Alex Hendrie

ATR Analysis of the Tax Cuts and Jobs Act

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Thursday, November 2nd, 2017, 4:46 PM PERMALINK

House Ways and Means Chairman Kevin Brady (R-Texas) today released long awaited tax reform legislation, entitled “The Tax Cuts and Jobs Act.” This legislation contains many provisions that simplify the tax code, give tax cuts to families and businesses, and grow the economy leading to higher wages and new or better jobs. The release of this bill represents an important step toward achieving pro-growth tax reform in 2017. Chairman Brady and his staff should be commended for releasing this detailed legislation.

Under this proposal, as many as 95 percent of taxpayers could file on a postcard since the majority of taxpayers would no longer itemize and many existing provisions (such as those relating to family and education provisions) would be consolidated and simplified. These reforms would also allow the IRS to be reduced in size and scope.

In addition, the bill will reduce the corporate tax rate from 35 percent to 20 percent effective 2018. This competitive rate will place American businesses on a level playing field with foreign competitors and will ensure the economy grows by at least three percent, as President Donald Trump has promised.

Individual Provisions:

- Consolidates the seven tax brackets into four (12%, 25%, 35%, and 39.6%) - Under this reform, the existing 10 percent bracket goes to zero. The 15 percent bracket goes to 12 percent.

-The 12 percent bracket applies to income up to $45,000 ($90,000 for married couples). This does not include the standard deduction of $12,000 or $24,000.

-The 25 percent bracket applies to income between $45,001 and $200,000 ($90,001 and $260,000 for married couples).

-The 35 percent bracket applies to income between $200,001 and 500,000 ($260,001 and $1 million for married couples).

-The 39.6 percent bracket applies to income above $500,000 ($1 million for married couples).

-Doubles the standard deduction (The first $12,000 for individuals and $24,000 for families will not be taxed). 

-Increases the child tax credit from $1,000 to $1,600 per dependent under 17 with an additional $300 credit per parent. The child tax credit is currently used by 22 million Americans.

-Simplifies the tax code – The bill repeals personal exemptions, repeals the state and local tax deduction for income and sales taxes and caps the SALT deduction for property taxes at $10,000. The home mortgage interest is grandfathered in and preserved for new homes up to $500,000. All other itemized deductions with the exception of charitable giving are repealed.

- Repeals the alternative minimum tax – This tax is currently paid by 4.5 million individuals and families.

Repeals the death tax effective 2024 - In years 2018 to 2023, the exemption is doubled to $10 million ($20 million for a couple) and indexed to inflation. The generation skipping transfer tax is also repealed while the gift tax is lowered from 40 percent to 35 percent. Step-up in basis is preserved.

Preserves retirement tax savings accounts such as 401(k)s and Individual Retirement Accounts.  

Business Provisions:

Permanently reduces the corporate income tax rate to 20 percent effective immediately - The current 35 percent federal rate is the highest in the developed world. Reducing this rate to 20 percent will allow American businesses to compete against foreign competitors and will allow the U.S. economy to grow. According to an analysis by the Council of Economic Advisers, a 20 percent corporate rate would increase average household income by between $4,000 and $9,000.

- Enacts 100 percent, full business expensing for five years - Section 179 small business expensing is increased from $500,000 to $5 million, and the phaseout is increased from $2 million to $10 million.

Reduces the business tax rate on pass-through entities from 44.6 percent to 25 percent - This new rate would be applied based on one of two formulas designed to prevent wage income from being mischaracterized as business income.

- Repeals numerous distortionary tax credits but preserves the Research and Experimentation (R&E) credit.

- Implements a partial cap on deductibility of net interest expense for corporations - The cap will be applied when a corporation’s net interest exceeds 30 percent of earnings before interest, tax, depreciation and amortization (EBITDA).

- Implements a modern, territorial system of taxation so that American businesses operating overseas can compete.

- Introduces a one-time repatriation rate of 12 percent for cash and 5 percent for non-cash, payable over eight years.This allows $2.6 trillion in after-tax income to come back to the U.S. to be reinvested in the economy. Ideally, the repatriation rate should be single digit rates. However, this reform will still allow trillions to come back into the U.S. economy. 

