Obamacare's Tax Hike Train Wreck
Asked about Senator Max Baucus’s (D-Mont.) recent “train wreck” comments, President Obama today said, “A huge chunk of it [Obamacare] has already been implemented.” Unmentioned was the wave of destructive Obamacare tax increases that will begin to hit Americans during the next tax filing season and beyond:
Starting in tax year 2013:
Obamacare Surtax on Investment Income: A new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single). This tax hike results in the following top tax rates on investment income:
*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations. It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income. It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans. (Bill: Reconciliation Act; Page: 87-93)
Obamacare Medicare Payroll Tax Increase:
All Remaining Wages
2.9% self employed
(Bill: PPACA, Reconciliation Act; Page: 2,000-2,003; 87-93)
Obamacare Medical Device Tax: Medical device manufacturers employ 409,000 people in 12,000 plants across the country. Obamacare imposes a new 2.3 percent excise tax on gross sales – even if the company does not earn a profit in a given year. In addition to killing small business jobs and impacting research and development budgets, this will make everything from pacemakers to artificial hips more expensive. (Bill: PPACA; Page: 1,980-1,986)
Obamacare High Medical Bills Tax: Before Obamacare, Americans facing high medical expenses were allowed a deduction to the extent that those expenses exceeded 7.5 percent of adjusted gross income (AGI). Obamacare now imposes a threshold of 10 percent of AGI. Therefore, Obamacare not only makes it more difficult to claim this deduction, it widens the net of taxable income. According to the IRS, 10 million families took advantage of this tax deduction in 2009, the latest year of available data. Almost all are middle class. The average taxpayer claiming this deduction earned just over $53,000 annually. ATR estimates that the average income tax increase for the average family claiming this tax benefit will be $200 - $400 per year. To learn more about this tax, click here. (Bill: PPACA; Page: 1,994-1,995)
Obamacare Flexible Spending Account Tax: The 30 - 35 million Americans who use a pre-tax Flexible Spending Account (FSA) at work to pay for their family’s basic medical needs face a new Obamacare cap of $2,500. This will squeeze $13 billion of tax money from Americans over the next ten years. (Before Obamacare, the accounts were unlimited under federal law, though employers were allowed to set a cap.) Now, a parent looking to sock away extra money to pay for braces will find themselves quickly hitting this new cap, meaning they would have to pony up some or all of the cost with after-tax dollars.
Needless to say, this tax will especially impact middle class families.
There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. Nationwide there are several million families with special needs children and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. This Obamacare tax provision will limit the options available to these families. (Bill: PPACA; Page: 2,388-2,389)
Starting in tax year 2014:
Obamacare Individual Mandate Non-Compliance Tax: Starting in 2014, anyone not buying “qualifying” health insurance – as defined by President Obama’s Department of Health and Human Services -- must pay an income surtax to the IRS. The Congressional Budget Office recently estimated that six million American families will be liable for the tax, and as pointed out by the Associated Press: “Most would be in the middle class.”
In addition, 100 percent of Americans filing a tax return (140 million filers) will be forced to submit paperwork to the IRS showing they either had “qualifying” health insurance for every month of the tax year or they obtained an exemption to the mandate.
Americans liable for the surtax will pay according to the following schedule
|1 Adult||2 Adults||3+ Adults|
(Bill: PPACA; Page: 317-337)
Obamacare Employer Mandate Tax: If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2,000 for all full-time employees. This provision applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3,000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer). (Bill: PPACA; Page: 345-346)
Obamacare Tax on Health Insurers: Annual tax on the industry imposed relative to health insurance premiums collected that year. The tax phases in gradually until 2018. Fully imposed on firms with $50 million in profits. (Bill: PPACA; Page: 1,986-1,993)
Starting in tax year 2018:
Obamacare Tax on Union Member and Early Retiree Health Insurance Plans: Obamacare imposes a new 40 percent excise tax on high cost or “Cadillac” health insurance plans, effective in 2018. This tax increase will most directly affect union families and early retirees, who are likely to be covered by such plans. This Obamacare tax will be levied on insurance policies whose premiums exceed $10,200 for an individual and $27,500 for a family. Middle class union members tend to be covered by such plans in states like Ohio, Pennsylvania, Wisconsin, and Michigan. Higher threshold ($11,500 single/$29,450 family) for early retirees and high-risk professions. CPI +1 percentage point indexed. (Bill: PPACA; Page: 1,941-1,956)
Top Internet Tax Lobbyist Dismisses Constitution as "an 18th-century document"
As published in the Wall Street Journal, David French, senior vice president of government relations for the National Retail Federation, a group lobbying for the Marketplace Fairness Act, said the following:
"The industry is evolving very rapidly, and the law today is a 20th-century interpretation of an 18th-century document that is holding back the entire retail industry as it adapts to 21st-century consumer preferences and demand," said David French, senior vice president for government affairs at the National Retail Federation, a retail-industry trade group lobbying for the legislation.
