Ryan Ellis

Get Ready for the Other Shoe to Drop:<br> Volcker Commission Tax Hikes for Healthcare

Posted by Ryan Ellis on Monday, December 21st, 2009, 2:22 PM PERMALINK

It was little-noticed in late November when former Federal Reserve Chairman Paul Volcker announced that the tax reform commission he chairs would wait to deliver its report until "after the holidays."

What you might not see is the connection between this and the Reid-Obama government healthcare bill.

ATR has written considerably about the $500 billion in new tax increases to pay for this government takeover of health insurance.  Many have speculated that even this gargantuan sum of money won't be enough, especially as unanticipated cost over-runs typical of such schemes begin to take hold.

This is where the Volcker tax-hike commission comes in.

If the Obama Administration and Congressional Democrats are going to get their way and permanently raise federal spending to 25 or 30 percent of GDP (and the unfunded liabilities in Reid-Obama will do their part to push that along), they will need new sources of revenue (the historical level of federal taxes has been a bit over 18 percent of GDP).

It's likely the White House and Capitol Hill Democrats didn't want to announce all the new tax increases now, preferring to wait until "after the holidays" (and after Congress has already committed American taxpayers to this new scheme).

What types of tax hikes could there be?  How about a new value-added tax (VAT)?  Assuming a European VAT base, each 2.5 percent of VAT rate raises you 1 percent of GDP.  Tax hikes on international profits of U.S. employers is another tempting target.  How about carbon taxes or other energy tax hikes?  Some have called for the IRS to prepare your tax return for you, which "strangely" results in higher overall taxes collected.  Anyone for closing the "tax gap" through "revenue enforcement mechanisms?"  The list goes on and on.

The point is, the tax hike side of this health care debate has yet to show its final card.

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Why Supporting Reid-Obama Health Bill Violates Taxpayer Protection Pledge

Posted by Ryan Ellis on Monday, December 21st, 2009, 10:46 AM PERMALINK

Some have questioned whether supporting the Reid-Obama health bill is a violation of the Taxpayer Protection Pledge.  It is.  Let's use Senator Nelson's pledge as an example:

"I, Ben Nelson, pledge to the taxpayers of the State of Nebraska and to the American people that I will: ONE oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses, and TWO oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates."

Here is a link to the Tax Pledge language.

There are two promises in that Pledge.  The first says "I won't raise income tax rates."  The second says "I won't expand the income tax base on net unless it's to reduce tax rates."  Each is vital.

UPDATE: Senator Nelson violated the first part of the Pledge by supporting a hike in the Medicare payroll tax rate. This is an income tax rate hike on wages and self-employment income.

He needs to read the second commitment in that promise.  The Senate bill contains a net income tax increase in the income tax base.

The full list of tax hikes with score is here.

You can see from the CBO score that this is a net tax increase of $498 billion over a decade.  This factors in the tax credits for individuals and small businesses.  The net income tax increase is smaller than this (since not all the tax hikes are income tax hikes), but it is still a net income tax increase over the budget window.  This is a violation of the second part of Senator Nelson's Pledge.

Pledge signers should read the whole Pledge, not just the parts they want to read.

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If Specter Votes for Health Bill Cloture He Will Violate Taxpayer Protection Pledge

Posted by Ryan Ellis on Sunday, December 20th, 2009, 5:56 PM PERMALINK

If Sen. Arlen Specter (D-Penn.) votes for cloture on the Manager’s Amendment or for final passage of the Senate healthcare bill, he will violate his Taxpayer Protection Pledge – a written commitment Specter made to Pennsylvanians and the American people.

“Senator Specter promised the people of Pennsylvania that he would vote against any income tax increases,” said Grover Norquist, president of Americans for Tax Reform. “Senate Democrat bosses have said that Senator Specter has promised to vote for a bill to give the government more control over health care.  That bill includes 18 different tax increases.”
When Sen. Specter ran for the U.S. Senate, he made a written Pledge to his constituents to oppose any net income tax hikes.  He is bound by that Pledge for the duration of his career as a senator.  The Senate healthcare bill contains nearly $500 billion in new tax hikes over the next decade, including billions in income tax hikes.

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NEWS: Comprehensive List of Tax Hikes in<br> Reid-Obama Health Bill UPDATED

Posted by Ryan Ellis on Saturday, December 19th, 2009, 1:46 PM PERMALINK

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List of tax hikes in original Reid bill

Manager's Amendment

CBO Score of Manager’s Amendment

JCT Score of Manager’s Amendment

(Page numbers reference ORIGINAL REID-OBAMA BILL unless noted):

Individual Mandate Tax (Page 324/Sec. 1501/$15 bil/Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following (page 71 of manager’s amendment updates Reid bill):

 Single2 People3+ People
2014$495/0.5% AGI$990/0.5% AGI$1485/0.5%/AGI
2015$495/1.0% AGI$990/1.0% AGI$1485/1.0%/AGI
2016+$495/2.0% AGI$990/2.0% AGI$1485/2.0%/AGI


Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS).