Tax Reform Bill Abolishes Death Tax

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Thursday, November 2nd, 2017, 10:40 AM PERMALINK

The House Republican tax reform bill officially abolishes the Death Tax. 

"It is official. The Death Tax will die," said Grover Norquist, president of Americans for Tax Reform. "Date set. No call from the governor." 

Repeal of the Death Tax will spur economic growth. In 2016, the Tax Foundation estimated that repeal of the Death Tax would create 150,000 jobs. Additionally, the Joint Economic Committee reported that the Death Tax has suppressed over $1.1 trillion of capital in the United States’ economy since being introduced. Much of this comes from small businesses, who are the core of America’s economy. This loss of capital ultimately results in fewer jobs and lower wages for American workers.

The Death Tax is bad for jobs and repeal would give families a raise. Again according to the Tax Foundation the Death Tax is an economy killer. They have a macroeconomic “dynamic” model to see what killing the Death Tax would do to the job market. This model projects that killing the death tax would create 139,000 jobs, increase private business hours by 0.1 percent, and increase wages by 0.7 percent.

Numerous studies have found that majority of Americans oppose the Death Tax and support its repeal. For example, a recent report by NPR found that 76 percent of Americans support full, permanent repeal of the Death Tax.  

In addition, the Death Tax contributes a miniscule amount of revenue relative to the size of federal government. In all, it makes up only one half of one percent of all federal revenue. Because the Death Tax is so economically destructive, almost all the revenue lost would be offset by increased economic growth. As noted by the Tax Foundation, repealing the Death Tax would result in $240 billion in lower taxes over a decade. However, the economic growth created by repealing the Death Tax would produce $221 billion in federal revenue because of increased wages and more jobs.

Repeal of the Death Tax pays for itself. The same Tax Foundation report says that the death tax would increase the economy by 0.8 percent (or $137 billion in today’s dollars). Because this additional economic growth would be subject to taxation all its own, it would more than make up for the revenue lost by repealing the Death Tax–it would make up the $20 billion per year, plus yield an extra $8 billion per year on top of that. You heard that right–we’d actually collect more tax revenue if we stopped collecting the Death Tax.

A (Properly Designed) Territorial Tax System Will Make America More Internationally Competitive

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie, Olivia Grady on Monday, October 30th, 2017, 3:46 PM PERMALINK

Full PDF of this Document Can be Found Here]


The United States currently has a worldwide system of taxation where all income of residents is taxed, including foreign income. Because foreign income is often taxed where it is earned as well, this creates a double layer of taxation and subjects businesses to complex rules. Also, because the foreign income is not taxed by the U.S. until repatriated, trillions of dollars of foreign income is stranded overseas and not invested in the U.S.

The majority of countries have fixed these problems, particularly in recent years, by switching to a territorial system where income is taxed in the country it is earned. The U.S. should follow their lead and switch to a territorial system in order to modernize its uncompetitive and outdated system.

However, in transitioning to a territorial system, the U.S. should consider base erosion rules. These rules help determine what income should be taxed, especially with passive income, because international tax is complex with frequent cross-border transactions between multinational corporations and their foreign subsidiaries.

These rules need to be carefully considered though because overly burdensome rules would hurt U.S. businesses and make them less competitive. Other countries have rules on transactions with controlled foreign corporations (typically subsidiaries), dividend exemption systems and limitations on the tax deductibility of interest.

Another approach that some have suggested is a broad based minimum tax on foreign profits, but this might undercut the change to a territorial system.

[Full PDF of this Document Can be Found Here]

Photo Credit: Flickr

Middle Class Families Are The Real Winners In The GOP Tax Plan

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Monday, October 16th, 2017, 12:00 PM PERMALINK

This article originally appeared in

The unified Republican tax reform framework released last month cuts taxes and increases take-home pay for the middle class while simplifying the code for millions of American families.

First, the framework consolidates the existing seven tax brackets into three — 12 percent, 25 percent, and 35 percent, giving rate reduction to all.

In addition, the plan doubles the standard deduction to $24,000 for a family and $12,000 for individuals, meaning this amount is taxed at zero percent, a significant tax reduction for millions of Americans.

