A Run Down of the Tax Increases and Rising Costs Included in ObamaCare

A comprehensive list of taxes:

Next week, the U.S. House of Representatives will be voting on an historic repeal of the Obamacare law.  While there are many reasons to oppose this flawed government health insurance law, it is important to remember that Obamacare is also one of the largest tax increases in American history.  Below is a comprehensive list of the two dozen new or higher taxes that pay for Obamcare’s expansion of government spending and interference between doctors and patients.

Individual Mandate Excise Tax(Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following

  1 Adult 2 Adults 3+ Adults
2014 1% AGI/$95 1% AGI/$190 1% AGI/$285
2015 2% AGI/$325 2% AGI/$650 2% AGI/$975
2016 + 2.5% AGI/$695 2.5% AGI/$1390 2.5% AGI/$2085

Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS)

Employer Mandate Tax(Jan 2014):  If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees.  This provision applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

Combined score of individual and employer mandate tax penalty: $65 billion/10 years

Surtax on Investment Income ($123 billion/Jan. 2013):  This increase involves the creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single).  This would result in the following top tax rates on investment income

  Capital Gains Dividends Other*
2010-2012 15% 15% 35%
2013+ (current law) 23.8% 43.4% 43.4%
2013+ (Obama budget) 23.8% 23.8% 43.4%

*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations.  It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income.  It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans.  The 3.8% surtax does not apply to non-resident aliens.

Excise Tax on Comprehensive Health Insurance Plans($32 bil/Jan 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). For early retirees and high-risk professions exists a higher threshold ($11,500 single/$29,450 family).  CPI +1 percentage point indexed.

Hike in Medicare Payroll Tax($86.8 bil/Jan 2013): Current law and changes:

  First $200,000
($250,000 Married)
All Remaining Wages
Current Law 1.45%/1.45%
2.9% self-employed
2.9% self-employed
Obamacare Tax Hike 1.45%/1.45%
2.9% self-employed
3.8% self-employed

Medicine Cabinet Tax($5 bil/Jan 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

HSA Withdrawal Tax Hike($1.4 bil/Jan 2011): Increases additional 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.

Flexible Spending Account Cap – aka“Special Needs Kids Tax”($13 bil/Jan 2013): Imposes cap of $2500 (Indexed to inflation after 2013) on FSAs (now unlimited). . There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. 

Tax on Medical Device Manufacturers($20 bil/Jan 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax.  Exemptions include items retailing for less than $100. 

Raise “Haircut” for Medical Itemized Deduction from 7.5% to 10% of AGI($15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI).  The new provision imposes a threshold of 10 percent of AGI; it is waived for 65+ taxpayers in 2013-2016 only.

Tax on Indoor Tanning Services($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons

Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D($4.5 bil/Jan 2013)

Blue Cross/Blue Shield Tax Hike($0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services

Excise Tax on Charitable Hospitals(Min$/immediate): $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS

Tax on Innovator Drug Companies($22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Health Insurers($60.1 bil/Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. The stipulation phases in gradually until 2018, and is fully-imposed on firms with $50 million in profits.

$500,000 Annual Executive Compensation Limit for Health Insurance Executives($0.6 bil/Jan 2013)

Employer Reporting of Insurance on W-2(Min$/Jan 2011): Preamble to taxing health benefits on individual tax returns.

Corporate 1099-MISC Information Reporting($17.1 bil/Jan 2012): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers

“Black liquor” tax hike(Tax hike of $23.6 billion).  This is a tax increase on a type of bio-fuel.

Codification of the “economic substance doctrine”(Tax hike of $4.5 billion).  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.

And the cost of government-run healthcare:

In a Jan. 7 letter to President Obama, more than 30 current and former GOP governors urged the White House to remove “excessive constraints placed on us by healthcare-related federal mandates.” The letter says that ObamaCare and spending mandates from the stimulus bill passed in 2009 “prevent states from managing their Medicaid programs for their unique Medicaid populations.”

