Obamacare May Cause Flexible Spending Accounts to “Vanish”
As a presidential candidate, Barack Obama repeatedly made a “firm pledge” against “any form of tax increase” on any American making less than $250,000:
“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]
But his promise was shattered when he signed Obamacare into law. Of its 20 new or higher taxes, at least seven directly raise taxes on Americans making less than $250,000 per year. Most of the middle class tax hikes were scheduled to take effect after 2012, once the President was safely re-elected. Among these taxes is Obamacare’s Flexible Spending Account tax which took effect in 2013.
And now, according to an industry analyst quoted by Politico tax reporter Brian Faler, FSAs will be “one of the first things to go” thanks to Obamacare’s final impending tax hike: 2018’s “Cadillac Tax” on comprehensive health insurance plans. Below is an excerpt from Faler’s Politico piece titled “Flexible spending accounts may vanish as result of Cadillac tax”:
A popular middle-class tax benefit could become one of the first casualties of the Affordable Care Act’s so-called Cadillac tax, potentially affecting millions of voters.
Flexible spending accounts, which allow people to save tax free for everything from doctor’s co-pays to eyeglasses, may vanish in coming years as companies scramble to avoid the law’s 40 percent levy on pricey health care benefits.
“They’ll be one of the first things to go,” said Richard Stover, a health care actuary and principal at Buck Consultants, an employee benefits consulting firm. “It’s a death knell for them. If the Cadillac tax doesn’t change, FSAs will go away very quickly.”
That is likely to come as a big surprise to middle-class voters who may be only vaguely aware of the Cadillac tax, and inflame what is already a growing debate over one of Obamacare’s most important and controversial cost-saving provisions.
There are an estimated 30 - 35 million Americans who use a pre-tax FSA at work to pay for their family’s basic medical needs. They already face an Obamacare-imposed cap of $2,500. (Before Obamacare, the accounts were unlimited under federal law, though employers were allowed to set a cap.) The tax was designed to squeeze $13 billion of tax money from Americans over its first ten years. Parents socking away money to pay for braces for their kids find themselves quickly hitting the new cap, meaning they have to pony up some or all of the cost with after-tax dollars. And now they face the Cadillac Tax and its potential impact on their FSAs. Conveniently for President Obama and his middle class tax pledge, he will be long out of office when things hit the fan.
Hillary Calls for $350 Billion Student Loan Tax Hike
Another program, another tax hike. Hillary Clinton today proposed a $350 billion tax increase as part of a “New College Compact” spending program.
The $350 billion tax hike over ten years comes in the form of a 28 percent cap on itemized deductions. This creates a new Alternative Minimum Tax.
"By capping itemized deductions -- which already phase out based on income -- Clinton will complicate the tax code and bring back the AMT for millions of families," said Grover Norquist, president of Americans for Tax Reform. "The original AMT targeted 155 individuals but grew to target 40 million families. Hillary's new idea is the old AMT that starts as a $350 billion tax hike and will certainly grow.”
Back in June, Clinton spokesman Brian Fallon warned of upcoming “revenue enhancements” – and the campaign has not disappointed. Today’s tax increase follows her July proposal for the most complicated capital gains tax scheme in U.S. history.
Clinton has also called for a tax increase in the form of a “Buffett Rule.”
Hillary Spokesman Warns of "Revenue Enhancements"
Hillary Clinton's press secretary Monday night warned of upcoming plans for "revenue enhancements" to be announced by the candidate.
In a tweet, press secretary Brian Fallon said: "We are rolling out major policy proposals over the summer/fall. Among these proposals will be revenue enhancements."
.@BuzzFeedAndrew We are rolling out major policy proposals over the summer/fall. Among those proposals will be revenue enhancements.— Brian Fallon (@brianefallon) June 16, 2015
The Clinton camp's warning of tax increases is consistent with a career record in support of tax hikes and opposition to tax cuts. As a Senator, Clinton voted against income tax relief for all Americans.
Other key tax votes include:
- Voted against cutting the capital gains and dividends tax.
- Voted against killing the Death Tax.
- Voted against doubling the child tax credit.
- Voted against ending the marriage penalty for most Americans.
- Voted against killing the Alternative Minimum Tax
Hillary Clinton's use of the Orwellian term "revenue enhancements" echoes language from the Bill Clinton White House, which described taxes as "broad-based contributions."
