Obamacare May Cause Flexible Spending Accounts to “Vanish”

Share on Facebook
Tweet this Story
Pin this Image

Posted by John Kartch on Friday, August 28th, 2015, 3:36 PM PERMALINK


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]

“If your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not one single dime.” [Transcript] [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.

 

Photo Credit: 
Shaun Murphy, https://www.flickr.com/photos/rabsda/

More from Americans for Tax Reform

Top Comments


A Bigger Navy with No Money?

Share on Facebook
Tweet this Story
Pin this Image

Posted by Danil Zelenkov on Friday, August 28th, 2015, 11:14 AM PERMALINK


As the race for the White House heats up, the overcrowded GOP field seems to be coming together on one issue: building a bigger navy. Defense hawks in the Republican Party like Chris Christie, Scott Walker, Marco Rubio and John Kasich all propose that the current 273 ship U.S. Navy will be expanded if any one of them is elected president.  Candidates should consider ways to pay for an expanding navy with low-hanging reforms. 

Richard Danzig – a former Navy secretary in the Clinton administration – has made his stance clear in terms of a Navy enlargement that “more is better than less”. In addition, the public advocacy group for the Navy has voiced concerns that the Navy is at a “breaking point”, facing overdue maintenance as well as overworked sailors.

Adding a Carrier Strike Group is a costly endeavor worth over $25 billion in total.

  • Gerald Ford Class carrier: $13 billion
  • 2 Ticonderoga Class Aegis cruisers: $2 billion
  • 3 Arleigh-Burke Class Destroyers: $ 5 billion
  • 2 Virginia Class submarines: $5.6 billion

 

This does not account for operational costs, the price of manning the aircraft carrier or the cost of an air wing that is added to the carrier.

If the Republican field insists on this expansion, they must make sure that any future additions to the fleet adhere to the budget caps. If we want a larger Navy, it needs to be paid for somehow.

The Rebalance for an Effective Defense Uniform and Civilian Employees Act (REDUCE Act) – HR 340 – would save the Pentagon $82.5 billion over five years. The savings would result from a reduction in the Pentagon civilian workforce which has grown 15% while total active military declined by 4%. This is inconsistent with historic trends where a reduction in active military personnel results in a proportional civilian employee reduction. 

The REDUCE Act would also cut the civilian workforce 15% by 2022. Currently, it stands at 770,000, a too inflated of a figure in times of financial restraint and exploding federal debt.

Hence, the funds freed up from the reduction could be spent on the Navy enlargement programs that some of the Republican presidential hopefuls wish to implement.

This bill has wide conservative support; the Heritage Foundation has highlighted the bloated civilian workforce as an easy target for waste cutting. Their study indicated the much needed civilian workforce cuts that the REDUCE Act would implement.

Enacting common-sense reforms such as the REDUCE Act would allow the Navy to expand its fleet by 3 carrier groups: 24 of the deadliest ships ever put to sea. Regardless of the need to add ships to America’s docks, lawmakers can and should bring the Pentagon back to its workforce-norm and spend those resources on American security.

Photo Credit: 
Official U.S. Navy Page https://www.flickr.com/photos/usnavy/

More from Americans for Tax Reform

Top Comments


Hackers "walked in through the front door of the IRS website" to Steal Taxpayer Personal Data

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alexander Hendrie on Friday, August 28th, 2015, 10:43 AM PERMALINK


The IRS disclosed in May that one of its applications had been breached by hackers, resulting in the theft of personal data for 100,000 taxpayers. Since then, the agency has disclosed the number of taxpayers affected is much higher – over 330,000 taxpayers have had their personal information stolen.

A report by Quartz details the story of one man, Michael Kasper, who was likely one of the more than 330,000 taxpayers who had their personal information stolen. The IRS has yet to confirm or deny whether Kasper’s tax fraud case was part of the larger hack. However, based on Kasper’s own investigation into the fraud, it appears to be the case. As the report notes:

“The story of Kasper’s tax return would eventually turn out to involve a bank account in rural Pennsylvania, a go-between on Craigslist, and a Western Union wire transfer to Nigeria. He was almost certainly one of the more than 330,000 Americans who fell victim to an audacious hack of the Internal Revenue Service (IRS), which was disclosed earlier this year.”

