Health Reform Bill Has Hidden Taxes That Will Hurt
While some were applauding passage of the Health Reform bill in the House and President Obama called it “historic,” one thing that may be historic about the reform package, if it passes the Senate and they get what they want as well, are the hidden taxes consumers will be paying, and not just the wealthy consumers.
President Obama promised he would not raise taxes for the middle class and that only families that earn more than $250,000 would have to pay higher income, capital gains, and other taxes. But as has happened in the past, there are ways to tax consumers insidiously, and that appears to be what’s happening with this health reform bill.
Consider the high excise taxes that the Senate is proposing on different areas of the medical industry, including health insurance companies, drug companies, and medical device makers, all of whom could be responsible for paying about $130 billion in fees over the next ten years. Who will ultimately pay for those imposed fees on medical and health care providers? The consumer, and hardest hit will be the middle-class consumer.
Consumers should also be aware that there are plans by the Senate Finance Committee to cut tax breaks for health savings accounts and medical expenses, deductions millions of Americans count on.
How about the increases consumers will see in capital gains and dividends? In a Wall Street Journal article on November 6, it was noted that the capital gains tax rate, which is not 15 percent, would increase to 25.4 percent in 2011 with the Pelosi-Obama health tax surcharge and the accompanying repeal of the Bush tax rates. The tax rate on dividends would also rise from 15 percent to 45 percent (5.4% plus the pre-Bush rate of 39.6%).
Consider also the proposed 40 percent excise tax on so-called Cadillac health insurance plans that are valued at more than $21,000. Richard L. Trumka, the head of the AFL-CIO, notes that about 15 percent of families with health insurance and 19 percent of individuals, all from the middle-class, have health policies that would fall into this category. In a Business Week article, Trumka was noted as saying “What [they are] actually saying is that cost of covering the uninsured should be borne by the middle class.”
If you are a small business owner, there are penalties for you as well. The business payroll penalty is imposed on a sliding scale starting at 2 percent for firms that have payrolls of $500,000 and increasing to 8 percent on firms with payrolls greater than $750,000. But because those amounts are not indexed for inflation, if there is a 4 percent average inflation rate in 10 years, this range would impact firms with payrolls between $335,000 and $510,000 in 2009 dollars. Small business owners have been told that this “pay or play” tax would not apply to most of them, but because the tax is not indexed, every year more and more businesses will be hit by the penalty.
Americans need health insurance reform, but they need changes that do not make them sick and suffer in other areas of their lives. Americans also deserve honesty about the reforms being sold to them, yet it seems that all the rhetoric around caring about Americans’ health is just words. It took decades for the health insurance and medical care mess that we have today to develop. Passing reforms that just put temporary bandages on our wounds is not health care.
Business Week November 4, 2009
Wall Street Journal November 6, 2009