Cameron’s Tax Pledge “had significant cut-through,” says Founder of Britain’s TaxPayers’ Alliance
The founder of Britain’s leading taxpayer advocacy group says David Cameron’s tax pledge against increases in the income, VAT, and national insurance taxes “had significant cut-through.”
Announcing the tax pledge in an April 29 address, Cameron asked the voters:
When you're standing in the polling booth, ask yourself: on the things that matter in your life who do you really trust? When it comes to your tax bill, do you trust the people who have taxed you to the hilt when they were in power and still haven't come clean about the taxes they want to increase next time round? Or do you trust the Conservatives, who have cut income taxes for 26 million people and who will cut your taxes again next time.
Following the Conservative victory, Matthew Elliott — Founder of the TaxPayers’ Alliance — said:
A month out from Election Day, Prime Minister David Cameron's campaign was widely deemed to be faltering - the Conservative Party hadn't overtaken the centre-left Labour Party in the polls, and there was a feeling that a strong, believable case needed to be made to convince a skeptical electorate that his Government deserved re-election. A key announcement was the Tax Pledge - a pledge not to raise the key taxes on ordinary, hard-working families in the UK. This Pledge had significant cut-through, because it proved to voters that the Conservatives' plans for taxation were real, and concrete, as opposed to the illusionary promises from the other parties. Now the Prime Minister has an overall majority in Parliament, this Pledge will become an important part of Britain's fiscal debate. It's certainly works for taxpayers in the US, and it'll work here in Great Britain.
NRO’s John Fund agrees:
This British election was supposed to revolve around post-Thatcher worries about income inequality and resentment against the rich. A recent study by the London School of Economics found that 62 percent of Britons felt inequality had reached unsustainable levels and that 74 percent believed the rich should pay more taxes. Bart Cammaerts, the author of the study, wrote that it showed the country moving toward 'a renewed politics of redistribution.'
Goodbye to all that, for this election at least. If anything, British voters were motivated to turn out in support of Prime Minister David Cameron’s last-minute support of a version of America’s famous anti-tax pledge. Just last week, Cameron pledged that if the voters gave him a second term, he would push legislation blocking any increases in Britain’s national-insurance, income, or value-added taxes (the lattermost, a form of sales tax). 'We know it’s your money, not government money. You’ve worked for it, you’ve earned it, you should be able to keep it,’ he told voters.
Finally, in an item titled U.K. Conservatives’ Tax Stances Could Resonate in U.S., Politico Pro’s Katy O’Donnell writes:
Taxation was a prominent theme in the election: Conservative Chancellor George Osborne pledged to cut taxes for low-income workers and, late in the campaign, Prime Minister David Cameron promised a five-year 'tax lock' — legislation banning any increases to the country’s Value Added Tax, income taxes and national insurance taxes. A Labour Party spokesman dismissed the idea as a 'last-minute desperate gimmick.'
All Formally Declared GOP Presidential Candidates Have Signed the Taxpayer Protection Pledge
All three of the formally declared candidates for the Republican nomination for President have signed the Taxpayer Protection Pledge. Senators Rand Paul, Ted Cruz, and Marco Rubio have signed a written commitment to the American people to “oppose and veto any and all efforts to increase taxes" if elected President.
Sens. Paul, Cruz, and Rubio have also signed and kept the Pledge as members of the U.S. Senate. Rubio signed and kept the Pledge as a member of the Florida House of Representatives and as state House Speaker.
"Elected officials face a choice: Reform government to cost less, or raise taxes instead of reforming government,” said Grover Norquist president of Americans for Tax Reform. “Senators Rand Paul, Ted Cruz, and Marco Rubio have made it clear that they stand with taxpayers now and in the future.” said Norquist.
With the exception of former Florida governor Jeb Bush, prospective GOP presidential candidates have signed the Pledge in their current or former capacity. As incumbent governors, Scott Walker (R-Wis.), Bobby Jindal (R-La.) have signed and kept the Pledge. Former Texas Governor Rick Perry signed and kept the Pledge.
In 2012, all candidates for the Republican nomination for president signed the Taxpayer Protection Pledge, with the lone exception of former Utah Governor Jon Huntsman. Huntsman dropped out of the race on Jan. 15, 2012 after finishing third in the New Hampshire primary.