Employer Mandate Tax (Page 348/Sec. 1513/$28 bil/Jan 2014):  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 $750 for all full-time employees.  Applies to all employers with 50 or more employees.

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).

Excise Tax on Comprehensive Health Insurance Plans (Page 1979/Sec. 9001/$149.1 bil/Jan 2011): Starting in 2013, new 40 percent excise tax on “Cadillac” health insurance plans ($8500 single/$23,000 family).  Higher threshold ($9850 single/$26,000 family) for early retirees and high-risk professions.  CPI +1 percentage point indexed.  Longshoremen have been exempted (page 362 of the manager’s amendment)

From 2013-2015, the 17 highest-cost states are 120% of this level. 

Employer Reporting of Insurance on W-2 (Page 1996/Sec. 9002/Min$/Jan 2011): Preamble to taxing health benefits on individual tax returns.

Medicine Cabinet Tax (Page 1997/Sec. 9003/$5 bil/Jan 2011): No longer allowable to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

HSA Withdrawal Tax Hike (Page 1998/Sec. 9004/$1.3 bil/Jan 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

FSA Cap (Page 1999/Sec. 9005/$13.3 bil/Jan 2011): Imposes cap on FSAs of $2500 (now unlimited).  Indexed to inflation after 2011 (added on page 363 of manager’s amendment)

Corporate 1099-MISC Information Reporting (Page 1999/Sec. 9006/$17.1 bil/Jan 2012): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers

Excise Tax on Charitable Hospitals (page 2001/Sec. 9007/Min$/immediate): $50,000 per hospital if they fail to meet new "community health assessment needs," "financial assistance," and "billing and collection" rules set by HHS (updated on page 364 of manager’s amendment).

Tax on Innovator Drug Companies (Page 2010/Sec. 9008/ $22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Medical Device Manufacturers (Page 2020/Sec. 9009/$19.2 bil/Jan 2010): $2 billion annual tax on the industry imposed relative to shares of sales made that year.  Exempts items retailing for <$100.  Rises to $3 billion annually in 2017 (updated by page 364 of manager’s amendment).

Tax on Health Insurers (Page 2026/Sec. 9010/$59.6 bil/Jan 2011): $10 billion annual tax on the industry imposed relative to health insurance premiums collected that year.  Phases in gradually until 2017.  Fully-imposed on firms with $50 million in profits (updated on page 365 of manager’s amendment)

Eliminate tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D (Page 2034/Sec. 9012/$5.4 bil/Jan 2011)

Raise "Haircut" for Medical Itemized Deduction from 7.5% to 10% of AGI (Page 2034/Sec. 9013/$15.2 bil/Jan 2013): Waived for 65+ taxpayers in 2013-2016 only

$500,000 Annual Executive Compensation Limit for Health Insurance Executives (Page 2035/Sec. 9014/$0.6 bil/Jan 2013)

Hike in Medicare Payroll Tax (Page 2040/Sec. 9015/$86.8 bil/Jan 2013): Current law and changes:


First $200,000
($250,000 Married)

All Remaining Wages
Current Law1.45%/1.45%
2.9% self-employed
2.9% self-employed
Reid-Obama Tax Hike1.45%/1.45%
2.9% self-employed
3.8% self-employed

The 0.9% new rate addition is not deductible for the self-employment tax adjustment.  Updated by page 372 of manager’s amendment.

Blue Cross/Blue Shield Tax Hike (Page 2044/Sec. 9016/$0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services

STRICKEN: Tax on Cosmetic Medical Procedures (Page 2045/Sec. 9017/$5.8 bil/Jan 2010): New 5% excise tax on elective cosmetic surgery to be paid by the surgery patient.

REPLACED BY: Tax on Indoor Tanning Services (Page 373 of Manager’s amendment/$2.7 billion/July 1, 2010): New 10% excise tax on indoor tanning salons

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UPDATED: List of Tax Changes in<br> Reid Manager's Amendment

Posted by Ryan Ellis on Saturday, December 19th, 2009, 9:54 AM PERMALINK

Full bill is here.  Page references are below.

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(Page numbers below reference manager amendment.  These should be read in context of original Reid bill)

Individual mandate surtax (page 71) Assuming a bronze-level plan is more expensive (a near-certainty), this penalty is now the greater of a flat dollar amount ($495 single, $990 two persons, $1485 three persons or more), or a percentage of “household income” (0.5% 2014, 1.0 percent 2015, 2.0 percent 2016 and afterwards)

Longshoremen have been exempted (page 362) from the 40% “Cadillac plan” excise tax which will be assessed on comprehensive health insurance plans

FSA cap (page 363) the $2500 cap on flex spending accounts is now indexed for inflation starting in 2012

Tax on charitable hospitals (page 364) made less onerous by changing calculation input from the lowest amount charged, to the amount generally billed by a hospital

Medical device manufacturer's tax (page 364) now starts in 2010 and raises $2 billion per year ($3 billion starting in 2017)

Insurance company profit surtax (page 365) now fully implemented on companies with $50 million in profits; now up to $10 billion in total taxes, assessed on a pro-rated basis to insurance companies based on profits; exempts the non-profit insurance plans

