(Photo credit: 401(K) 2012)The third wave of ObamaCare taxes began on January 1, the latest blitz before the tsunami of changes from the health overhaul law hit in 2014. These new and higher taxes are being levied to partially pay for ObamaCare’s massive new subsidies for private health insurance and expansion of Medicaid.
The most controversial of the latest ObamaCare taxes is the Medical Device Tax that hits entrepreneurial firms making equipment such as heart valves and hip replacement parts. They face a 2.3% profit on gross sales – a tax they must pay even if they have no profit at all. Many firms say this tax – slated to collect $29 billion over 10 years – will soak up virtually all of their research budgets.
The medical device industry employs more than 400,000 people in 12,000 factories across the country, often small, entrepreneurial firms with a small product line. Many say that to survive, they will have no choice but to relocate abroad – taking much-needed, high-tech jobs with them. These lost jobs will be more casualties of ObamaCare. And the tax means that medical devices will be more expensive, driving up health cost even further.
A new Surtax on Investment Income impacts individuals making more than $200,000 a year or couples with $250,000 or more. They must pay a new 3.8% levy on income from investments, possibly including profits from the sale of a home.
A new Medicare Tax adds to ObamaCare’s pain. These same high-earners must pay an additional .9% Medicare payroll tax on wages above $200,000 for individuals and $250,000 for couples. This means the current 2.9% Medicare payroll tax will be increased to a total of 3.8% — a big hit especially for the self-employed.
Together, these new Medicare taxes are expected to raise $318 billion to help fund ObamaCare.
The new Flexible Spending Account Tax limits the amount of money that workers can set aside tax-free for medical costs. ObamaCare sets the cap at $2,500 in order to collect another $13 billion from taxpayers. (Previously there was no cap; however some employers limited the amount worker could set aside.)
Those who find the accounts most valuable are those with the greatest health needs – parents of special needs children, people who have had organ transplants and who must take maintenance drugs, and others facing major medical expenses.
Beginning January 1, ObamaCare also tightens the screws on Itemized Medical Deductions. The law raises the threshold for allowed deductions from 7.5% of adjusted gross income to 10%, further burdening those with the largest medical expenses by limiting how much of these costs they can deduct on their taxes. Hit to these taxpayers: $19 billion.
Many more taxes are coming, including a “tax penalties” for individuals and businesses who don’t comply with ObamaCare’s mandate that they purchase government-approved health insurance. The Congressional Budget Office expects these penalties for non-compliance to bring in $160 billion in the first decade they are in effect.
ObamaCare’s $1 trillion in total tax increase hit everything from health insurers, drug companies, and tanning salons to Health Saving Accounts and – eventually – high-cost employer-based health insurance.
All of this will prove that the more people learn about what is actually in the health overhaul law, the more unpopular it will become.
The 2012 elections were not a referendum on ObamaCare: President Obama avoided talking about everything except the early candy that the law tosses out. And Gov. Mitt Romney was unable to persecute the law’s most unpopular provisions – the individual and employer mandates, Medicaid expansion, and health insurance Exchanges — because they all are part of the health reform law he passed in Massachusetts.
But the drip-drip-drip of the law’s taxes, mandates, and dislocations will continue, and 2013 likely will see a new attempt to delay, divert, defund, and dismantle the law.
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