ATR has shared the Pledge with all candidates for federal office since 1986. In the 114th Congress, 49 U.S. Senators and 218 members of the U.S. House of Representatives have signed the Pledge. This includes all members of the House and Senate GOP leadership as well as the chairmen of the tax writing committees, Rep. Paul Ryan (R-Wis.) and Sen. Orrin Hatch (R-Utah). On the state level, 13 incumbent governors and approximately 1,000 incumbent state legislators have signed the Pledge.
Update: On May 7th, Carly Fiorina signed the Taxpayer Protection Pledge becoming the fourth announced candidate for President to make a written commitment to "oppose and veto any and all efforts to increase taxes" if elected.
Oversight Chairman Peter Roskam’s Remarks at ATR Press Conference: Stop IRS Abuse
House Ways and Means Oversight Subcommittee Chairman Peter Roskam (R-Ill.) addressed ATR’s annual tax day press conference in the U.S. Capitol. Chairman Roskam successfully shepherded a series of IRS reform bills through the full House, with overwhelming bipartisan support. As Roskam pointed out, the measures are common sense yet necessary to begin to rein in the out of control IRS. The full text of Roskam’s remarks are below:
"I'm really pleased -- there is a bipartisan consensus that's developed in the House of Representatives as a restraining influence for what we've seen from the Internal Revenue Service. We've seen the IRS over the past few years act with impunity, act with impunity as it relates to targeting people, act with impunity as it relates to squandering resources, making the false claim that they're not able to get their work done because they don't have enough money, all of which is nonsense.
And on a bipartisan basis, coming out of the Ways and Means Committee, we've marked up a series of bills and we expect to have a debate on them today and have a vote on them tomorrow. And if past is prelude, I think that these are all likely to get out of the House and over to the Senate.
Let me highlight a couple of them. Two of them I've sponsored. One forces the IRS to implement the Taxpayer Bill of Rights. What's important about this legislation is it makes it a distinct responsibility of the commissioner of the Internal Revenue Service to make sure that the agency, in fact, fulfills these obligations under the Taxpayer Bill of Rights.
Second is the Fair Treatment for All Gifts Act, which is HR 1104 which permanently ensures that the IRS cannot tax gifts to nonprofit organizations. Again, this is one of these things that goes beyond your sense of wonder, that the IRS would contemplate creating a gift tax liability when there shouldn't be one, and this clears that up.
Congressman [Kenny] Marchant has jumped in to all the IRS email drama, making sure that emails are only used through official accounts. Congressman Mike Kelly has the [Taxpayer Knowledge of IRS Investigations Act]. Congressman George Holding is sponsoring legislation that will allow social welfare groups to self-declare their tax-exempt status, not unlike other elements of the code in order to expedite the process. Congressman Pat Meehan heads legislation that would permit organizations to appeal denied requests for tax-exempt status to some entity that is new and fair and neutral so they'd get a fair hearing. And, finally, Congressman Jim Renacci has legislation that makes it a firing offense to target organizations -- target Americans for political purposes.
All of these things when you hear them are fairly intuitive. All of these things when you hear them seem very, very common sense and, yet, it's only in Washington, D.C., that this tends to be groundbreaking legislation. So I am really pleased that it seems like there is a bipartisan consensus that's developing about this and that, essentially, what is happening is the American public, through their elected representatives, are reclaiming delegated authority. It was delegation that was abused and now it's authority that's being reclaimed."
Norquist Praises Cruz Upon Campaign Launch
Americans for Tax Reform president Grover Norquist today praised Sen. Ted Cruz upon his announcement as a candidate for President of the United States:
“The first announced Republican candidate for President has taken the Taxpayer Protection Pledge as a Senate candidate, kept that pledge as a Senator, and should be commended for his history of championing pro-growth, tax-reducing legislation."
As the campaign season unfolds, Americans for Tax Reform will release evaluations of tax plans and summaries of the tax voting record and pledge-taking status of all declared candidates.
As governors, Scott Walker, Bobby Jindal, and Rick Perry have all signed — and kept — the Taxpayer Protection Pledge. As Senators, Rand Paul, Marco Rubio (and Ted Cruz, as noted above) have all signed — and kept — the pledge. Former Arkansas governor Mike Huckabee did not sign the pledge while in the statehouse, but did sign the pledge as a presidential candidate in the 2008 and 2012 presidential races.
Jeb Bush Still Refuses to Rule Out Tax Hikes
Jeb Bush has enthusiastically endorsed a "grand bargain" tax increase with Democrats, says his father's 1990 "Read My Lips" tax increase "created the spending restraint of the 90's," (false -- see details below) and refuses to sign the Taxpayer Protection Pledge to the American people.
