The Impact of the ACA on Middle-Class Taxes
“And I can make a firm pledge; under my plan no family making less than $250,000 a year will see any form of tax increase.”
–Barack Obama, Sept. 12, 2008, Dover, New Hampshire
Now to be fair, Barak Obama is not the first president to break a promise, and he’s likely not the last either. I remember in 1988 when George H.W. Bush pledged “read my lips, no new taxes” and eventually caved to Congressional pressure and broke that promise. One of the big differences between then and now is the media’s virtually ignored Obama’s broken promise and never let us forget Bush’s.
For of you who need a reminder of the new taxes on those of us who make less than $250,000, I’ll chronicle a few. It didn’t take long for the President to break his promise. On February 4, 2009, a mere 15 days after taking office, he signed legislation raising the federal excise tax on cigarettes by 158%. By the way, this tax is one of the most regressive taxes we have and impacts the poor disproportionately.
A year later, President Obama signed the Affordable Care Act, which by most accounts has at least 15-20 new taxes that affect Americans who make less than $250,000. I’ll try to be brief.
- The first tax created by the act was the 10% excise tax on indoor tanning services (effective July 1, 2010).
- The individual mandate tax. Is it a penalty? Is it a tax? The only reason it matters is that Justice Roberts said it is a tax, which makes the mandate constitutional. Otherwise, we’re not having this conversation. At any rate, by 2016 it will be a 2.5% income tax on anyone that does not purchase a qualified insurance plan.
- The employer mandate tax. A business that employs more than 50 full-time workers must provide a qualified plan for its workers (not their dependents). Failure to do so can result in a $3,000 penalty per worker, if even one worker receives a subsidy to purchase insurance from a state exchange. As a result, fewer workers will have jobs and those who do will be paid less. (This is great news in light of the recent news that median per capita income has fallen to $50,054, its lowest levels since 1995.)
- A 2.3% tax on medical device manufacturers. This tax will make everything from hearing aids, motorized wheel chairs, and hip implants more expensive.
- A 5% tax on elective cosmetic medical procedures (whether paid for by insurance or out-of-pocket). This will work like a simple sales tax.
- A health insurance premium tax will be levied on all insurance companies. This is a tax that will be passed on to all purchasers of insurance in the form of higher premiums.
- The law creates a cap of $2,500 on the amount of pre-tax income you can put in your flexible spending account. The result of this provision is you’ll have to pay your copays and deductible with before-tax dollars.
- Those of you with health savings accounts, health reimbursement accounts, and flexible spending accounts may already be aware that as of January 1, 2011, you can no longer use your account to purchase over-the-counter medications without a prescription.
- Cadillac tax on high-premium insurance plans. Any insurance policy with an individual premium over $10,200 or a family premium over $27,500 will be taxes at a 40% marginal rate. You may not think this provision affects you, but the cap is incremented annually by the CPI plus 1%. Recently, premiums are increasing much more than that. It may not be too long before your plan makes you a target for this tax.
Another tax that affects everyone is the tax you pay every time you fill your car with gasoline. When President Obama took office in 2009, the price of a gallon of regular gasoline was $1.84. Since that day, the price of gasoline has risen to $3.86 per gallon, and in many parts of the US it’s approaching $4. If you drive 12,000 miles annually and your car averages 20 MPG, you’re spending $100 per month more on gasoline than you did when Obama took office.
At the same time, supporters of this policy are trying to convince us that it’s for our own good. I’m sure George Harrison was thinking that the “Tax Man” never saw a tax he didn’t like.
If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold I’ll tax the heat,
If you take a walk, I’ll tax your feet.
Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the taxman, yeah, I’m the taxman.
Beatle’s, Revolver, 1966.