The Commerce Clause in the U.S. Constitution affirms that states cannot tax across their borders. Physical presence within a state’s boundaries is required for a state to be able to tax a business, a consumer, or a sale. The Constitution is clear: a person or business must be physically present within a state’s borders in order to be taxed. By suggesting the Constitution is outdated, Internet tax pushers align themselves with the rhetoric of far-left judicial activists.
Americans for Tax Reform has pointed out five reasons the Marketplace Fairness Act is bad for taxpayers:
Expands State Tax Authority: State governments will be able to tax across their borders despite clear legal and judicial precedent arguing otherwise.
Slippery Slope to More State Tax Grabs: Opens the door for further government intervention in the Internet and for states to reach across their borders for other taxes.
Tax Complexity: Small businesses would be forced to accommodate over 9,000 highly variable state and local tax codes and be required to settle disputes with out-of-state revenue boards in out-of-state courts.
Discourages Tax Competition: Rather than competing to lower taxes and attract businesses, states will compete to raise taxes on residents of other states.
Threatens Privacy: Business and state revenue boards with a track record of losing private information will have more chances to do so.
View PDF here.
In Push for Internet Sales Tax, NGA Accuses its Chairman of Presiding Over a "Tax Haven"
In today’s Wall Street Journal, National Governors Association (NGA) executive director Dan Crippen contemptuously tarred as “tax havens” the five U.S. states that choose not to levy a sales tax upon their citizens. One of the five states with no sales tax is none other than Delaware, the state run by the current NGA chairman, Governor Jack Markell (D).
“The genius of America is to have the fifty states compete to provide the best government at the lowest cost,” said Grover Norquist, president of Americans for Tax Reform. “The NGA is fighting to establish a cartel in order to avoid competition which would lead to better, less expensive government.”
In their Wall Street Journal opinion piece, the NGA denied the Marketplace Fairness Act was being rammed through the Senate and falsely claimed online sales tax opponents were merely “attempting to preserve the sales-tax havens of a few states.” In so doing, the NGA revealed its scorn toward low-tax states and especially the five states with no sales tax. Four of the five are governed by Democrats, and all five are members of the NGA:
Delaware – Gov. Jack Markell (D)
Montana – Gov. Steve Bullock (D)
New Hampshire – Gov. Maggie Hassan (D)
Oregon – Gov. John Kitzhaber (D)
Alaska – Gov. Sean Parnell (R)
So the NGA accepts “tax havens” as members. And the NGA has no problem publicly defaming states whose taxpayers foot the bill for its 89-person staff, who spend their days pushing ever-higher taxes.
“The NGA staff does not represent the fifty states. Every time, the NGA staff sides with the high tax states against the low-tax states,” said Norquist.
Internet sales tax legislation pushed by the NGA passed cloture Thursday in the U.S. Senate by a vote of 63-30. This most recent vote to tax e-commerce represents a significant drop in Senate support for the measure in just 24 hours. On Wednesday, the vote was 75-22.
Taxpayers can visit www.TaxesWithoutBorders.com to encourage their Congressman and Senators to vote against the Marketplace Fairness Act.
View PDF here.
Norquist on Marketplace Fairness Act: Tremendous abuses would flow from politicians
Americans for Tax Reform president Grover Norquist appeared today on Fox Business Network’s Varney & Co. to discuss the Marketplace “Fairness” Act.
Excerpts are below:
“Do you really believe there is a limit to the amount of abuse an Alabama tax collector can hurl on a New York or California or Maine business?”
