the Health Care Tax Calculator , the Tax Foundation provides several other online data tools for consumers, taxpayers, and policymakers to examine the effects of taxes at the federal, state, and local level. Available tools include a searchable database of property taxes by county, the marginal tax rates calculator and graph, and state-to-state migration data.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

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A 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.

A payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue.

An excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections.