12 Taxes in Health Care Law Violate Obama’s Pledge Not to Increase Taxes on Earnings Less than $250m

12 Taxes in Health Care Law Violate Obama’s Pledge Not to Increase Taxes on Households Earning Less than $250,000

President Barack Obama smiles in the East Room of the White House in Washington, Tuesday, March 23, 2010, during the signing ceremony for the health care bill. (AP Photo/J. Scott Applewhite)(CNSNews.com) – As many as a dozen taxes in the new health care law violate President Barack Obama’s campaign pledge not to raise taxes on families earning less than $250,000 and on individuals earning less than $200,000.

At least seven of these taxes directly affect health consumers regardless of income, such as the individual mandate to buy insurance, the employer mandate, the tanning tax, and limits and penalties on health savings accounts. In addition, Republicans argue that the tax impact of the law should include indirect taxes, such as the annual taxes on the health care sector that will be passed on to consumers.

On many occasions during the 2008 presidential campaign, candidate Barack Obama pledged that, if elected, he would ensure that Americans earning less than $250,000 a year would not see a federal tax increase of any kind.

“I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increases,” the Illinois senator told a crowd in Dover, N.H. on Sept. 12, 2008. “Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

As president, Obama repeated the pledge during his Feb. 24, 2009 address to a joint session of Congress.

“If your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not a single dime,” the president said.

The bulk of the $500 billion in tax increases in the new health care law targets households earning $250,000 and individuals earning $200,000 -- for example, the increase in the Medicare payroll tax. But many of the taxes hit the general public at large.

The individual mandate, for example, will require all legal U.S. residents to purchase a government-approved health insurance plan beginning in 2014. Once the reconciliation bill is voted on in the Senate to amend the law signed by Obama this week, the individual mandate will require a single person to pay 2.5 percent of their income or $695 if they do not purchase health insurance.

Generally, a single person making $30,000 or more will have to pay a 2.5 percent penalty if they do not carry health insurance. A person making less than $30,000 will have to pay $695. This penalty/tax is found in Section 1501 of the bill for “requirement to maintain minimum essential coverage.

The government will also mandate that employers provide health insurance for their employees. This mandate would include small businesses with revenues below $250,000 per year. If the employer does not provide health insurance, the business will have to pay a tax of $750 for each full-time employee. For the employer who requires a waiting period of 30-to-60 days, there is a $400 tax per employee and $600 per employee if the business takes longer than 60 days to comply. This is found in Section 1513 of the bill for “shared responsibility for employers.”

House Speaker Nancy Pelosi laughs as Majority Leader Steny Hoyer of Maryland speaks during a press conference after the House passed health care reform in the U.S. Capitol in Washington, Sunday, March 21, 2010. (AP Photo/Charles Dharapak)“Small businesses are particularly hard hit,” said Rep. Charles Boustany (R-La.), a doctor and member of the House Ways and Means Committee, which writes tax laws. “They may end up with revenue below $250,000 and will have less take-home pay.”

Under the new law, Americans would not be able to use pre-tax dollars from health savings accounts (HSA), flexible spending accounts (FSA), or health reimbursements accounts (HRA) to buy over-the-counter non-prescription medicines. This measure takes effect in 2011 and is supposed to bring in $5 billion dollars. This is found in Section 9003 of the law, under “Distributions for medicine qualified only if for prescribed drug or insulin.”

“Many of us expected the president would violate his pledge,” Boustany told CNSNews.com. “HSAs and FSAs are a prime example. There are other adjustments we will find as we dig into this law. The more the American people see, the more they will find how the amount of tax increases affects them personally.”

Further, the law increases the tax from 10 percent to 20 percent for non-medical early withdrawals from a health savings account for those under the age of 65. This measure takes effect in 2011 and is estimated to increase revenues by $1.3 billion. This is under Section 9004, “Increase in additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses.”

Beginning in 2011, the government will impose a cap of $2,500 on FSAs, which are now unlimited, as a means of raising $14 billion in revenue. This is under Section 9005, “Limitation on health flexible spending arrangements under cafeteria plans.”

Those seeking a tan without catching natural rays will find a new 10-percent excise tax on using indoor tanning salons. The tax, estimated to raise $2.7 billion, will take effect in July. This is under Section 10907, “Excise tax on indoor tanning services in lieu of elective cosmetic medical procedures.”

Now, medical expenses that exceed 7.5 percent of a person’s adjusted gross income can be deducted for tax purposes. But the new law raises that deduction threshold to 10 percent of adjusted gross income, meaning fewer tax deductions for someone with high medical costs. This provision starts in 2013 and is supposed to raise $15.2 billion in revenue. This is under Section 9013, “Modification of itemized deduction for medical expenses.”

The law also imposes a 40-percent tax on high-cost insurance plans reaching $10,200, but exempts union members unless the cost of their plan reaches $27,500. This is called the “Cadillac tax.” This tax is actually on the insurer. This goes into effect in 2018 and is estimated to raise $32 billion in revenue.

There is also a tax on insured and self-insured health plans for a patient-centered outcomes research trust fund. Boustany called this a slush fund for the Department of Health and Human Services to dole out grants.

The government estimates it will bring in $107 billion in revenue from new taxes on insurance companies, drug manufacturers and medical device manufacturers. These are three separate indirect taxes that will be passed on to consumers, Republicans contend.

“The annual tax on drug manufacturers and device makers will all be passed along to the consumer,” Rep. Cynthia Lummis (R-Wyo.) told CNSNews.com. “The high-cost plan will encourage some employees to join a union to get a 40-percent discount.”

But Americans for Tax Reform, a libertarian taxpayer-advocacy group, does not believe it is necessary to consider indirect taxes.

“Frankly, you can say any tax is going to affect consumers. We didn’t need to really stretch to include too many other things,” ATR tax policy analyst Ryan Ellis told CNSNews.com. “We have seven that were pretty clear violations of President Obama’s pledge not to raise taxes on these people. The one you always hear people bring up is the Cadillac excise tax. That’s not a tax on people, that's a tax on the insurance company. We’ve never asserted that that is a tax [on consumers] because frankly it isn’t. We don’t need to make that argument because there are seven that clearly are.”

Just before signing the bill into law, President Obama said, “And this represents the largest middle-class tax cut for health care in our history.”

A Democratic spokesman for the House Ways and Means Committee could not be reached for comment on Wednesday. But after Obama signed the bill on Tuesday, Ways and Means Committee Chairman Sander Levin (D-Mich.) said in a statement that the law provides tax credits for four million small businesses.

“Today, in the greatest of American traditions – opportunity and community – we enacted a law that will improve the overall health of our citizens and the overall well-being of our nation,” Levin said in the March 23 statement. “This legislation was the product of generations of hard work, driven by the personal stories of so many who have suffered from a lack of health insurance and the devastation of rising health care costs.”

Oh, and there is so much more we don’t know about.

The sections described below are taken from HR 3590 as agreed to by the Senate and from the reconciliation bill as displayed by the Rules Committee.

