Americans for Tax Reform has culled the 1990-page Pelosi health-care overhaul bill to find the taxes that will supposedly collect over $540 billion in revenue over 10 years. It’s quite an impressive list of new burdens on Americans and their health-care providers and producers — but that’s redundant. After all, who do you think will end up paying for the medical-device taxes? It won’t be insurers or doctors:
- Employer Mandate Excise Tax (Page 275): If an employer does not pay 72.5 percent of a single employee’s health premium (65 percent of a family employee), the employer must pay an excise tax equal to 8 percent of average wages. Small employers (measured by payroll size) have smaller payroll tax rates of 0 percent (<$500,000), 2 percent ($500,000-$585,000), 4 percent ($585,000-$670,000), and 6 percent ($670,000-$750,000).
- Individual Mandate Surtax (Page 296): If an individual fails to obtain qualifying coverage, he must pay an income surtax equal to the lesser of 2.5 percent of modified adjusted gross income (MAGI) or the average premium. MAGI adds back in the foreign earned income exclusion and municipal bond interest.
- Medicine Cabinet Tax (Page 324)
- Cap on FSAs (Page 325)
- Increased Additional Tax on Non-Qualified HSA Distributions (Page 326)
- Denial of Tax Deduction for Employer Health Plans Coordinating with Medicare Part D (Page 327)
- Surtax on Individuals and Small Businesses (Page 336)
- Excise Tax on Medical Devices (Page 339)
- Corporate 1099-MISC Information Reporting (Page 344)
- Delay in Worldwide Allocation of Interest (Page 345)
- Limitation on Tax Treaty Benefits for Certain Payments (Page 346)
- Codification of the “Economic Substance Doctrine” (Page 349)
- Application of “More Likely Than Not” Rule (Page 357)
See the ATR post for detailed descriptions of each new tax. For the moment, I just want to focus on a couple of interesting choices. For instance, the new “codification” on page 349 essentially allows the IRS to willy-nilly disallow legal deductions based on their view that the motive for it was not “entirely business related.” Gee, I wonder how many times the IRS will reach that conclusion when the government needs cash? The entire point of tax law is supposed to prevent that kind of subjective decision-making — and the historical thrust of American jurisprudence is to assume innocence until guilt is proven. Now, the IRS can just ex post facto assume guilt and penalize the taxpayer.
Note, too, the two attacks on health-savings accounts (HSAs) and similar structures that allow people to use non-taxed cash without itemizing. Congress wants to double the penalty for using HSAs for non-qualified distributions, which they have not done with similar shelters such as IRAs, 401(k)s, and the like. They also have entirely eliminated non-prescription medication from the qualifications, except insulin, which means that taxpayers will pay more taxes and have less reason to keep HSAs.
And the Limitation of Tax Treaty bears special mention. The Obama administration abandoned an effort to tax foreign earnings of American corporations, finally convinced that it would make US companies less competitive overseas (see here for explanation). This codicil doesn’t quite restore the Obama plan, but it places a penalizing tax on American earnings for corporations with overseas profits. That should drive those corporations that can relocate to foreign shores, while making other American corporations less competitive.
Jazz Shaw writes:
So while the Obama administration’s talking heads continue insisting they will only tax the “very rich” (a joke which really never gets old) and they work on taxing cigarettes, soda, coffee, gasoline and heating oil, (with hamburger soon to follow, I’m sure) now we’ll be treated to a whole new set of taxes. Need more help with your health care needs? No problem! We’ll just tax your wheelchairs, your teeth and your prosthetic devices!
Has the middle class discovered the biggest lie of the Obama campaign yet? When statist policies get imposed, everyone pays. Everyone.