The breach was not a result of hackers utilizing innovative new software. Instead, as the report notes, they walked through the front door:

“The hackers didn’t use sophisticated malware or social engineering tactics—the hallmarks of many recent data breaches. Instead, they walked in through the front door of the IRS website, pretending to be regular people filing their taxes, and walked out with millions of dollars in fraudulent refunds.”

As the report notes, hackers managed to breach the “Get Transcript” system by using data they had obtained from other sources, likely through an automated system:

“In the first step, a user has to provide a Social Security number, date of birth, tax filing status, and street address, according to the IRS statement. The second step is a common identity-verification method known as Knowledge-Based Authentication, or KBA, and it involves a series of multiple-choice questions that ask the user about his or her credit history.”

Once they had breached the Get Transcript system, they filed fraudulent tax returns using the personal data within the system:

“In any case, once the hackers had successfully obtained taxpayers’ personal data, they now had to use it to create new tax returns. Comparing Kasper’s real return to the fraudulent one submitted under his name, it seems clear that this process—which involves filling out PDF forms and submitting them online—would have been automated too.”

As ATR previously noted, this data breach was entirely preventable. The IRS had been warned seven times by watchdog groups to strengthen their protection of sensitive data but the agency failed to implement nearly 50 recommendations.

See Also:

 

Photo Credit: 
Brian Klug, https://www.flickr.com/photos/brianklug/

More from Americans for Tax Reform

Top Comments


The IRS Needs Reform, Not More Taxpayer Dollars

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alexander Hendrie on Thursday, August 27th, 2015, 2:08 PM PERMALINK


IRS management is insistent on claiming they are starved of taxpayer dollars, and any problems with the agency are because they do not have enough funding. But in reality, the agency is poorly managed and has failed time and time again at its basic responsibilities. Taxpayers are being ill-served by inept bureaucrats that are more concerned about harassing conservatives and businesses than doing their job.

At every chance, IRS officials claim that the agency is cash-strapped. Union Chief Colleen Kelly recently said the IRS is “struggling to keep the lights on.” But this claim does not hold up under scrutiny.

According to the National Taxpayer Advocate’s Annual Report to Congress the IRS is unable to justify spending decisions. As the report stated:

“The IRS lacks a principled basis for making the difficult resource allocation decisions necessitated by today’s tight budget environment.”

In addition, the IRS has failed to properly prioritize funding even when budgetary pressure did not exist. The agency has failed to produce a single report on tax complexity since 2002, despite federal law requiring one be compiled each year.

In fact, the IRS budget has doubled in the past 30 years, even after adjusting for inflation, according to an analysis by Cato Institute economist Dan Mitchell, Although its funding has declined since 2010, it remains higher than mid 2000s levels.

Recently, the IRS disclosed that hackers had stolen the information of over 330,000 taxpayers. Hackers then used this information to file fraudulent tax returns.

Unfortunately, the IRS hack was entirely preventable. The IRS had been warned by the Treasury Inspector General for Tax Administration (TIGTA) to strengthen their protection of data on seven occasions since 2007. TIGTA has issued almost 50 recommendations that the agency failed to implement before the hack, including 10 more than three years old. Even when the agency had higher funding, they failed to perform due diligence time and time again.

The agency’s poor decision making continues to this day. The IRS recently hired trial law firm Quinn Emanuel to perform an audit of Microsoft, a highly unusual decision that may have violated federal law and has prompted an investigation by the Senate Finance Committee.

But perhaps worse, the agency’s decision to hire a $1,000 an hour, litigation-only white shoe law firm is an egregious waste of taxpayer dollars. The IRS already has 40,000 employees dedicated to enforcement efforts and could have turned the case over to either the IRS office of Chief Counsel or a Department of Justice attorney. Employees in both offices already have the expertise to conduct an examination without putting sensitive information at risk.