This reform represents drastic rate reduction for the 105 million Americans across the country who took the standard deduction in 2015, according to IRS data. More than seven million taxpayers in Florida, nine million taxpayers in Texas, and three million in Michigan and North Carolina benefit from this tax reduction. These numbers also understate the number of taxpayers who will benefit as the increased standard deduction becomes more attractive for taxpayers.

This is not the only reform in the framework that helps American families. The plan calls for expanding the child tax credit, benefiting more than 22 million families across the country that used this credit in 2015, including more than 500,000 families in New Jersey, 800,000 families in Ohio, and 2.7 million families in California.

Similarly, the repeal of the AMT gives tax relief to almost 4.5 million American families that paid the tax in 2015. More than half a million taxpayers in New York, 250,000 taxpayers in Texas and 166,000 taxpayers in Pennsylvania are hit by the AMT.

Clearly, there are millions of Americans that benefit from the Republican tax reform framework, even before considering other changes in the framework.

Despite this, the plan has been attacked by some who claim the plan doesn’t benefit American families. For instance, a report released by the liberal Tax Policy Center claims that middle-class families will see little if any tax relief, and many will face a tax increase.

However, this analysis fails to account for several factors. First, it assumes many specific details such as the income threshold for the consolidated tax brackets and the size of the child tax credit. For instance, the TPC report assumes a child tax credit of just $1,500, even though two advocates of the child tax credit, first daughter Ivanka Trump and Senator Marco Rubio, have proposed a child tax credit of $2,500.

Even using the biased assumptions of the TPC, the framework is a significant tax reduction for families, as noted by Ryan Ellis writing for Forbes. After modeling three median income American families, Ellis found that each one came out better off from the GOP framework than they currently are.

The TPC study also fails to use any kind of dynamic scoring in its analysis. In large part, the tax reform framework is a jobs bill and many of the reforms to business taxes, like lower competitive rates for businesses and implementation of 100 percent expensing, are aimed at creating new or better jobs for Americans and increasing take-home pay for families through stronger economic growth.

Without dynamic scoring, an analysis of the GOP tax framework is incomplete because it does not account for changes in behavior that result from tax changes. Dynamic scoring has increasingly become the norm as a more accurate way to measure tax changes. While it is far from perfect, dynamic scoring can properly account for changes, like a reduction of the corporate tax.

Many studies have concluded that around 75 percent (and possibly even more) of the corporate tax is borne by labor, meaning a reduction in this tax as the framework proposes, also benefits American workers.

In fact an analysis by the Tax Foundation estimates that going to a 20 percent corporate rate creates the equivalent of 641,000 jobs and boosts income by three percent, or almost $1,700 per family based on 2015 median income. Failing to use dynamic scoring, as the TPC study does, means that the true benefits of the Republican framework are obscured. Any true analysis of the tax plan’s effect on individuals needs to include the benefits business changes have to the economy.

By any measure, the middle class is the winner of this tax reform plan. Under the unified framework released last month, American families will see tax cuts, tax simplification, new or better jobs, and more take-home pay.


Alex Hendrie is the director of tax policy at Americans for Tax Reform, a nonprofit group that works to support limited government.

Photo Credit: Greg Nash

More from Americans for Tax Reform

Millions of Taxpayers Benefit from GOP Tax Reform Framework

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Tuesday, October 3rd, 2017, 12:35 PM PERMALINK

Americans for Tax Reform Foundation today released a study titled “Who Benefits From Simplification Proposed in the Republican Tax Reform Framework?”

The study includes recently released IRS state by state data on the Alternative Minimum Tax (AMT), the Child Tax Credit, and the Standard Deduction.

(The full document can be found here.)

President Donald Trump and Congressional Republicans had four goals in mind when developing this framework: 1. Simplify the tax code; 2. Give American families more take-home pay; 3. Create more jobs; and 4. Bring home trillions of dollars, which are currently overseas.

The study examines the several ways the framework achieves its simplification goal.

Doubling the Standard Deduction

The plan doubles the standard deduction to $12,000 for an individual and $24,000 for a family. This increased deduction simplifies the tax code by encouraging more taxpayers to take the standard deduction, rather than itemizing their deductions, a complex and time-consuming process. In addition, the larger standard deduction reduces the tax burden of many Americans, including all those currently in the 10% bracket to zero.