Medicare payroll tax (Page 372) shall now rise from 2.9 percent to 3.8 percent for wages and self-employment income above $200,000 ($250,000 married).  Current 2.9 percent rate retained for wages and self-employment income below this amount

10 percent tax on the cost of indoor tanning services (page 373) This replaces the “botax” cosmetic surgery tax, which has been stricken

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ATR Will Rate All Remaining Votes on<br> Senate Health Bill This Year

Posted by Ryan Ellis on Friday, December 18th, 2009, 12:54 PM PERMALINK

Americans for Tax Reform will be key-voting all the anticipated remaining votes on the Senate healthcare bill.  This includes all cloture votes, as well as a potential vote on final passage.  ATR will score negatively a vote that cuts off debate on this bill, and will score negatively a vote in favor of this bill’s passage.

Assuming the Obama-Reid health bill as modified contains the same tax language as the original version, there are 18 separate tax increases totaling $858 billion over the next decade.  There will be tax increases on those failing to get “qualifying health insurance,” employers not offering insurance, comprehensive insurance plans, wages, medical device manufacturers, and anyone with a health account like an FSA or HSA.  Many of these tax hikes fall directly on households making less than $250,000 per year, in total violation of President Obama’s oft-repeated campaign promise not to raise “any form” of taxes on these families and small businesses.

In a time of deep recession, the economy cannot afford the new tax increases in this bill.  It should be vigorously opposed for this and many other reasons.

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ATR Will Rate A Vote In Favor Of<br> Crapo Motion on Working Family Tax Hikes

Posted by Ryan Ellis on Tuesday, December 15th, 2009, 12:58 PM PERMALINK

This afternoon, the United States Senate will be casting a series of votes on the Reid-Obama government health bill.  One of these motions is sponsored by Senator Mike Crapo (R-Id.).  His motion would specify that “no provision” in the legislation shall result in an increase in federal tax liability for families with incomes under $250,000 annually or individuals with incomes under $200,000.

The language of this motion is nothing more than putting into the bill what President Obama and many Congressional Democrats promised over and over again in 2008 to get elected: namely, that families making less than $250,000 would not see “any form” of tax increase.

The Reid-Obama government health bill contains many tax hikes on families making less than $250,000 per year.  To name but a few, it imposes a new tax on anyone not purchasing qualifying health insurance, it taxes anyone with an HSA or FSA who wants to use tax-free dollars to purchase over-the-counter medicines, and it taxes families with special needs children who use FSAs to pay for special-needs tuition.

A list of all taxes in the bill that violate President Obama’s pledge and a timeline of this oft-repeated promise can be found on ATR’s website.

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ATR Opposes Gregg-Conrad<br> Bipartisan Tax/Spending Commission Bill

Posted by Ryan Ellis on Wednesday, December 9th, 2009, 1:24 PM PERMALINK

Americans for Tax Reform President Grover Norquist sent the following letter today to Senators Judd Gregg (R-N.H.) and Kent Conrad (D-N.D.):


I write to express in the strongest possible terms Americans for Tax Reform’s opposition to your “Bipartisan Task Force for Responsible Fiscal Action Act of 2009.”  As written, it would lead to a guaranteed tax increase.

The bill establishes an eighteen-member task force comprised of ten Democrat and eight Republican Congressmen, Senators, and Administration officials.  A report from the commission would need to gather fourteen votes in order to make an expedited recommendation to both bodies.  The recommendation would only pass with a supermajority vote in each chamber.

Despite the appearance of protection for taxpayers, this commission would guarantee a net tax increase be in its proposal.  Every Democrat on the commission would insist on tax increases to “balance” spending cuts in the recommendation.  There is no conceivable scenario whereby the commission would issue a report that does not contain tax hikes.  Therefore, this commission is unacceptable from a taxpayer perspective.

In order to make this commission acceptable from a taxpayer perspective, language must be included that explicitly removes tax increases and/or new taxes from commission consideration.

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ATR Opposes H.R. 4173, <br>Tax Hikes on Financial Services

Posted by Ryan Ellis on Tuesday, December 8th, 2009, 6:55 PM PERMALINK

ATR President Grover Norquist sent the following letter today to House Financial Services Chairman Barney Frank (D-Mass.):


Americans for Tax Reform is opposed to H.R. 4173, the “Wall Street Reform and Consumer Protection Act of 2009.”  Besides raising the cost of government with onerous new regulations on the financial services sector, H.R. 4173 is a net tax increase.

According to the Congressional Budget Office and the Joint Tax Committee, net tax revenues would increase by $4.9 billion over the 2009-2019 budget window.  These tax hikes are the result of new fees assessed on the financial services sector in order to pay for the new regulations on that same sector.

Increasing taxes and regulations on financial services companies will only result in fewer and more expensive financial services offered to the American people.  The old maxim, “if you want less of something, tax it more” certainly applies here (and one might also insert “regulate” instead of “tax”). 

Raising taxes on vital services needed by everyone—at least everyone who owns a home, has a credit card, or has opened an IRA—is foolish public policy.

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