State Rep. Ed Lindsey: A Dangerous Game — Obamacare, Taxes, & You

via email:

A Dangerous Game We Cannot Win: Obamacare, Taxes, & You

Dear Friends and Neighbors:

Let’s play a game – which really is not a game at all since you and I have no chance of winning. Below are some of the taxes that will be imposed as part of the implementation of Obamacare. Your part in this “game” is to see how many either directly or indirectly impact you and your family.

Mandate Penalties on Individuals

The individual federal mandate will go into effect in 2014. The penalty for not having insurance will increase from 1% of income in 2014 to 2.5% in 2016.

Reducing Medical Deductions

The threshold for deducting on your income tax return the cost of medical care increases in 2013 from 7.5% to 10%, requiring families to spend an additional 2.5% of their gross income on medical expenses before becoming eligible for the deduction. The tax, of course, hits all families with significant health difficulties regardless of income levels.

Flexible Saving Account Limitations

Flexible savings accounts (“FSA”) in 2013 will no longer be exempt from taxation up to $5000. The maximum is being reduced to $2500. In addition, over the counter medications can no longer be paid for out of FSA’s or similar tax exempt plans.

4. Retiree Drug Subsidies

The law eliminates the existing tax deduction for the subsidy by employers who maintain prescription drug plans for their Medicare Part D eligible retirees.

5. Medicare tax increase

For individuals making over $200,000 and couples earning over $250,000, the Hospital Insurance portion of payroll taxes will increase in 2013 from 2.9% to 3.8%. In addition, for the first time this tax will apply to investment income. In addition, the thresholds are not indexed to inflation, therefore, as time passes more taxpayers will be caught in this tax increase. This means that in 10 years it is estimated that individuals and couples presently earning $152,000 and $190,000 respectively will be caught in this tax increase.

6. Health Savings Account Penalties

The penalty tax for withdrawal of funds from Health Savings Accounts prior to 65 for non-qualified medical expenses is increased from 10% to 20%.

7. Indoor Tanning Facilities

Indoor tanning customers now face a 10% sales tax on sessions.

8. “Cadillac Policy” Tax

A 40% tax will be imposed in 2019 on high end employer paid health insurance plans that cost more than $10,200 for individuals and $27,500 for families. Once again, this is not indexed to inflation and over time will pull in more and more families

9. Mandate Penalties for Employers

Employers with 50 full time employees or more will be penalized if their employees do not receive health insurance. The fine is $2000 per employee and $3000 if the employee uses tax credits available on the health insurance exchanges.

10. Hospital Insurance Provider Tax

An annual tax is charged to every health insurance provider in 2014 according to their respective percentage share of the market.

11. Prescription Drug Fees

Manufacturers and importers of brand drugs are taxed according to their respective percentage share of the market.

12. Medical Device Tax

Medical device manufacturers in 2013 will begin having to pay a 2.3% excise tax. The tax is based on sales and not on profits which makes it particularly harsh on manufacturers. As a result, an American company whose market includes a substantial percentage of overseas customers is likely to take its manufacturing overseas to avoid or lessen its tax obligations. One former Cobb County company has already made this move.

Even if you are not directly affected by these taxes, you will be paying more for services and goods that are paying them directly. In addition, we will all be paying more for the health insurance premiums we either pay directly or receive through our employers. My firm, which I helped start with three friends in 1990, saw its insurance premiums increase 20% this year due to Obamacare and there will be more increases for everyone in the future. The reason is simple – in the words of the Wall Street Journal,“The congressional Democrats who crafted the legislation ignored virtually every actuarial principle governing rational insurance pricing.”In other words, Washington can bury its head in the sand, but free market forces will always find a way and, in the case of Obamacare taxes, the way is through your pocketbook.

So how do we avoid losing further in the Obamacare tax game? In the coming e-newsletters, we will discuss not only other problems with Obamacare but also better ways to deal with our health care needs in our society that do not involve sticking our head in the sand and ignoring the free market, but, instead, use it to our advantage.

Working together for conservative reforms on health care, you and I can and will do better for our families and our nation.