The number of people this plan will help is large. In Texas, today, over 9 million taxpayers take the standard deduction. In Florida, more than 7 million taxpayers take this deduction, and more than 3 million Americans in North Carolina and Michigan also take it. 

Increasing the Child Tax Credit

The framework also raises the current child tax credit amount of $1,000 per child and folds other deductions into it. While the framework does not specify the level of increase, Senator Marco Rubio and special advisor to the President Ivanka Trump have suggested increasing the cap to $2,500 per child.

According to IRS data, this part of the framework would help more than 22 million Americans who take the child tax credit. In California, alone, almost 3 million taxpayers take the credit, while over a million people in Florida and New York also use it. Finally, over 2 million Texans also take the credit.

Repealing the AMT

The framework repeals the Alternative Minimum Tax (AMT). This repeal simplifies the tax code significantly. Many Americans today are forced to calculate their taxes twice if their income is higher than the AMT threshold. They then pay the higher amount of either the AMT or the normal tax burden. This is expensive and time consuming.

Further, the AMT was only initially passed to make sure 155 high-income Americans paid some federal income tax. Today, almost 4.5 million Americans have to pay the tax. For example, in California, more than 900,000 taxpayers pay the AMT, and more than 500,000 pay it in New York. In Texas, almost 250,000 taxpayers pay this tax, while 166,000 pay it in Pennsylvania.

This study, therefore, finds that many Americans are helped when the standard deduction is doubled, the child tax credit is increased, and the AMT is repealed.

To find out more on who is helped by the framework in your state, please click here.

ATR Comments on Joint Statement on Tax Reform

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Thursday, July 27th, 2017, 3:59 PM PERMALINK

Today ATR President Grover Norquist released the following comments regarding the Joint Statement on Tax Reform:

“The joint White House, Senate, and House statement proves that tax reform is on schedule for 2017. Congress and the administration are in agreement on a tax reform plan that includes tax cuts and simplification for individuals, lower rates for all businesses, full business expensing, and territoriality. This bold plan is the key to unlocking at least three percent economic growth, creating millions more jobs, and giving American families lower taxes and more take-home pay.”

Photo Credit: Gage Skidmore

More from Americans for Tax Reform

The Top 20% of Households Pay 88% of Federal Income Taxes

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie, John Kartch on Thursday, July 27th, 2017, 1:37 PM PERMALINK

According to the Congressional Budget Office:


-The top one percent of households pay 38.3% of federal income taxes and 25.4% of total federal taxes.

- The top 20 percent of households pay 88% of federal income taxes and 69% of total federal taxes.

- The top one percent of households pay an average income tax rate of 23.6% while the middle quintile pays an average income tax rate of 2.6%.

- The top one percent of households pay an average total tax rate of 34% while the middle quintile pays an average total tax rate of over 12.8%.  

- The top 20 percent of households pay an average total tax rate of 26.3 percent while the middle quintile pays an average total tax rate of 12.8%.

The data is shown below:

Photo Credit: Pictures of Money

More from Americans for Tax Reform

Congress Should Pass the Preserving Taxpayers Rights Act

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Thursday, July 20th, 2017, 8:00 AM PERMALINK

In recent years, the IRS has proven again and again that it is incapable of doing its job. This failure is due to both the increasing politicization of the agency, as well as the ineptitude of IRS management.

Recently, government watchdog groups have found the IRS mispaid 31% of their employees, gave bonuses to tax delinquent employees, shortchanged taxpayers by $1.2 million, lost track of computers with sensitive taxpayer information on them, and wasted $12 million on an unstable email system.  

One of the strangest blunders by the IRS was the agency’s insistence on hiring Quinn Emanueal, an elite, litigation-only, white shoe law firm to audit tech company Microsoft. The agency did so despite having the capability to handle this audit without hiring private contractors.

Already, the IRS has roughly 40,000 employees responsible for enforcement and auditing. In addition, the agency has access to the services of the office of Chief Counsel or a Department of Justice attorney, both of which would have had the expertise to conduct this kind of work without putting sensitive information at risk.

