ObamaCare’s Cascade of Taxes Pounds U.S. Taxpayers

Grace-Marie Turner, President, Galen Institute

Grace-Marie Turner, President, Galen Institute

By Grace-Marie Turner and Tyler Hartsfield

President Obama promised middle-income families they would not see their taxes go up “one single dime” as a result of ObamaCare. But millions of such Americans are indeed paying to finance the gargantuan health overhaul law through hidden taxes and fees, many of which already are driving up the cost of their medical care and health insurance.

In total, the 21 taxes in ObamaCare will extract $1 trillion over a decade, nearly double the $569 billion that Congress’ Joint Committee on Taxation estimated at the time the law passed in 2010.

The first wave hits many higher-income people who got a rude awakening about the health law’s new and higher taxes when they filed their tax forms this year.

Tyler Hartsfield, Policy Analyst, Galen Institute

Tyler Hartsfield, Policy Analyst, Galen Institute

First is a new surtax on investment income that went into effect in January 2013. This new 3.8 percent surtax is paid by households making at least $250,000 (or $200,000, single) with investment income.

In addition, households in these same income categories face an increase in their Medicare payroll taxes of 0.9 percent, raising their tax rate to 2.35 percent from 1.45 percent to help finance ObamaCare’s subsidies. These two taxes together are estimated to cost taxpayers an additional $317 billion over the decade.

But despite the president’s promise that middle-income Americans would be protected, they do pay because, as bank-robber Willie Sutton said, that’s where the money is.

For example, parents of children with special needs face an added ObamaCare tax. The law caps at $2,500 a year the amount of income that employees can put tax free into their Flexible Spending Accounts. Thousands of families with special-needs children who have large medical and educational costs now must pay expenses above the cap with after-tax dollars.

People with high medical bills also face a new limit on what they can deduct for medical expenses — a threshold of 10 percent of their adjusted gross income instead of the old 7.5 percent trigger. Together, these taxes will raise about $43 billion over 10 years.

ObamaCare also imposes a new sales tax on health insurance companies that already is increasing health insurance premiums. The tax is assessed on insurers based upon the premiums the companies collected in the previous year.

The tax will raise $8 billion in 2014, increasing to $14.3 billion in 2018, and rising thereafter based on premium trend. The Joint Committee on Taxation estimates the health insurance tax will exceed $100 billion over the next 10 years, virtually all of which will be passed along to consumers in the form of higher premiums.

The tax will increase premiums for consumers in the individual insurance market by an average of $2,150 and $5,080 for family coverage over 10 years. The average expected increase in the cost of Medicare Advantage coverage is $3,590 over the decade.

ObamaCare calls for a “transitional reinsurance tax” that amounts to a $63-a-year fee on every person with private health insurance to cushion the cost of covering people with pre-existing conditions in the exchanges. The assessment is supposed to be levied for three years starting in 2014 and is designed to raise $25 billion.

Labor unions have been particularly incensed about this tax because they must pay it to compensate health insurers for high-risk patients in the ObamaCare insurance exchanges. Some labor unions, but not all, were given waivers.

An early ObamaCare tax is already hitting innovator drug companies, collecting $34 billion from the pharmaceutical industry over 10 years — passed along to consumers in higher prices and, more often, reduced investment in research for new medicines.

A tax on medical device manufacturers took effect last year, siphoning another $29 billion from creators of surgical instruments, artificial joints and even routine medical devices. The 2.3 percent excise tax is imposed on revenues and must be paid by companies whether or not they have any profit. Many companies say this tax is reducing significantly their investment in research for the next generation of medical devices.

The law calls for many more taxes and fees to finance ObamaCare’s massive subsidies for health insurance and Medicaid expansion. It may come as a shock to middle-income Americans that the majority of these taxes hit them either directly or through higher prices they have to pay for health insurance and medical care to finance ObamaCare.

The more people pay and the more visible these taxes become, the more people will demand repeal of this law that is causing so much more pain than gain for our health sector and economy.

(Grace-Marie Turner is President and Tyler Hartsfield is Policy Analyst at the Galen Institute in Alexandria, Virginia.  Galen specializes in health care policy strategies. This article was published by Investor’s Business Daily and appears here with permission from the authors.)