(Americans for Tax Reform) – President Obama today vetoed legislation that repealed 16 Obamacare taxes that will hit American families and businesses to the tune of $833.2 billion over the next ten years.
By vetoing this legislation, Obama continues to break his “firm pledge” against “any form of tax increase” on any American earning less than $250,000. There are at least seven taxes in Obamacare that directly raise taxes on middle-income Americans. Though Obama already shattered the pledge when he first signed Obamacare into law, this bill gave him a chance to begin to keep his word. He failed.
Below is the list of taxes that will stay on the books due to Obama’s veto. The first seven listed are a direct violation of his middle class tax pledge.
- Individual Mandate Non-Compliance Tax: Anyone not buying “qualifying” health insurance – as defined by President Obama’s Department of Health and Human Services — must pay an income surtax to the IRS. In 2014, close to 7.5 millionhouseholds paid this tax. Most are in the middle class. The Obama administration uses the Orwellian phrase “shared responsibility payment” to describe this tax.
From this point forward, the tax will be a minimum of $695 for households.
|Households w/ 1 Adult||Households w/ 2 Adults||Households w/ 3+ Adults|
|2.5% AGI/$695||2.5% AGI/$1390||2.5% AGI/$2085|
A recent analysis by the Congressional Budget Office (CBO) found that repealing this mandate would decrease spending by $311 billion over ten years.
- Flexible Spending Account Tax:The 30 – 35 million Americans who use a pre-tax Flexible Spending Account (FSA) at work to pay for their family’s basic medical needs face a new Obamacare cap of $2,500. This tax will hit Americans $32 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: This income tax increase directly targets middle class Americans with high medical bills. Before Obamacare, Americans facing high medical expenses were allowed a 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. This income tax increase will cost Americans $40 billion over the next ten years.
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.
- Medicine Cabinet Tax:Since 2011 millions of Americans are no longer able to purchase over-the-counter medicines using pre-tax Flexible Spending Accounts or Health Savings Accounts dollars. Examples include cold, cough, and flu medicine, menstrual cramp relief medication, allergy medicines, and dozens of other common medicine cabinet health items. This tax costs FSA and HSA users $6.7 billion over ten years.
- Ten Percent Excise Tax on Indoor Tanning:This $800 million Obamacare tax increase has the distinction of being the first to go into effect (July 2010). Slipped into the bill by Sen. Harry Reid (D-Nev.) behind closed doors in the middle of the night, this tax hike replaced the planned Obamacare “Botax” on cosmetic surgery. This petty, burdensome, nanny-state tax affects both the business owner and the end user. Industry estimates from the Indoor Tanning Association show that 30 million Americans visit an indoor tanning facility in a given year, and over 50 percent of salon owners are women. There is no exception granted for those making less than $250,000 meaning it is yet another tax that violates Obama’s “firm pledge” not to raise “any form” of tax on Americans making less than this amount.
- HSA Withdrawal Tax Hike: 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.
- Excise Tax on Comprehensive Health Insurance Plans: In 2020, a new 40 percent excise tax on “Cadillac” health insurance plans kicks in.
- 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 single). This created a new top capital gains tax rate of 23.8% and increased taxes on investment $222.8 billion over ten years.
- Employer Mandate Tax: This provision forces employers to pay a $2,000 per full time employee if they do not offer health coverage, and at least one employee qualifies for a health tax credit.
- Hike in Medicare Payroll Tax: Obamacare imposes an additional 0.9 percent payroll tax on individuals making $200,000 or couples making more than $250,000. This tax increase costs Americans $123 billion over ten years.
- Tax on Medical Device Manufacturers: 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 tax was recently paused for tax years 2016 and 2017. It will cost Americans $20 billion by 2025.
- Tax on Prescription Medicine: Obamacare imposed a tax on the producers of prescription medicine based on relative share of sales. In 2010, this tax equaled $2.3 billion and costs a total of $29.6 billion over the next ten years.
- Tax on Health Insurers: Annual tax on the industry imposed relative to health insurance premiums collected that year. Will cost $130 billion over the next ten years.
- Codification of the “economic substance doctrine”: This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed. This costs taxpayers $5.8 billion over ten years.
- Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D: The elimination of this deduction costs a total of $1.8 billion in additional taxes.
- $500,000 Annual Executive Compensation Limit for Health Insurance Executives: This deduction limitation costs taxpayers $600 million over ten years.
Americans for Tax Reform is a non-partisan coalition of taxpayers and taxpayer groups who oppose all tax increases. For more information or to arrange an interview please contact John Kartch at 202-785-0266 or by email at email@example.com.