Instead, the IRS hired a law firm with zero prior experience handling sensitive tax data, leaving taxpayers to foot a $1,000 per hour bill. This unusual decision promoted an investigation from Senate Finance Chairman Orrin Hatch (R-Utah) over concerns that the hiring of the firm was wasting taxpayer resources, and that there were significant risks of using private contractors for the examination of records and handling of sworn testimony.

Bizarrely, it was determined that the IRS hiring this outside firm did not break any laws, and it still remains legal for the agency to hire unqualified and expensive outside counsel today. This decision should be troubling for all taxpayers as it shows the lack of protections in place.

Last week, Members of Congress introduced legislation that would fix this problem and ensure sensitive taxpayer information is protected. The “Preserving Taxpayers’ Rights Act,” introduced by Congressman Jason Smith (R-MO) puts in a number of guardrails around the IRS so that the agency cannot abuse or abrogate its duty to taxpayers:

-First, this legislation ensures taxpayers have an explicit legal right to have their case heard by the independent and impartial IRS Office of Appeals. This will ensure disputes between taxpayers and the IRS are addressed in a timely, efficient and cost-saving manner.

-Second, the bill limits the IRS’s ability to designate cases for litigation to situations where tax abuse is a recurring, significant legal issue affecting a large number of taxpayers.

-Third, the bill limits the ability of the agency to use designated summonses to situations where a taxpayer is being uncooperative and refusing to comply with a request to provide information.

-Fourth, and most importantly, the legislation eliminates the IRS’s ability to outsource a taxpayers’ audit to a private entity. This will better protect sensitive taxpayer information and ensure taxpayer funds cannot be wasted.

These reforms will ensure that the IRS is not able to abuse the auditing process, and that they must instead follow a system that is transparent, efficient, and protects sensitive taxpayer information.

Reigning in power and eliminating provisions that encourage abuses of power to happen are the critical first steps to reforming the IRS. ATR urges all Members of Congress to support this commonsense, bipartisan legislation and encourages its swift passage. 

Photo Credit: Dustin Gaffke

ATR Submits Comments on Need for Tax Reform to Senate

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Monday, July 17th, 2017, 4:13 PM PERMALINK

ATR president Grover Norquist today submitted comments to Senate Finance Chairman Orrin Hatch (R-Utah) in response to the Committee’s June 16 request for feedback on tax reform.

[The full document can be found here]

Pro-growth tax reform has not been signed into law since 1986. Today, the code is outdated, complex, and burdensome. U.S. tax policy is also restricting economic growth and impeding the ability of American businesses to compete internationally.

The tax code is more than 75,000 pages long, and has almost tripled in size in the past three decades. Americans spend more than 8.9 billion hours and $400 billion complying with the code every year. This complexity makes it difficult, if not impossible, for Americans to file their taxes by themselves.

In addition, the code suppresses the economy by restricting the growth of new jobs, increasing the cost of capital, and discouraging innovation.

Over the past decade, the economy has struggled at just two percent GDP growth as the country has experienced the worst recovery in the modern era. The Congressional Budget Office projects that under current policies, two percent growth will continue into the next decade.

The outdated tax code also places American businesses at a disadvantage relative to foreign competitors. According to one study, the U.S. business climate is so uncompetitive that American companies have suffered a net loss of almost $200 billion in assets over the last decade.

Foreign companies are able to expand at a far greater pace, largely because they are based in countries with tax codes that are more favorable to investment and innovation. If the corporate rate was just ten points lower, U.S. companies would have instead experienced a net gain of $600 billion in assets over the same period.

Tax reform is an opportunity to address all of these problems, and reach economic growth of at least three percent. Reforms that should be implemented include:

  • A 15 percent tax rates for all businesses.
  • Tax cuts and simplification for families.
  • Moving to a territorial tax system for individuals and businesses.
  • Implementing full business expensing.
  • Repeal of the death tax and gift tax.
  • Lower capital gains taxes.
  • Expanding tax-preferred savings accounts.