“There are tremendous abuses that would flow from politicians taxing businesses that can't even vote against them. That’s why the politicians at the state level love this! It’s ‘free money!’ they think. But by opening it up, the voters in their states will get mugged by 49 tax collectors in the other states.”
“This is all about raising money to pay unionized state and local government workers more money and more pensions because they don't think making $20,000 more than people in the private sector is enough, having gold-plated pensions is not enough. They want more. They think this is the only way they can get certain states to raise money for them.”
“We need to first put into any bill that is being discussed a prohibition on having this process extended to income taxes and corporate income taxes. Because what the union bosses want is not the sales taxes, there is no money there. They maybe think, you know, $8 billion they could raise in a year off Internet sales taxes, that doesn’t get them through the week, okay. What they want is to tax Exxon’s worldwide earnings out of Mississippi, out of North Dakota. This is to extend corporate income taxes.”
“Loser states -- Illinois and California -- that are losing people are trying to figure out how to tax people that are leaving.”
White House confirms: Obama Budget Contains Middle Class Income Tax Hike
The White House has confirmed that President Obama’s forthcoming budget contains an income tax increase on middle class Americans.
During a Friday, April 5 White House press briefing, spokesman Jay Carney replied “I’m not disputing that” when asked if a particular Obama budget proposal would raise income taxes on the middle class.
The proposal in question is known as “Chained CPI.” The term is a Beltway euphemism for measuring inflation at a different, slower pace. Many tax and budget items are indexed to inflation, so slowing inflation’s measured rate of growth has both spending cut and tax increase implications.
On the tax side, all income tax brackets are subject to inflation. Slowing down the inflation rate slows down the annual rate of growth in all income tax brackets.
This means the Obama budget contains a tax increase on 100 percent of middle class taxpayers—anyone who pays the federal income tax.
Many other tax provisions—the standard deduction, the personal exemption, PEP and Pease, IRA and 401(k) contribution limits, and many others—are also tied to how CPI is measured.
Chained CPI as a stand-alone measure (that is, not paired with tax relief of equal or greater size) is a tax increase and a Taxpayer Protection Pledge violation. Various reports peg the tax increase amount as exceeding $100 billion over the next decade.
The transcript from the exchange is as follows:
MAJOR GARRETT, CBS NEWS/NATIONAL JOURNAL: “A follow-up on Jim’s question -- you do not and the White House does not dispute that if the chained CPI were put in -- to be put into effect, it would raise taxes on middle-income Americans?”
JAY CARNEY: The chained CPI, which is a technical adjustment to how we measure the consumer price index --
GARRETT: But its practical effect would be --
CARNEY: Again --
GARRETT: -- to raise taxes on --
MR. CARNEY: I’m not disputing that, but I’m saying that it is not the President’s ideal policy. It is in a letter from the Senate Minority Leader requesting that it be part of a negotiation deal.
GARRETT: All right, I'm just saying you don’t disagree, that those things happen?
CARNEY: Right, but Major, and --
GARRETT: -- a tax increase?
CARNEY: -- let’s be clear, as we’ve said all along, that the offer was on the table. The President made that offer because he was hopeful that we would see commensurate willingness to compromise from Republicans. Unfortunately, we haven’t seen that.
The President is engaged in conversations with Republicans in the Senate in particular but also in the House in an effort to find common ground, to see if there is a willingness to embrace the idea that we can reduce our deficits in a balanced way and continue to invest in our economy and middle-class families. And if there is, then we’ll be able to get something done.
GARRETT: And to critics who would say to this President, looking at this proposal, this is the last and possibly worst time -- from their point of view -- to raise taxes on the middle class, inflict benefit cuts on elderly on fixed incomes, even in the pursuit of deficit reduction, the President would say what?
CARNEY: The President would say that as part of a balanced approach that asks the wealthy and well-to-do and well-connected to contribute their fair share through tax reform, elimination of special tax breaks that average folks don’t get, that we can also include entitlement reforms that allow us to achieve deficit reduction in a balanced way and allow us to continue to invest in our economy in ways that will help it grow and create jobs.
ATR Releases 2013 State of the Union Bingo!
Americans for Tax Reform is taking its annual State of the Union Bingo game to Facebook. Viewers can play along during the speech by visiting www.atr.org/bingo
-- Players can access a customized bingo card on the full Facebook site, mobile site, and Facebook smart phone and tablet apps.
