Seven New Taxes on Citizens Earning Less than $250,000

Obama Liar-n-Chief Taxes For One And All!!!!!!!

While we were all debating the cost to our liberty due to the
Patient Protection and Affordable Care Act (Obamacare), we were ignoring
the cost to our pockets. If there ever was a reason for bipartisan
rage about this law, it should be on the twenty - yes, twenty - hidden
new taxes of this law. Making matters even more relevant is that seven
of these taxes are levied on all citizens regardless of income. Hence,
Mr. Obama’s promise not to raise taxes on anyone earning less than
$250,000 is just another falsehood associated with this legislation.

The first, and best known, of these seven taxes that will hit all
Americans as a result of Obamacare is the Individual Mandate Tax (no
longer concealed as a penalty). This provision will require a couple to
pay the higher of a base tax of $1,360 per year, or 2.5% of adjusted
growth income starting with lower base tax and rising to this level by
2016. Individuals will see a base tax of $695 and families a base tax
of $2,085 per year by 2016.

Next up is the Medicine Cabinet Tax that took effect in 2011. This
tax prohibits reimbursement of expenses for over-the-counter medicine,
with the lone exception of insulin, from an employee’s pre-tax dollar
funded Health Saving Account (HSA), Flexible Spending Account (FSA) or
Health Reimbursement Account (HRA). This provision hurts middle class
earners particularly hard since they earn enough to actually pay federal
taxes, but not enough to make this restriction negligible.

The Flexible Spending Account (FSA) Cap, which will begin in 2013, is
perhaps the most hurtful provision to the middle class. This part of
the law imposes a cap of $2,500 per year (which is now unlimited) on the
amount of pre-tax dollars that could be deposited into these accounts.
Why is this particularly hurtful to the middle class? It is because
funds in these accounts may be used to pay for special needs education
for special needs children in the United States. Tuition rates for this
type of special education can easily exceed $14,000 per year and the
use of pre-tax dollars has helped many middle income families.

Another direct hit to the middle class is the Medical Itemized
Deduction Hurdle which is currently 7.5% of adjusted gross income. This
is the hurdle that must be met before medical expenses over that hurdle
can be taken as a deduction on federal income taxes. Obamacare raises
this hurdle to 10% of adjusted gross income beginning in 2013. Consider
the middle class family with $80,000 of adjusted gross income and
$8,000 of medical expenses. Currently, that family can get some relief
from being able to take a $2,000 deduction (7.5% X $80,000 = $6,000;
$8,000 –$6,000 = $2,000). An increase to 10% would eliminate the
deduction in this example and if that family was paying a 25% federal
tax rate, the real cost of that lost deduction would be $500.

The fifth new tax on the middle class, and all Americans, is the
Health Savings Account (HSA) Withdrawal Tax Hike. This provision
increases the additional tax on non-medical early withdrawals from an
HSA from 10% currently to 20% beginning in 2013. This provision
actually sets these accounts apart from Investment Retirement Accounts
(IRAs) and other tax advantaged accounts, all of which remain with a 10%
early withdrawal tax.

Another regressive tax that is part of this law began in 2010 and
that is the Indoor Tanning Services Tax, which places a 10% excise tax
on people using tanning salons. While some may regard this as
insignificant, the broader implication is that this act of taxation is a
blatant move by the federal government to control the behavior of
citizens. This provision, as does the Individual Mandate and as Justice
Kennedy said during the oral arguments on the constitutionality of the
law said, “….fundamentally changes the relationship between the federal
government and the citizen.”

The seventh new tax that directly impacts the middle class, along
with all citizens, is the Excise Tax on Comprehensive Health Insurance
Plans or the “Cadillac” Health Insurance Plan Tax. These are plans that
provide extensive coverage and that are generally fully paid for, or
largely paid for, by employers. This provision imposes a 40% excise tax
on the employer-paid premium on taxpayers who are covered by such
plans, beginning in 2018. The reason it begins in 2018 is because most
unionized workers are covered by plans that fall under this definition
and a deferral was made to spare union members from this tax for at
least a period of time.

There are thirteen other taxes that apply to businesses and that
apply to high income (over $250,000 per year) households. While these
additional provisions will not impact the middle class directly, they
can have serious indirect consequences for middle and low income
earners. Beginning in 2014, the Employer Mandate Tax will impose an
annual non-deductible tax on employers with more than 50 employees who
do not provide health insurance for their employees.

The impact of this provision on low and middle income earners, and
really all working Americans, is that employers will be confronted with
three choices. The first is provide some level of health insurance, as
many do today, and there would be no impact on employees. The second
choice is to pay the penalty, which would most likely be less expensive
than providing health insurance, and force employees to seek their own
health insurance or purchase it through federal government controlled
state exchanges. Studies have estimated that 20 million Americans will
lose their employee funded health insurance as a result of this
provision and employers electing this option. The third choice is for
employers to lay off employees, or not hire additional employees,
because Obamacare forces them to either provide health insurance or pay
the new tax.

Another new tax, the Tax on Medical Device Manufacturers that begins
in 2013, places a 2.3% excise tax on all items retailing for more than
$100. This provision will not only drive up the cost of various medical
devices ranging from mobility assistance devices to personal testing
supplies, but will also impact an industry that employs 360,000 people
in 6,000 plants across our country. This tax, while not a direct tax,
would have significant negative impact on the middle class.

The Surtax on Investment Income for households earning $250,000 and
more, beginning in 2013, will raise the Capital Gains Tax from 15% to
23.8% on investment income for these households and will raise Taxes on
Dividends from 15% to 43.4% for the same households. Aside from the
impact on retired citizens dependent on dividends, this provision will
pull income from the private economy. In addition, the tax rate on
Other Investment Income earned by Subchapter S Corporation (which many
small business are organized as, allowing the owners to claim all
business income as personal income) will rise from 35% to 43.4%. This
part of the provision would place additional pressure on small
businesses resulting in more layoffs and less hiring, impacting all
American workers.

All but one of the remaining new taxes in Obamacare are directed at
health industry businesses and while they will not impact middle income
families directly, the additional costs will most likely be passed on to
the public. The last new tax is really interesting, it is a tax on
certain bio-fuels!

These are the facts. It does not matter if you support Mr. Obama and
his new law or if you oppose it, the new taxes on the middle class or
real and all Americans should understand their impact on their families
and the economy. Citizens, regardless of political beliefs, should
recognize that Obamacare was passed with almost no sunlight shined on
these middle class tax increases and need to understand that the new law
was sold with the promise that there would be no new middle class
taxes. This is not partisan, it is simply the reality of politics.