The House And Senate Bills Are Terrible Bills For Medical Care And The Economy. Part 8 : The Bill’s New Taxes
Stanley Feld M.D.,FACP,MACE
The Senate healthcare reform bill contains a host of new taxes for both the wealthy and the middle class. The tax increases are designed to raise $370 billion dollars. Another $202 billion dollars will be raised from other provisions such as fees and penalties.
The fees and penalties are really tax increases. Many of these tax increases will start in 2010 before benefits begin.
“The most shocking tax increase is a payroll tax increase that will permanently sever the link between the Medicare Payroll tax and its contributions to Medicare.
An additional Medicare payroll tax will go into the general revenue fund rather than the Medicare Trust Fund. The funds collected can be used for other programs.
“The shift emerges from the liberals. They have long been tried to turn social insurance programs into welfare programs that redistribute wealth. The Reid payroll tax is a huge step down the road of using social insurance payroll taxes as regular taxes to transfer income.”
This payroll tax increase will be 5% on earnings above $200,000 for singles and $250,000 for couples.
President Obama promised anyone earning less than $ 200,000 will not experience a tax increase. He failed to mention the other taxes and fees that will be imposed on the middle class.
There will be an excise tax on healthcare insurance companies. This excise tax is projected to raise $150 billion dollars. Everyone knows this tax will be passed on to all consumers in the form of higher premiums either for private insurance or government insurance.
There will be taxes imposed on drug companies and medical device companies which in turn will pass on these added costs to consumers. The increase in the costs of drug and medical devices will result in increased healthcare insurance premiums. Consumers will pay these extra costs with post tax dollars. Isn’t this a hidden tax for all consumers?
The Joint Tax Committee published an complete list of the new taxes and its projected revenue generation for the federal government.
A 40% Excise tax on High Value healthcare insurance plans such as $8,500 for Individual and $23,000 for a couple. This tax is projected to generate $149.1 billion in new revenue over the next ten years. The government will not collect this excise tax because companies will not buy these healthcare plans.
The 5% increase in the Medicare Payroll Tax for single earners over $200,000 and joint earners over $250,000 will generate $53.8 billion in new taxes over the next ten years.
President Obama’s unintended consequences will eliminate innovative healthcare insurance products that would make real gains toward repairing the healthcare system.
A proposed change would tax and restrict Health Savings Accounts, Archer Medical Spending Accounts and Health Flexible Spending Accounts and Health Reimbursement Arrangements in order to generate $5 billion in new federal revenues. This is another mistake. These innovative healthcare plan products are a step in the right direction. They make consumers more responsible for their healthcare. Their elimination makes consumers be more dependent on the government.
A tax on branded drugs will cost the pharmaceutical industry $22.2 billion over ten years. This tax will be passed on to all consumers as another hidden tax increase.
The annual tax on the health insurance companies is projected to generate $60.4 billion over ten years resulting in an increase of $60.4 dollars in premium increases plus a handling fee.
Medical device companies will experience a $19.3 billion dollar increase in taxes over ten years. Again, this increase will be passed on to consumers. It will also stifle medical device innovation.
The federal government is going to impose a 5% federal sales tax on cosmetic surgery and procedures over ten years. I am not a big fan of cosmetic surgery but this move is a tax on consumers’ freedom of choice
A more complicated and less transparent tax increase is the change of the Medical Expenses Deduction from 7.5% of Adjusted Gross Income to 10%. The floor for seniors will be maintained at 7.5%. It is a tax on having an expensive illness. Consumers will not be able to deduct medical expenses to the degree they could in the past.
The federal revenue projection is it will generate an additional $15.2 billion dollars. President Obama is penalizing someone who becomes sick. The tax increase consumer out of pocket expenses. It is also decreasing discretionary income for consumer spending.
Harry Reid’s bill will eliminate the income tax deduction of Medicare Part D (prescription drug plan) and generates $5.4 billion dollars in new taxes over the next ten years.
The federal government plans to cap salaries for all employees of health insurance companies at $500,000. Any salary above $500,000 will not be a deductible expense to the company. The government claims making salaries of over $500,000 a year a non deductible expense will save over $6 billion over ten years.
All these taxes, fees and penalties will be taxes not only on the wealthy but on the middle class as well. They will have a negative effect on innovation. They will eliminate incentives.
President Obama’s healthcare reform bill is not really about healthcare reform. It transfers the power of healthcare regulations from the states to the federal government and is a tax increase to all consumers.
Healthcare insurance mandates for employers and employees are going to increase taxes to consumers even further. There has been much confusion about these mandates. I will cover the specifics of this draconian provision in detail in my next blog.
President Obama’s bill is not about improving healthcare. It is about concentrating the power of the Federal government and increasing its control over American citizens. It is about reducing their freedom to choose and making their own decisions.
The Democrats have tried in the past to accomplish this. It failed.
If Americans wake up the Democrats will fail again.
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