[ATR’s full submission can be accessed here]

Photo Credit: Shawn Clover

More from Americans for Tax Reform

List of Obamacare Taxes Repealed in Senate Health Bill

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Thursday, June 29th, 2017, 4:41 PM PERMALINK

The Senate health bill abolishes the following Obamacare taxes:

  • Abolishes the Obamacare Individual Mandate Tax which hits 8 million Americans each year. Combined with the Employer Mandate Tax listed immediately below, this is a $137 billion tax cut.
  • Abolishes the Obamacare Employer Mandate Tax. Combined with the Individual Mandate Tax listed immediately above, this is a $137 billion tax cut.
  • Abolishes Obamacare’s Medicine Cabinet Tax which hits 20 million Americans with Health Savings Accounts and 30 million Americans with Flexible Spending Accounts. This is a $5.6 billion tax cut.
  • Abolishes Obamacare’s Flexible Spending Account tax on 30 million Americans. This is a $18.6 billion tax cut.
  • Abolishes Obamacare’s Chronic Care Tax on 10 million Americans with high out of pocket medical expenses. This is a $36 billion tax cut.
  • Abolishes Obamacare’s HSA withdrawal tax. This is a $100 million tax cut.
  • Abolishes Obamacare’s 10% excise tax on small businesses with indoor tanning services. This is a $600 million tax cut.
  • Abolishes the Obamacare health insurance tax. This is a $144.7 billion tax cut.
  • Abolishes the Obamacare 3.8% tax on investment income. This is a $172 billion tax cut.
  • Abolishes the Obamacare medical device tax. This is a $19.6 billion tax cut.
  • Abolishes the Obamacare tax on prescription medicine. This is a $25.7 billion tax cut.
  • Abolishes the Obamacare 0.9 Medicare payroll tax increase. This is a $58.6 billion tax cut.
  • Abolishes the Obamacare tax on retiree prescription drug coverage. This is a $1.8 billion tax cut.
  • Abolishes the Obamacare remuneration tax increase on insurers. This is a $500 million tax cut.
  • The bill also delays (until 2026) the “Cadillac” tax on employer-provided insurance. This saves taxpayers $66 billion over the next ten years.


President Obama had promised repeatedly that he would not raise any form of tax on any American earning less than $250,000 per year, but he broke the promise when he signed Obamacare. Now, passage of the Senate’s Better Care Reconciliation Act means tens of millions of middle income Americans will get tax relief from Obamacare's long list of tax hikes.

Here is a more detailed list of the Obamacare taxes abolished in the Senate Bill:

Individual Mandate Tax and Employer Mandate Tax: Under Obamacare, anyone not buying “qualifying” health insurance – as defined by the Obama-era Department of Health and Human Services -- must pay an income surtax to the IRS. In 2015, eight million households paid this tax. Most make less than $250,000. The Obama administration creepily used the Orwellian phrase “shared responsibility payment” to describe this tax. The Senate health bill repeals this tax and the employer mandate tax, saving Americans $137 billion over the next ten years.

For tax year 2016, the tax is a minimum of $695 for individuals, while families of four have to pay a minimum of $2,085.


Households w/ 1 Adult


Households w/ 2 Adults

Households w/ 2 Adults & 2 children


2.5% AGI/$695


2.5% AGI/$1390

2.5% AGI/$2085


Medicine Cabinet Tax on HSAs and FSAs: Under Obamacare, the 20.2 million Americans with a Health Savings Account and the 30 million covered by a Flexible Spending Account are no longer able to purchase over-the-counter medicines using these pre-tax account funds. Examples include cold, cough, and flu medicine, menstrual cramp relief medication, allergy medicines, and dozens of other common medicine cabinet health items. The Senate health bill will abolish this tax, saving Americans $5.6 billion over the next ten years.

Flexible Spending Account Tax: Under Obamacare, the 30 million Americans who use a pre-tax Flexible Spending Account (FSA) at work to pay for their family’s basic medical needs face an Obamacare-imposed cap of $2,500. The Senate health bill will abolish this tax, saving Americans $18.6 billion over the next ten years.

Before Obamacare, the accounts were unlimited under federal law, though employers were allowed to set a cap. Now, parents looking to sock away extra money to pay for braces find themselves quickly hitting this new cap, meaning they have to pony up some or all of the cost with after-tax dollars. Needless to say, this tax especially impacts middle class families.