Instead the supposedly cash strapped IRS chose to hire an elite law firm under an initial $2.2 million contract.

Lastly, the Senate Finance Committee released a damning report examining the Lois Lerner tea party targeting scandal earlier this month. The report concluded that Lerner’s personal beliefs led her to discriminate against conservative organizations applying for non-profit status. Lerner was able to do so because the agency had given her complete autonomy.

While the IRS continues to plead poverty, it is clear that the problem stems from gross mismanagement, not lack of funds. Agency officials seem more interested in targeting conservative groups and harassing businesses than actually doing the job that taxpayers pay them for.

Photo Credit: 
Simon Cunningham, https://www.flickr.com/photos/lendingmemo/

More from Americans for Tax Reform

Top Comments

Russell J. Coller Jr.

they probably need a bigger fleet of GMC SUVs & smart phones.... they love them some smart phones.... unencrypted, of course.


Jim Gilmore Signs Taxpayer Protection Pledge to the American People

Share on Facebook
Tweet this Story
Pin this Image

Posted by ATR on Thursday, August 27th, 2015, 10:30 AM PERMALINK


Former Governor Jim Gilmore (R-Va.), a candidate for the presidency of the United States, has signed the Taxpayer Protection Pledge to the American people. The pledge is a written commitment to the American people to “oppose and veto any and all efforts to increase taxes.”

“By signing the Taxpayer Protection Pledge, Governor Gilmore continues his commitment to the taxpayers of this country,” said Grover Norquist, President of Americans for Tax Reform. “Governor Gilmore understands that government should be reformed so that it takes and spends less of the taxpayers’ money, and will oppose tax increases that paper over and continue the failures of the past."

Gilmore recently outlined The Growth Code, an aggressive pro-growth tax reform plan that includes a single 15 percent tax on all business income, three individual income tax rates of 10, 15, and 25 percent, immediate expensing of business investment, and a territorial tax system that allows American business earnings abroad to be returned to the U.S. without penalty.

Gilmore served as governor of Virginia from 1998 to 2002. He led a successful campaign to phase out the state’s much-loathed car tax, saving Virginia families millions of dollars. As soon as he left office, the legislature froze the phase out before it fully took effect. (The Tax Foundation has a nice summary here.)

Though it is still early in the 2016 nominating process, most of the GOP candidates have already made a written commitment to the American people that they will oppose and veto any tax increase in the event they are elected to the White House. Along with Gilmore, these candidates include Marco Rubio, Rand Paul, Ted Cruz, Chris Christie, Rick Perry, Carly Fiorina, Dr. Ben Carson, Rick Santorum, and Mike Huckabee.

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. Pledge signers include Senate Majority Leader Mitch McConnell, House Speaker John Boehner, House Majority Leader Kevin McCarthy, House Majority Whip Steve Scalise, and GOP Conference Chair Cathy McMorris Rodgers. Senate Finance Committee Chairman Orrin Hatch and House Ways and Means Committee Chairman Paul Ryan are also pledge signers.

On the state level, 13 incumbent governors and approximately 1,000 incumbent state legislators have signed the Pledge. The pledge-signing governors include Scott Walker (R-Wis.), John Kasich (R-Ohio), Rick Scott (R-Fla.), and Nikki Haley (R-S.C.).

In 2012, all candidates for the Republican nomination for president signed the Taxpayer Protection Pledge, with the lone exception of former Utah Gov. Jon Huntsman. Huntsman finished seventh in Iowa and third in New Hampshire before dropping out of the race.

