Whether the final health bill has a public plan (a.k.a. "co-op") or not, it’s important for taxpayers to realize that the tax increases will stay. In particular, there are four tax hikes in the House bill that violate Obama’s promise not to raise taxes on familes making less than $250,000 per year:
Restrictions on tax-deductible purchases of over-the-counter medicines with health spending accounts like FSAs and HSAs. This isn’t in the original H.R. 3200, but it did make it into Charlie Rangel’s “Chairman’s Mark.” The description can be found at www.jct.gov, and it’s document JCX-32-09. If you’re one of the 8 million Americans with a health savings account (HSA) or the 30 million Americans with a health flexible spending account (FSA), you will no longer be able to buy over-the-counter medicines (aspirin, etc.) on a pre-tax basis. Contrary to the Obama rhetoric, this changes the plan you currently have, and raises your taxes in the process. This affects anyone with these types of accounts, not just those making more than $250,000 per year.
Tax on Individuals Not Enrolled in Health Insurance (Page 167): If you don’t enroll in a health insurance plan, you will have to pay a new tax equal to 2.5% of income. If you earn $40,000 a year and don’t have health insurance, you’ll have to pay tax of $1000. Notice how this tax affects all individuals, not just those making more than $250,000 per year.
Tax on Businesses Not Offering Health Insurance (Page 183): If a business has a payroll of at least $500,000 and does not offer health insurance, it will be compelled to pay a new payroll tax of 8 percent. It doesn’t matter if the business is profitable or running a loss. Small businesses pay taxes on their owners’ 1040s. This will affect thousands of small businesses with profits of less than $250,000 per year.
IRS Can Disallow Perfectly Legal Tax Deductions They Just Don’t Like (Page 207): If a taxpayer (including one making less than $250,000 per year) uses a perfectly-legal tax deductiovn the IRS doesn’t like, the IRS will be empowered to simply disallow it. The only reason the IRS has to give is that the tax break lacks “economic substance”—that is, the taxpayer is not taking the deduction for “substantial” or “business” reasons. So if you want to engage in a legal activity to cut your tax bill, the IRS wins no matter what.