--Each player is given one free space designated as the “Gov’t Subsidized ‘Free’ Space.”
--During the State of the Union, players will follow along as words are called out in the “Last Box Called” area. Users must identify the word in the allotted time.
--If a player or players has all the words covered diagonally, across a row or vertically in a column, they should click the “Call BINGO!” button.
Bingo terms and translation key:
"Investment" – Taxpayer-funded giveaways to union bosses and big-city political machines.
"Children and grandchildren" – The people picking up the tab.
"Energy" – What the Obama administration expends to ensure the Keystone XL Pipeline is never built.
"I" or "Me" – Center of the known universe.
"Compromise" – Tax hikes.
"Sacrifice" – Tax hikes.
"Fair" OR "Fair Share" – Tax hikes.
"Balanced" – Tax hikes.
“My fellow Americans” – Tax hikes.
“Special Interests” – Thank you for not asking about Solyndra.
"Small business" – Those whose tax rate just went up from 35% to 43.4% thanks to Obamacare and the fiscal cliff.
"There are those who..." OR "Some" – [INSERT STRAW MAN HERE]
"Middle class" – Those who are the target of seven tax hikes in Obamacare.
"Deficit" – The product of an overspending problem which Democrats want to “fix” with tax hikes.
"Regulations" – Things you write during your first four years and make public only after you are safely re-elected.
"Infrastructure" OR "Roads and Bridges" – High-speed “bullet trains” to nowhere.
"Affordable" – Affordable only after a taxpayer-funded subsidy. But not really.
"Obstructionists" –1. NOT the Senate Democrats who have refused to pass a budget for four years. 2. Nor the same Senate Dems who have unanimously voted down the Obama budget.
“Loopholes”- Tax preference items forced into the fiscal cliff bill at the insistence of the Obama administration.
"Jobs" – Where young adults used to spend their time instead of Mom and Dad’s basement.
“Millionaires and Billionaires” -- Taxpayers making far less than this amount (i.e. $250,000).
“Gun safety” – Gun control.
"Recovery" – This term I’m serious. I swear.
View PDF here.
$1 Trillion Obamacare Tax Hike Hitting on Jan. 1
Obamacare contains twenty new or higher taxes. Five of the taxes hit for the first time on January 1. In total, Americans face a net $1 trillion tax hike for the years 2013-2022, according to the Congressional Budget Office.
The five major Obamacare taxes taking effect on January 1 are as follows:
The Obamacare Medical Device Tax: Medical device manufacturers employ 409,000 people in 12,000 plants across the country. Obamacare imposes a new 2.3 percent excise tax on gross sales – even if the company does not earn a profit in a given year. In addition to killing small business jobs and impacting research and development budgets, this will increase the cost of your health care – making everything from pacemakers to artificial hips more expensive.
The Obamacare Flex Account Tax: The 30-35 million Americans who use a pre-tax Flexible Spending Account (FSA) at work to pay for their family’s basic medical needs will face a new government cap of $2500. This will squeeze $13 billion of tax money from Americans over the next ten years. (Currently, the accounts are unlimited under federal law, though employers are allowed to set a cap.)
There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are several million families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. This Obamacare tax provision will limit the options available to these families.
The Obamacare Surtax on Investment Income: This is a new, 3.8 percentage point surtax on investment income earned in households making at least $250,000 ($200,000 single). This would result in the following top tax rates on investment income:
2013+ (current law)
The table above also incorporates the scheduled hike in the capital gains rate from 15 to 20 percent, and the scheduled hike in dividends rate from 15 to 39.6 percent.
The Obamacare “Haircut” for Medical Itemized Deductions: Currently, those Americans facing high medical expenses are allowed a deduction to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). This tax increase imposes a threshold of 10 percent of AGI. By limiting this deduction, Obamacare widens the net of taxable income for the sickest Americans. This tax provision will most harm near retirees and those with modest incomes but high medical bills.