1. You are young and don’t want health insurance? You are starting up a small business and need to minimize expenses, and one way to do that is to forego health insurance? Tough. You have to pay $750 annually for the “privilege.” (Section 1501)
2. You are young and healthy and want to pay for insurance that reflects that status? Tough. You’ll have to pay for premiums that cover not only you, but also the guy who smokes three packs a day, drink a gallon of whiskey and eats chicken fat off the floor. That’s because insurance companies will no longer be able to underwrite on the basis of a person’s health status. (Section 2701).
3. You would like to pay less in premiums by buying insurance with lifetime or annual limits on coverage? Tough. Health insurers will no longer be able to offer such policies, even if that is what customers prefer. (Section 2711).
4. Think you’d like a policy that is cheaper because it doesn’t cover preventive care or requires cost-sharing for such care? Tough. Health insurers will no longer be able to offer policies that do not cover preventive services or offer them with cost-sharing, even if that’s what the customer wants. (Section 2712).
5. You are an employer and you would like to offer coverage that doesn’t allow your employers’ slacker children to stay on the policy until age 26? Tough. (Section 2714).
6. You must buy a policy that covers ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services; chronic disease management; and pediatric services, including oral and vision care.
You’re a single guy without children? Tough, your policy must cover pediatric services. You’re a woman who can’t have children? Tough, your policy must cover maternity services. You’re a teetotaler? Tough, your policy must cover substance abuse treatment. (Add your own violation of personal freedom here.) (Section 1302).
7. Do you want a plan with lots of cost-sharing and low premiums? Well, the best you can do is a “Bronze plan,” which has benefits that provide benefits that are actuarially equivalent to 60% of the full actuarial value of the benefits provided under the plan. Anything lower than that, tough. (Section 1302 (d) (1) (A))
8. You are an employer in the small-group insurance market and you’d like to offer policies with deductibles higher than $2,000 for individuals and $4,000 for families? Tough. (Section 1302 (c) (2) (A).
9. If you are a large employer (defined as at least 101 employees) and you do not want to provide health insurance to your employee, then you will pay a $750 fine per employee (It could be $2,000 to $3,000 under the reconciliation changes). Think you know how to better spend that money? Tough. (Section 1513).
10. You are an employer who offers health flexible spending arrangements and your employees want to deduct more than $2,500 from their salaries for it? Sorry, can’t do that. (Section 9005 (i)).
11. If you are a physician and you don’t want the government looking over your shoulder? Tough. The Secretary of Health and Human Services is authorized to use your claims data to issue you reports that measure the resources you use, provide information on the quality of care you provide, and compare the resources you use to those used by other physicians. Of course, this will all be just for informational purposes. It’s not like the government will ever use it to intervene in your practice and patients’ care. Of course not. (Section 3003 (i))
12. If you are a physician and you want to own your own hospital, you must be an owner and have a “Medicare provider agreement” by Feb. 1, 2010. (Dec. 31, 2010 in the reconciliation changes.) If you didn’t have those by then, you are out of luck. (Section 6001 (i) (1) (A))http://www.investors.com/stockresearch/quote.aspx?symbol=1
13. If you are a physician owner and you want to expand your hospital? Well, you can’t (Section 6001 (i) (1) (B). Unless, it is located in a country where, over the last five years, population growth has been 150% of what it has been in the state (Section 6601 (i) (3) ( E)). And then you cannot increase your capacity by more than 200% (Section 6001 (i) (3) (C)).
14. You are a health insurer and you want to raise premiums to meet costs? Well, if that increase is deemed “unreasonable” by the Secretary of Health and Human Services it will be subject to review and can be denied. (Section 1003)
15. The government will extract a fee of $2.3 billion annually from the pharmaceutical industry. If you are a pharmaceutical company what you will pay depends on the ratio of the number of brand-name drugs you sell to the total number of brand-name drugs sold in the U.S. So, if you sell 10% of the brand-name drugs in the U.S., what you pay will be 10% multiplied by $2.3 billion, or $230,000,000. (Under reconciliation, it starts at $2.55 billion, jumps to $3 billion in 2012, then to $3.5 billion in 2017 and $4.2 billion in 2018, before settling at $2.8 billion in 2019 (Section 1404)). Think you, as a pharmaceutical executive, know how to better use that money, say for research and development? Tough. (Section 9008 (b)).
16. The government will extract a fee of $2 billion annually from medical device makers. If you are a medical device maker what you will pay depends on your share of medical device sales in the U.S. So, if you sell 10% of the medical devices in the U.S., what you pay will be 10% multiplied by $2 billion, or $200,000,000. Think you, as a medical device maker, know how to better use that money, say for R&D? Tough. (Section 9009 (b)).
The reconciliation package turns that into a 2.9% excise tax for medical device makers. Think you, as a medical device maker, know how to better use that money, say for research and development? Tough. (Section 1405).
17. The government will extract a fee of $6.7 billion annually from insurance companies. If you are an insurer, what you will pay depends on your share of net premiums plus 200% of your administrative costs. So, if your net premiums and administrative costs are equal to 10% of the total, you will pay 10% of $6.7 billion, or $670,000,000. In the reconciliation bill, the fee will start at $8 billion in 2014, $11.3 billion in 2015, $1.9 billion in 2017, and $14.3 billion in 2018 (Section 1406).Think you, as an insurance executive, know how to better spend that money? Tough.(Section 9010 (b) (1) (A and B).)
18. If an insurance company board or its stockholders think the CEO is worth more than $500,000 in deferred compensation? Tough.(Section 9014).
19. You will have to pay an additional 0.5% payroll tax on any dollar you make over $250,000 if you file a joint return and $200,000 if you file an individual return. What? You think you know how to spend the money you earned better than the government? Tough. (Section 9015).
That amount will rise to a 3.8% tax if reconciliation passes. It will also apply to investment income, estates, and trusts. You think you know how to spend the money you earned better than the government? Like you need to ask. (Section 1402).
20. If you go for cosmetic surgery, you will pay an additional 5% tax on the cost of the procedure. Think you know how to spend that money you earned better than the government? Tough. (Section 9017).

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.