Photo Credit: 
Gage Skidmore https://www.flickr.com/photos/gageskidmore/

More from Americans for Tax Reform

Top Comments


Chart: Among Governors Running for President, Jindal Has Best Anti-Spending Record

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alexander Hendrie on Wednesday, August 26th, 2015, 4:58 PM PERMALINK


Of the 17 GOP Presidential candidates, nine have experience serving as chief executive of a state. A study by Dan Clifton, head of policy research at Strategas Research Partners, provides an apples to apples comparison of their record on government spending. The chart below compares the average annual increase in general fund spending during each Governor’s term. The chart shows that during his time in office, Gov. Jindal has the most aggressive anti-spending record:


Photo Credit: 
Gage Skidmore https://www.flickr.com/photos/gageskidmore/

More from Americans for Tax Reform

Top Comments

Mr. Right

It's a real shame that Jindal isn't doing better in the polls.


The Grover Norquist Show: Obama IRS is Rotten to the Core

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alexander Hendrie on Tuesday, August 25th, 2015, 4:53 PM PERMALINK


In the 28th edition of The Grover Norquist Show, ATR President Grover Norquist discusses the latest IRS news with Policy Fellow Alex Hendrie. Since it was revealed that the IRS targeted conservative non-profits under the leadership of Lois Lerner, investigators have uncovered concerning stories of lost emails, destroyed hard drives, and Lerner's contempt for conservative and tea party groups.

While this scandal epitomises the toxic culture of the IRS, the agency has also failed to serve taxpayers in many other ways. Last week, it was revealed that the personal information of over 330,000 taxpayers was hacked in May. The agency had been warned to strengthen protection of taxpayer data seven times by watchdog groups since 2007 but failed to implement almost 50 recommendations. Clearly, the IRS is an agency in need of major reform. See the podcast here.

 

Photo Credit: 
Gage Skidmore https://www.flickr.com/photos/gageskidmore/

More from Americans for Tax Reform

Top Comments


IRS Discloses Existence of Second Personal Email Account Used By Lois Lerner for Official Business

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alexander Hendrie on Tuesday, August 25th, 2015, 11:29 AM PERMALINK


Lois Lerner had a second personal email account she used to conduct IRS business, according to a report by Washington Times reporter Stephen Dinan. The agency disclosed this information on Monday through a court filing for an open-records lawsuit that was filed by watchdog group Judicial Watch.

Update: Toby Miles is Lois Lerner's dog, according to a National Review article.

The email address, identified as “tobomatic@msn.com” was supposedly used by a “Toby Miles.” It is unclear who Toby Miles is, and what his relationship is to Lerner. Regardless, it is clear that this account was used by Lerner for IRS business. The email is the third used by Lerner for IRS business – she also used her official agency address and another personal address.

According to IRS lawyer Geoffrey J. Klimas, the agency only recently learned of the existence of this third email address:

“As the agency was putting together a set of documents to turn over to Judicial Watch, it realized Ms. Lerner had used yet another email account, in addition to her official one and another personal one already known to the agency.”

In his court filing, Klimas argued that the IRS previously hinted of the existence of additional email accounts based on a footnote contained in a 2014 letter that referenced Lerner’s “personal home computer and email on her personal email account(s).”

It is outrageous that new revelations are still breaking years after the public first learned of the Lois Lerner tea party targeting scandal. Earlier this month, a report by the Senate Finance Committee found that the IRS granted just one conservative group non-profit status over a three year period. The report concluded that Lerner’s personal political beliefs drove her to undertake a concerted effort to discriminate against tea party and conservative non-profits by delaying their applications and subjecting them to unnecessary audits.

See Also:

 

Photo Credit: 
House Oversight Committee

More from Americans for Tax Reform

Top Comments


Another Reason for Tax Reform: Etsy Corp

Share on Facebook
Tweet this Story
Pin this Image

Posted by Hal Smith on Monday, August 24th, 2015, 12:33 PM PERMALINK


Yet another American start-up has packed up and moved out of the country. This time, Brooklyn based Etsy was forced to establish a subsidiary in Ireland as result of a corporate tax rate that continues to drive entrepreneurs and businesses overseas.

In 2014, Etsy recorded 5 million members, including 1.4 million active sellers and 19.8 million active buyers. With such a large presence, Etsy sellers generated gross merchandise sales of $1.93 billion globally.