There is one group of FSA owners for whom this new cap is particularly cruel and onerous: parents of special needs children. Families with special needs children often use FSAs to pay for special needs education. Tuition rates at special needs schools can run thousands of dollars per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. This Obamacare tax increase limits the options available to these families.

Chronic Care Tax: Under Obamacare, this income tax increase directly targets middle class Americans with high medical bills. The tax hits 10 million households every year. Before Obamacare, Americans facing high medical expenses were allowed an income tax 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, approximately 10 million families took advantage of this tax deduction each year before Obamacare. Almost all were middle class: The average taxpayer claiming this deduction earned just over $53,000 annually in 2010. ATR estimates that the average income tax increase for the average family claiming this tax benefit is about $200 - $400 per year.

The Senate health bill will abolish this tax, saving Americans $36 billion over the next ten years.

HSA Withdrawal Tax Hike: Under Obamacare, this provision increases the 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. The Senate health bill will abolish this tax, saving Americans $100 million over the next ten years.

Ten Percent Excise Tax on Indoor Tanning: The Obamacare 10 percent tanning tax has wiped out an estimated 10,000 tanning salons, many owned by women. This Obamacare tax increase was the first to go into effect (July 2010). This petty, burdensome, nanny-state tax affects both the business owner and the end user. Industry estimates show that 30 million Americans visit an indoor tanning facility in a given year, and over 50 percent of salon owners are women. The Senate health bill will abolish this tax, saving Americans $600 million over the next ten years.

Health Insurance Tax: In addition to mandating the purchase of health insurance through the individual mandate tax, Obamacare directly increases the cost of insurance through the health insurance tax.

The total revenue this tax collects is set annually by Treasury and is then divided amongst insurers relative to the premiums they collect each year. While it is directly levied on the industry, the costs of the health insurance tax are inevitably passed on to small businesses that provide healthcare to their employees, middle class families through higher premiums, seniors who purchase Medicare advantage coverage, and the poor who rely on Medicaid managed care.

According to the American Action Forum, the Obamacare health insurance tax will increase premiums by up to $5,000 over a decade and will directly impact 1.7 million small businesses, 11 million households that purchase through the individual insurance market and 23 million households covered through their jobs. The tax is also economically destructive – the National Federation for Independent Businesses estimates the tax could cost up to 286,000 in new jobs and cost small businesses $33 billion in lost sales by 2023.

The Senate health bill will abolish this tax, saving Americans $144.7 billion over the next ten years.

Surtax on Investment Income: Obamacare created a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 for singles). This created a new top capital gains tax rate of 23.8%.

The capital gains tax hits income that has already been subjected to individual income taxes and is then reinvested in assets that spur new jobs, higher wages, and increased economic growth. Much of the “gains” associated with the capital gains tax is due to inflation and studies have shown that even supposedly modest increases in the capital gains tax have strong negative economic effects.

The Senate health bill will abolish this tax, saving Americans $172 billion over the next ten years.

Payroll Tax Hike: Obamacare imposes an additional 0.9 percent payroll tax on individuals making $200,000 or couples making more than $250,000. The Senate health bill will abolish this tax, saving Americans $58.6 billion over the next ten years.

Tax on Medical Device Manufacturers: Under Obamacare, this law imposes a new 2.3% excise tax on all sales of medical devices. The tax applies even if the company has no profits in a given year. The Senate health bill will abolish this tax, saving Americans $19.6 billion over the next ten years.

Tax on Prescription Medicine: Obamacare imposed a tax on the producers of prescription medicine based on relative share of sales. The Senate health bill will abolish this tax, saving Americans $25.7 billion over the next ten years.

Elimination of Deduction for Retiree Prescription Drug Coverage: The Senate health bill will abolish this tax, saving Americans $1.8 billion over the next ten years.

“Obamacare promised to reduce individual insurance premiums – a lot. Premiums rose – a lot,” said Grover Norquist, president of Americans for Tax Reform. Obama promised no tax hikes on anyone earning less than $250,000 – that was a lie. Taxes increased. Healthcare costs increased. Obamacare failed. By its own promised goals, it failed. It is time to repeal failure and reform healthcare to protect consumers, not bureaucracy.”


Photo credit: kidTruant

More from Americans for Tax Reform