ObamaCare’s mandated spending comes at a time when states “will face unprecedented budget challenges,” write the governors, and the biggest problem is Medicaid because “enrollment is up [and] revenues are down.”

One of the strongest advocates of replacing ObamaCare is Texas Gov. Rick Perry, who says that the new law and other mandates will “cost Texas $9 billion in new expenses at a time when our budget is already tight.” Without reforms in Medicaid rules, he predicts that Texas will be required to cut the rates paid to hospitals and doctors by 48%.

According to the governors, ObamaCare’s cost to states will be significantly greater than the Congressional Budget Office’s $20 billion estimate over 10 years. Indiana alone estimates that the bill will cost the Hoosier state between $2.6 billion and $3.1 billion. Pennsylvania says ObamaCare could add 800,000 new enrollees to its Medicaid bills.

ObamaCare supporters counter that these extra costs are paid for entirely by the federal government in the first year of the law’s implementation, and after that the feds pick up 90% of the tab. But Ed Haislmaier, a health-care expert at the Heritage Foundation, has reported that this doesn’t account for “billions of dollars of new administrative costs to states and for the fact that the individual mandate for ObamaCare will add potentially millions of patients to the Medicaid rolls” who otherwise would not have qualified. “This law could cost the states easily twice as much as anticipated,” he said. “It’s going to make Medicaid’s financial problems even worse for states.”



It Will Increase the Federal Deficit. In 2010, the federal deficit was $1.3 trillion. While the average historical deficit is 2.9 percent of gross domestic product (GDP), by 2050, the budget gap is projected to exceed 20 percent of GDP.[13] This trend is set to continue as the population ages and the baby boomer generation retires, causing the cost of programs such as Medicare, Medicaid, and Social Security to soar.

Rising health care costs further add to growth in entitlement spending. Creating a new entitlement program and expanding an existing one will hasten the arrival of inevitable financial collapse.[14] The deficit-reducing provisions of PPACA are either unrealistic or unsustainable.

It Delays Progress to Repair Existing Unsustainable Entitlement Programs. Claims that the new health care law will reduce the deficit are irresponsible and delay meaningful action. To truly reduce deficit spending, Medicare, Medicaid, and Social Security must be reformed. The sooner a solution is adopted, the better: current beneficiaries would experience greater stability and future beneficiaries would have more time to adjust to change.

PPACA made significant cuts to Medicare, but these can either increase the program’s solvency or pay for new spending—not both. Moreover, the new law increased Medicare payroll taxes and extended them to apply to investment income, but it will use the additional revenue to pay for non-Medicare spending. This sets a dangerous precedent that could further increase the insolvency of the program. The provisions create the illusion of Medicare reform, but the changes are the wrong ones and will only give lawmakers another excuse to further avoid addressing the long-term health of entitlement programs.

It Promises Future Increases in Taxes and Penalties. As mentioned earlier, PPACA creates enormous incentives for certain employers to drop their employer-sponsored coverage. The employer penalty included in the law ($2,000 per employee) is low enough to allow employers to drop coverage, pay the penalty, and come out ahead. John C. Goodman, President of the National Center for Policy Analysis, writes, “As more employers dump their employees onto the exchange and as the cost to taxpayers rises, the potential pressure to increase the fine will become inexorable.”[15] Larger penalties would harm businesses’ ability to create jobs, raise wages, or keep their current workers.

It Puts Future Generations on the Hook. Once Americans rely on the new subsidies in order to afford coverage, Congress will have a hard time walking back the generous program. To pay for it, Congress can either raise taxes or add to the deficit. Of course, deficit spending is not free; it merely delays paying for programs, requiring tomorrow’s taxpayers—currently unable to vote—to pay for current citizens’ benefits.[16]


Unless a stake is driven through the heart of this socialist vampire, the burden on future generations will be devastating.
To all the idiots who thought ObamaCare was such a panacea: If you think healthcare is expensive now, just wait until it’s “free”.

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