But Etsy it taking the revenues elsewhere. It made the logical and legal decision to move under the 12.5% corporate tax rates in Ireland. The United States undercuts any competitive business at a rate of 39%.

While the corporate tax rate is hard enough, the structure of the tax code ensures that if companies don’t move overseas they will choose to go in debt rather than make a profitable business.

Corporations are heavily pressured to choose debt financing over equity as a result of a tax structure that ensures that equity profits and the required returns to investors are both taxed. Therefore, startups, which struggle to find available credit and simply cannot get suitable bank loans are forced into this double tax.

According to the Tax Foundation, the U.S. has the highest corporate income tax rate amongst the 34 members of the Organization for Economic Development (OECD) and the third highest in the world.

The average corporate tax rate for these OECD countries is 25% -- a little over half what the United States draws from struggling startups.  

Once again the antiquated, overly complicated, and anti-competitive corporate tax code of the United States has forced another start-up overseas. Forcing entrepreneurs to other countries is the last thing this recovering economy needs, but with such inefficient and debilitating economic barriers like double taxation, who can blame them for leaving?

There needs to be a corporate tax rate of 20% in order to have the fair competition that fosters innovation and American entrepreneurship.

 

Photo Credit: 
Michelle Roy https://www.flickr.com/photos/formulaexo/

More from Americans for Tax Reform

Top Comments


Gina McCarthy on Obama's National Energy Tax: "Minority communities will be hardest hit."

Share on Facebook
Tweet this Story
Pin this Image

Posted by Justin Sykes on Friday, August 21st, 2015, 2:10 PM PERMALINK


This month President Obama and the EPA released the final version of their “Clean Power Plan,” or as more aptly referred, the new “National Energy Tax.” The rule seeks to limit carbon in the U.S., and by the EPA’s own projections the benefits will be negligible, reducing global temperatures by 0.018 degrees by 2100 and sea level rise by a mere 0.20 millimeters by 2050. 

While the environmental impact of the carbon rules is virtually non-existent, the impact on American families will be disastrous. Projections show the carbon rule will likely increase electricity rates in the U.S. by double digits in over 40 states. Such rate increases amount to a regressive tax on the nation’s most vulnerable.

The overwhelmingly regressive nature of the carbon rule is why leaders in Washington, such as House Speaker John Boehner (R-Ohio), have chosen to describe the rule as “Obama’s National Energy Tax.” 

In a recent panel discussion in D.C., EPA Administrator Gina McCarthy admitted the disparate impact the new carbon rule would have stating, “We know that low-income minority communities would be hardest hit.” For once, Administrator McCarthy has chosen to be direct and open about what the rule really means for America’s most vulnerable populations. 

As Americans for Tax Reform has previously pointed out, and EPA Administrator McCarthy has now confirmed, the effects the new carbon rule will have on low-income and minority communities will be particularly devastating.

According to recent reports by the National Black Chamber of Commerce, American minority communities will see jobs losses, reductions in household income and increased poverty rates that are far above the national average.

The report found that as a result of the regressive nature of Obama’s carbon rules, by 2035 African-American communities will see cumulative job losses of almost 7 million. For Hispanic communities the losses will be well over 12 million.

Similarly, median household income for African-Americans would decrease by $5,000 over the next 20 years and Hispanics would see losses greater than $7,000. The carbon rule will also lead to skyrocketing poverty rates for Hispanics, who will see poverty rate increases above 26 percent. For African-Americans the report found poverty rate increases of over 23 percent. 

Administrator McCarthy and President Obama seem all to comfortable sacrificing the livelihoods of millions of hard-working Americans for essentially non-existent benefits. Sadly as a result of the carbon rules, some of America's most vulnerable could now find themselves thrust into poverty, many of whom have just managed to pull themselves out.

 

Photo Credit: Chesapeake Bay Program 

More from Americans for Tax Reform

There are no related posts.

Top Comments


hidden
×