Taxes? In My PelosiCare?

ATR, has this list of all the taxes in Pelosi-Care…

Employer Mandate Excise Tax (Page 275): If an employer does not pay 72.5 percent of a single employee’s health premium (65 percent of a family employee), the employer must pay an excise tax equal to 8 percent of average wages.  Small employers (measured by payroll size) have smaller payroll tax rates of 0 percent (<$500,000), 2 percent ($500,000-$585,000), 4 percent ($585,000-$670,000), and 6 percent ($670,000-$750,000).

Individual Mandate Surtax (Page 296): If an individual fails to obtain qualifying coverage, he must pay an income surtax equal to the lesser of 2.5 percent of modified adjusted gross income (MAGI) or the average premium.  MAGI adds back in the foreign earned income exclusion and municipal bond interest.

So, the government will again force you to get insurance.  How very American?  This will, or course, raise some constitutional questions regarding the ability of the federal government to dictate that a citizen purchase something.  Many are stating that the government does not have a legal leg to stand on.  It might be interesting to see how that develops.

Medicine Cabinet Tax (Page 324): Non-prescription medications would no longer be able to be purchased from health savings accounts (HSAs), flexible spending accounts (FSAs), or health reimbursement arrangements (HRAs).  Insulin excepted.

Cap on FSAs (Page 325): FSAs would face an annual cap of $2500 (currently uncapped).

Increased Additional Tax on Non-Qualified HSA Distributions (Page 326): Non-qualified distributions from HSAs would face an additional tax of 20 percent (current law is 10 percent).  This disadvantages HSAs relative to other tax-free accounts (e.g. IRAs, 401(k)s, 529 plans, etc.)

The last three are of particular interest to me.  HSAs and the other types of re-imbursement programs have the function of allowing people greater independence with their health care, as they are paying their bills with their own money. Hence, the consumer controls what they purchase.  HSAs are bundled with a high deductible insurance plan, which is relatively inexpensive, to cover catastrophic illness and severe injuries.  Also, the ability to use these accounts for OTC medications, as well as other wellness activities, allows people to meet many of the government goals for health care…but without the loving hand of big brother to guide it.  It is my opinion that the government dislikes these plans due to this independence.    I believe that these restrictions are the first of many to be placed on savings type plans.  Over time, they will be phased out, or made to be too expensive and limited to be desirable.  Too much freedom there!

Denial of Tax Deduction for Employer Health Plans Coordinating with Medicare Part D (Page 327): This would further erode private sector participation in delivery of Medicare services.

Private Medicare plans represent choice and, in many cases, increased access to care via private companies.  Since government control is the goal, they have to be progressively limited, then eliminated.  This will have the effect of returning Medicare to the sole control of the government.

Surtax on Individuals and Small Businesses (Page 336): Imposes an income surtax of 5.4 percent on MAGI over $500,000 ($1 million married filing jointly).  MAGI adds back in the itemized deduction for margin loan interest.  This would raise the top marginal tax rate in 2011 from 39.6 percent under current law to 45 percent—a new effective top rate.

Excise Tax on Medical Devices (Page 339): Imposes a new excise tax on medical device manufacturers equal to 2.5 percent of the wholesale price.  It excludes retail sales and unspecified medical devices sold to the general public.

Let’s make medical devises more expensive!  Yes, it doesn’t count for retail, but will it make your hospital bill go up?  We all have to remember that the end user pays all taxes, so it’s predictable that we’ll be paying for this tax.

Corporate 1099-MISC Information Reporting (Page 344): Requires that 1099-MISC forms be issued to corporations as well as persons for trade or business payments.  Current law limits to just persons for small business compliance complexity reasons.  Also expands reporting to exchanges of property.

Delay in Worldwide Allocation of Interest (Page 345): Delays for nine years the worldwide allocation of interest, a corporate tax relief provision from the American Jobs Creation Act

Limitation on Tax Treaty Benefits for Certain Payments (Page 346): Increases taxes on U.S. employers with overseas operations looking to avoid double taxation of earnings.

Codification of the “Economic Substance Doctrine” (Page 349): Empowers the IRS to disallow a perfectly legal tax deduction or other tax relief merely because the IRS deems that the motive of the taxpayer was not primarily business-related.

Let’s put more people out of work!  Naturally, if you increase costs for businesses, one of four things happens.

1. The business moves away
2. The business goes out of business
3. The business raises prices
4. The business either lays off workers, or doesn’t replace departed workers.

None of these are obviously good for business, or jobs.

Also note the fact that this is terribly open to interpretation.  The IRS can say, and probably will, that almost any deduction is not primarily business related.  Of course, any company that has disagreed with the POTUS and this plan will suddenly find their deductions to be non-deductible.  Remember this, Humana!

Application of “More Likely Than Not” Rule (Page 357): Publicly-traded partnerships and corporations with annual gross receipts in excess of $100 million have raised standards on penalties.  If there is a tax underpayment by these taxpayers, they must be able to prove that the estimated tax paid would have more likely than not been sufficient to cover final tax liability.

It would seem that the government desires more control of the health care system.  We‘ve already established that the government option, now renamed the “consumer option,” is meant to be phase one of a single payer plan.  See posts here, and here to review that development.  Considering all the new taxes and restrictions that make people more dependent on the government, it is logical to conclude that the complete takeover of healthcare is again being attempted.  Again, this goal is not openly stated.  In fact, they use kind sounding words like “consumer option,” to lull the public into thinking that they will have control.  However, when you look at the legislation and the tax increases, as well as what the tax increases target, one can see that the plan penalizes private insurance, and would force more people into the “consumer option.”  We might as well call it the “consumer not-an-option.”