New Year means tax increases to pay for health care law

Five new tax increases take effect today to help pay for the nation’s health care overhaul.
Wire
Jan 1, 2013
The tax man is coming in 2013. And he’s wearing surgical scrubs and has a stethoscope around his neck.

Five new tax increases take effect today, Jan. 1, to help pay for the nation’s health care overhaul.

New provisions of the Affordable Care Act require affluent taxpayers to pay more for Medicare and, for the first time, have their investment income subject to Medicare taxes as well. Also, people who use flexible spending accounts for health care expenses will pay higher taxes. And taxpayers who spend a lot out of pocket on their health care will find it harder to deduct those expenses from their taxable income, raising their tax bill.

Individual consumers won’t be the only ones paying higher taxes. Importers and manufacturers of certain medical devices will face a 2.3 percent excise tax on U.S. sales in 2013.

The new measures are slated to raise $24.2 billion next year and more than $258 billion through the year 2019, according to the Joint Committee on Taxation.

Here’s a look at the changes:

CAP ON FSA CONTRIBUTIONS

An estimated 30 million American workers now place a portion of their pre-tax salary into health care Flexible Spending Accounts offered by their employers. The accounts help pay for out-of-pocket medical costs such as co-pays and deductibles that aren’t covered by insurance.

The accounts require enrollees to decide in advance how much money they’ll contribute for the coming year. Most employers capped employee contributions at $5,000. But beginning in 2013, the Affordable Care Act will cap annual employee contributions at $2,500.

The change will raise $1.5 billion in additional tax revenue in 2013 and $13 billion through 2019.

DEDUCTIONS FOR MEDICAL EXPENSES

Currently, taxpayers who itemize their returns can deduct the medical expenses from their taxable income that exceed 7.5 percent of their adjusted gross income. Obamacare increases that threshold to 10 percent in 2013. The higher income threshold means many taxpayers with high medical bills will no longer qualify for the deduction. Seniors age 65 and over and their spouses are exempt from the change until 2016.

The new higher rate will net $400 million in tax revenue in 2013 and $15.2 billion by 2019.

MEDICARE HOSPITAL TAX HIKE

The Medicare Part A tax rate on wages — which pays for hospital, hospice, nursing home and home care services — will go from 1.45 percent to 2.35 percent for individuals with income above $200,000 and families with income above $250,000. Married couples who file separately and earn more than $125,000 are also subject to the tax hike.

INVESTMENT INCOME SURTAX

Tax rates on investment income will increase from the current 15 percent to 18.8 percent. The 3.8-percentage-point “unearned income Medicare contribution tax” applies to interest, dividends, capital gains, annuities, royalties and other types of investment income. But it only applies on investment income above the $200,000 and $250,000 threshold.

Collectively, the Medicare Part A tax hike and the investment income surtax will bring in $20.5 billion next year and $210.2 billion through 2019, according to government estimates.

MEDICAL DEVICE EXCISE TAX

The 2.3 percent excise tax on medical device sales will affect a range of products, from artificial hips and bedpans to stents and defibrillators. The tax is a tradeoff of sorts for the device industry, which, like insurers and pharmaceutical companies, will see substantial new revenue when Obamacare requires millions of people to start buying insurance in 2014.

But industry officials say the new tax will hurt job creation and investment. Others aren’t so sure because the excise tax can be deducted from a company’s income taxes. One expert said that will make the true impact of the tax more like 1.4 percent instead of 2.3 percent. A research and development tax credit of nearly 2 percent further eases the tax burden on device companies.

Government estimates project the device tax will net $1.8 billion in 2013 and an estimated $20 billion through 2019.

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By Tony Pugh - McClatchy Newspapers (MCT)

©2012 McClatchy Washington Bureau

Visit the McClatchy Washington Bureau at www.mcclatchydc.com

Distributed by MCT Information Services

 

Comments

propman

Wasn't the bill called Affordable Health Care?
What is affordable when the Government adds new taxes on everything?

Dr. Information

This whole administration is a joke. But somehow this will be Bushs fault. The takers could care less because this wont effect them. No new taxes Obama said in 2008. LOL. He's a joke and the worst president ever.

remotecontrol

Yeah, he said no new taxes...but he was talking to the people who are leaching off the system. The only people who will see a noticeable hit to the wallet, are those who actually are of benefit to society.

ladydye_5

Noone read the fine print.

countrygirl30

oh sure....now people are going to ask questions....little too late

kal-el

"New provisions of the Affordable Care Act require affluent taxpayers"

I'm sure all of you whiners in the Norwalk Reflector online forum are "affluent taxpayers." You complain when your cable bill goes up 10 cents, so I hardly think this law will affect you financially. In fact, it'll probably benefit you and your kids.

remotecontrol

Read the law, it will hit the middle class the hardest...particulary families where there are two working parents. Tell me how it is going to help? Employers are starting to dump people from their health insurance because the fine costs less than having to pay the increased premiums. So now, people who had decent insurance will now be paying for what amounts to major medical on their own. I'm sure it won't affect you because you are probably on the dole.