The Obamacare Medicare Payroll Tax Hike: The Medicare payroll tax is currently 2.9 percent on all wages and self-employment profits. Under this tax hike, wages and profits exceeding $200,000 ($250,000 in the case of married couples) will face a 3.8 percent rate instead. This is a direct marginal income tax hike on small business owners, who are liable for self-employment tax in most cases. The table below compares current law vs. the Obamacare Medicare Payroll Tax Hike:
All Remaining Wages
Obamacare Tax Hike
Follow the author on Twitter: @JohnKartch
President Barack Obama did an interview with Minneapolis-based television station WCCO on Thursday night. Anchor Frank Vascellaro asked about the job-killing Obamacare medical device tax, and the recent letter signed by 18 Democrat senators and senators-elect requesting a delay in the implementation of the tax (after they voted for it in the first place).
The key exchange is as follows:
Frank Vascellaro, WCCO TV: “Senators Klobuchar and Franken are trying to delay and actually repeal part of the medical devices tax, which has a huge impact on Minnesota companies. Would you be willing to see that delayed?”
President Obama: “Uh, no. And here’s why. The health care bill is going to provide those health care companies, 30 million new customers. It’s going to be great for business and they’re doing really well right now and they’re going to get 30 million more customers as a consequence, so this additional tax essentially comes back to them as new customers. I think it’s very important for us to maintain the principal that A.) nobody should go bankrupt when they get sick in this country and B.) the providers of medical services should recognize they’re going to get a benefit from all of these uninsured folks suddenly having insurance and that means they should be willing to do a little bit in order to make that happen. It’s not just medical device folks, hospitals are doing a little bit more because they know now they’re not going to have uncompensated care in emergency rooms, everybody’s going to have some kind of insurance. Doctors, same kind of thing. So this is not unique to the medical device industry. The idea is that when you have 30 million more people coming in, you’re going to make money, you can do a little more to help facilitate and make sure people are getting the health care they need.”
As if this rationale wasn’t bad enough on its own, it doesn’t even hold water. As Senate Finance Committee ranking member Orrin Hatch has pointed out, “Justification for the tax falls short.”:
"Matthew Dolan, a senior research analyst at Roth Capital Partners, said he discounts the argument made by supporters of the medical device tax that it is a payback for the windfall the companies would reap when 30 million new customers gain access to health care plans through the Affordable Care Act.
Dolan said similar claims were made when Massachusetts adopted its own universal health care plan, but in fact sales of medical devices in the Bay State grew more slowly than rest of the country.”
Documentation of President Obama's Middle Class Tax Pledge
Speaking in Dover, New Hampshire on Sept. 12, 2008, candidate Obama said:
“I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.” [Video]
During a nationally televised Vice-Presidential debate in St. Louis on Oct. 3, 2008, candidate Joe Biden said:
“No one making less than $250,000 under Barack Obama’s plan will see one single penny of their tax raised whether it’s their capital gains tax, their income tax, investment tax, any tax.” [Transcript]
In an address to a joint session of Congress on Feb. 24, 2009, President Obama restated the promise in forceful terms:
During a White House press briefing on April 15, 2009, spokesman Robert Gibbs was asked if Obama’s tax pledge applied “to the health care bill.” Gibbs replied:
Dems Ask for Delay to Obamacare Med Device Tax They Voted for in the First Place
In a letter to Majority Leader Harry Reid, 18 Democrat senators and senators-elect have asked for “a delay in the implementation” of the Obamacare medical device tax. Like most of the significant tax increases in Obamacare, the medical device tax is scheduled to take effect on Jan. 1, 2013, conveniently after the 2012 presidential election.
Each of the 18 Democrat signatories voted for or supported Obamacare in the first place. And now they want a sweetheart exemption from one of its most onerous provisions. Even in Washington DC, that shows a lot of gall.
The signatories to the letter are as follows:
Amy Klobuchar (D-Minn.)
Kay Hagan (D-N.C.)
Al Franken (D-Minn.)
Herb Kohl (D-Wis.)
Barbara Mikulski (D-Md.)
John Kerry (D-Mass.)
Charles Schumer (D-N.Y.)
Kirsten Gillibrand (D-N.Y.)
Robert Casey (D-Pa.)
Ben Nelson (D-Neb.)
Debbie Stabenow (D-Mich.)
Jeanne Shaheen (D-N.H.)
Dick Durbin (D-Ill.)
Joseph Lieberman (I-Conn.)
Patty Murray (D-Wash.)
Elizabeth Warren (D-Mass.)
Richard Blumenthal (D-Conn.)
Joe Donnelly (D-Ind.) – (Voted for Obamacare in the House)
View PDF here.