And today, as reported in a piece by The Daily Beast's Tim Mak, the Jeb Bush camp refuses to even answer the question of whether Jeb will make any general statement promising not to raise taxes:
Pressed regarding Jeb Bush’s positions on taxes, his aides did not directly respond to a question about whether Jeb Bush might make a general promise to voters more broadly not to raise taxes.
Meanwhile, as governors, Scott Walker, Bobby Jindal, and Rick Perry have all signed — and kept — the Taxpayer Protection Pledge. As Senators, Rand Paul, Ted Cruz, and Marco Rubio have all signed — and kept — the pledge.
As president, George W. Bush kept his tax promise to the American people.
George H.W. Bush, reflecting upon his "Read My Lips" tax hike, deemed it the greatest mistake of his presidency.
Regarding Jeb's claim that the 1990 Read My Lips tax hike created spending restraint, let's take a look at what actually happened:
The 1990 “Read My Lips” Budget Deal Scam
Starting in May of 1990, President George H.W. Bush huddled with Democrat House and Senate members at Andrews Air Force Base.
- What was Promised: Congressional Democrats convinced a number of Republicans to join them in a bipartisan deal promising $2 in spending cuts for every $1 in tax increases. President Bush signed the deal on November 5, 1990.
- What Actually Happened: Every penny of the tax increases ($137 billion from 1991-1995) went through. Not only did the Democrats break their promise to cut spending below the CBO baseline by $274 billion—they actually spent $23 billion above CBO’s pre-budget deal spending baseline. Thirty-four House Republicans broke their own Taxpayer Protection Pledges and went along with this one-sided “deal.” As a result, Republicans lost eight seats in the 1990 Congressional midterms, and President Bush only received 38% of the vote in the 1992 Presidential election.
Norquist on Obamacare Tax Debacle: “How many Obama appointees will get fired?”
With the AP reporting the Obama administration sent 800,000 Healthcare.gov customers the wrong tax information, Americans for Tax Reform president Grover Norquist issued the following statement:
"800,000 or more Americans are having their lives disrupted and damaged by the Obama administration’s incompetence and overreach. They said they could run our lives better than we can. They were wrong. They can’t even get this one piece right. How many Obama appointees will get fired? My guess: Zero."
Flashback: Navigators Warned Not to Leave Tax Returns on Fax Machines
The Associated Press is reporting that "800,000 HealthCare.gov customers the wrong tax information, and officials are asking those consumers to delay filing their 2014 taxes.”
The Obama administration says it is "still investigating the root cause of the problem.”
Taxpayers got an early warning that Obamacare’s interaction with the tax code was going to be a debacle. In 2013, the official Obamacare Navigator manual warned navigators not to leave Americans’ personal tax information laying around “on printers and fax machines”:
The Department of Health and Human Services has a helpful tip for the program's so-called Navigators: “Do not leave documents that contain PII [Personally Identifiable Information] or tax return information on printers and fax machines.”
The warning is contained in Section 2.4.3 of the 207-page Health Insurance Marketplace Navigator Standard Operating Procedures Manual.
The same section asks navigators to “double-check” the fax number before faxing Obamacare enrollee’s tax returns:
“When faxing PII or tax return information, double-check that the recipient’s fax number is correct and that someone is able to pick up the faxed information immediately.”
Because the key components of Obamacare are being enforced by the IRS, navigators will have access to highly sensitive identifying information. The Navigator manual describes Personally Identifiable Information as follows:
- Identifying information such as consumers’ names, addresses, or SSNs
- Information about consumers’ incomes, personal finances, debts, deductions and exemptions
- Any action taken by the IRS against consumers, such as investigations or penalties
- Any private written agreements (such as a pricing agreement) with the IRS and any background information about these agreements
- Relevant information, even if not found on the return (e.g., expenses)
Additional excerpts from the Navigator Manual:
- No fake smiles: "Do not pretend to smile, or produce a false smile; these are easy to spot and send the wrong messages." – Section 2.2.1
- Listen: “By not listening you can become very frustrating to consumers.” – Section 2.2.3
- Apologize: “Apologizing when things go wrong demonstrates that you care about consumers and their experiences.” – Section 2.2.4
- "Be Memorable - For the Right Reasons." – Section 2.2.6
The Navigator manual can be found here.