Dr. Information

@kal-el. Proof please instead of opinion. Facts are across the board that obamacare will increase taxes.

Medical Device Tax of 2.3%...that will be passed down to anyone requiring surgery (heart valve and hip replacement).

Surtax on Investment Income for those making over 200,000 (not Rich) of 3.8%

Wages above 200,000....a new Medicare Tax . .9%

Health Savings Cap, which will hurt so many middle income and below families is now capped at 2500, instead of unlimited. KILLER RIGHT HERE. Those who find the accounts most valuable are those with the greatest health needs – parents of special needs children, people who have had organ transplants and who must take maintenance drugs, and others facing major medical expenses.

Lets not also forget the penalty companies will pay for not providing insurance, and the penalty for not having individual insurance. They may not come to your door to collect, but they will take it out of your tax return each year.

All from Forbes.com.....a credible site, but if you want to Google the actual bill and read it, its all in there.

http://www.forbes.com/sites/grac...

kURTje

Very true kal-el. They still buy lotto tickets? Our health care needs addressed in some fashion. It has been out of control for the majority of working Americans.

remotecontrol

I don't know anyone that pays $600/mo for lotto tickets. Wait til the exchanges start. The experts are already speculating that the average person will only save about $20/mo by buying through the exchanges and that the policies will average about $600-$800/mo for a family after the subsidy. I can't think of any working poor (the people this is supposed to target) that can afford to pay those premiums. If they could, they likely would already be on their employers insurance, which costs nearly the same on average.

sanduskysteve

Thanks Kal-el - I was going to say something to the same effect. The majority of Americans will see no effect from these "taxes". But the ACA as a whole will benefit those same Americans the most. If you are making so much money that you have billions in investment income or you are earning over 400,000 a year, then you certainly will not notice much of this either - let's be honest. You make enough in a year to buy a mansion house for each of my kids and you complain because instead of paying 15% tax on your investment income (which in Romney's case was his ONLY income, so he says) you have to pay 18% for something which SHOULD be 35% - then I don't think I would be complaining that much. And especially if you donate 1/4 of that income to charity which effectively reduces your tax even more! It is because of you rich people out there taking advantage of tax loopholes that we are in this revenue shortfall to begin with. I'm not going into that mess right now though - this is about obamacare and it's "horrible" effects on the average American - NOT!!!

arnmcrmn

Call it whatever you want but 75% of Americans will pay more in taxes this year than last.

Also factor in the hidden Health Savings Account cap (thanks to Obamacare) that now only allows individuals or a family to place 2500 dollars max into a HSA. This will hurt people BIG TIME in the middle class with having a cap now in place.

Contango

H*ll, through waste, fraud and abuse, Medicare and Medicaid lose an estimated $60 billion annually.

The U.S. govt. funds approx. 50% of the health care spending in this country and they can't control the spiraling costs and they want more?

They've done such an “excellent job” with Amtrak, USPS, Fannie Mae and Freddie Mac, so why not give the idiot bureaucrats in DC a larger portion of our economy to run into bankruptcy?

We ain't got a taxing problem, we've got a 'corrupt' spending problem.

BTW: SS and the Federal income tax were 'originally' only "rich man" taxes. Kinda "trickled down" didn't they?

Contango

A "great" cartoon -

"The small business owner's dilemma:

Should I comply with Obamacare and tax hikes until I'm destitute and can't make payroll...

...or should I close up shop while 'I've' still got enough to live on?

Oooooh... This is tough..."

http://www.zerohedge.com/news/20...

As the authoritarians tighten, many will choose the latter.

mikel

what is interesting is that prezo wants americans to have health insurance. so, being a responsible american, setting up my fsa account to help save for future medical expense's i was contributing $300 per month to my account. now, i will be penalized for being responsible! does prezo even kow what he wants?

propman

Yes Obama knows what he wants.
To be the first American Dictator.
He'll do it by destroying the economy and making most Americans relient on the Government for their day to day existence.

kURTje

Well if you so & so's are worried about waste, then refuse your SSI & medicaid. Its that E-z. No like most weak Americans you'd rather pea & moan.

arnmcrmn

http://online.wsj.com/article/SB...

A tax increase for everyone but the favored wealthy few

In praising Congress's huge new tax increase, President Obama said Tuesday that "millionaires and billionaires" will finally "pay their fair share." That is, unless you are a Nascar track owner, a wind-energy company or the owners of StarKist Tuna, among many others who managed to get their taxes reduced in Congress's New Year celebration.

There's plenty to lament about the capital and income tax hikes, but the bill's seedier underside is the $40 billion or so in tax payoffs to every crony capitalist and special pleader with a lobbyist worth his million-dollar salary. Congress and the White House want everyone to ignore this corporate-welfare blowout, so allow us to shine a light on the merriment.

You just cannot make this stuff up. Ahhh, bask in this people, just bask in the lies and theft right under you feet.

CDog

Why is most everyone complaining. "We" the people voted him back in. Did not anyone learn from the first four years. Get ready to be screwed! I am a middle-class person and I am paying more taxes now for Obama-care. Wake up America!