ATR President Grover Norquist has released a letter to members of the Senate Finance Committee urging Congressional action on a number of healthcare tax provisions.
The letter urges the repeal or delay or certain healthcare taxes, like the Health Insurance Tax (HIT), the Medical Device Tax, and the Cadillac Tax, while calling for other provisions to be extended or made permanent, such as the Medical Expense Deduction and the Paid Family and Medical Leave Tax Credit.
Health Insurance Tax
The Obamacare health insurance tax is a tax on insurance premiums that disproportionately harms workers and small businesses. The letter cites analysis that estimates that implementation of the HIT will raise healthcare costs by $16 billion for families and Medicare advantage seniors in 2020 alone. Half of the HIT revenue is paid by workers making less than $50,000 a year and the tax will hurt up to 1.7 million small businesses. ATR urges the repeal of the Health Insurance Tax.
Medical Device Tax
The Medical Device Tax was a key funding mechanism of Obamacare and imposes a 2.3% excise tax on the sale of commonly used medical devices like X-Ray machines, MRI machines, hospital beds, and more. The tax was in effect from 2013 – 2015, before being suspended by Congress in 2016. When it was in effect, the tax reduced R&D spending by $34 million in 2013 alone, and led to the loss of 28,000 jobs. ATR urges the repeal of the Medical Device Tax.
Another provision of Obamacare, the Cadillac Tax is a 40% excise tax on employer-based coverage plans which exceed $10,200 for individuals and $27,500 for families. This incredibly unpopular provision reduces quality and raises costs for health insurance. This tax applies to nearly every employer-provided plan in the country and will increase deductibles and co-pays for workers. The tax is set to go into effect in 2022. ATR urges the repeal of the Cadillac tax.
Medical Expense Deduction
This long-standing provision of the tax code allows for middle class families to deduct healthcare expenses that exceed a certain percentage of their adjusted gross income (AGI). Before Obamacare, this threshold was 7.5% of AGI and was claimed by more than 10 million families, whose average income was around $53,000 a year.
In 2010, Obamacare raised the threshold to 10% of AGI, and the letter estimates that this cost families $200-$400 per year. The TCJA restored the threshold to 7.5% of AGI for two years, but the 10% threshold was brought back at the start of 2019. ATR urges for a permanent threshold of 7.5% of AGI.
Paid Family and Medical Leave Tax Credit
The Republican Tax Cuts and Jobs Act established an employer tax credit for paid family and medical leave for 2018 and 2019. The credit applies if a company pays their employees at least 50% of wages through the leave. The credit starts at 12.5% of the paid wage and increases up to 25% of the wage if the employer pays full compensation during the leave. ATR urges and extension of the Paid Family and Medical Leave tax credit.