The House Health Care Bill: A $700 Billion Tax Hike

Posted October 29th, 2009 at 5.45pm in Health Care.

The New House Health Care Plan has several tax increases that will cost taxpayers $700 billion in the next ten years. Several of these taxes are new and were not in the earlier House bills.

The Surtax
The new Pelosi plan establishes a 5.4% surtax on joint filers with over $1 million in adjusted gross income or $500,000 for single filers. This is a single rate, which is different from the earlier House bills that had surtaxes at lower income levels. This surtax is not based on final adjusted gross income, but instead modified gross income. Thus the effective rate of the surtax is higher than just increasing marginal tax rates by 5.4%.

This surtax is also not indexed to inflation. This will cause more and more taxpayers to be hammered by the surtax even as their real income does not increase. This is one of the reasons that the Joint Tax Committee expects the cost of the surtax to more than double in year 10 of its estimate to $68.4 billion from $30.9 billion in 2011. The Joint Tax Committee estimates that taxpayers will be forced to pay $460.5 billion in higher taxes due to this provision. This is a larger tax increase than the 1993 Clinton income tax increase provisions that created a new tax bracket for high income taxpayers, increased the AMT, limited deductions and exemptions for high income earners.

Business Taxes
Businesses could pay a penalty of 8% on the average wage of their employees if they do not offer qualified health insurance. Small businesses with less than $500,000 in total payroll will be exempt from the business. Businesses with total payroll from $500-$750,000 will pay less than the full 8% depending on their total payroll size.

Business Rate Table
Does not exceed $500,000 ………………………….0 percent
Exceeds $500,000, but does not exceed $585,000 2 percent
Exceeds $585,000, but does not exceed $670,000 4 percent
Exceeds $670,000, but does not exceed $750,000 6 percent

Copying Baucus
The House bill copies the Baucus framework of having several small tax increases in an effort to raise additional income. For example, the House bill now also limits Flexible Spending Accounts to $2500 and limits the ability of FSA or HSAs to purchase goods by excluding over the counter drugs.

Here is a full list of the additional House tax increase items and their cost:
1. Health Savings Account Tax: Increases tax on health savings account funds not used for medical purposes from 10% to 20%. ($1.3 billion)
2. Flexible Spending Arrangement Cap: Caps contributions to flexible spending accounts at $2,500. ($13.3 billion/ ten years)
3. Medical Devices Excise Tax: Imposes 2.5% excise tax on sale of medical devices. ($20 billion/ ten years)
4. Self-Insured Health Fee: Imposes fee on insured and self insured health plans.
5. Itemized Deductions Definition: Conforms the definitions of medical expenses from employer-provide health insurance, merging flexible spending arrangements, health reimbursement arrangements, health savings accounts and archer MSAs to the definition of itemized deduction. ($5 billion/ ten years)
6. Medicare Part D: Eliminates deduction for expenses that can be allocated to the Medicare Part D subsidy. ($3 billion/ ten years)
7. Payments to Corporations: “Requires information reporting on payments to Corporations” ($17.1 billion/ ten years)
8. Worldwide Interest Allocation: Delays implementation of interest allocation. ($26.1 billion/ ten years)
9. Treaty Benefits Limit: Limits the treaty benefits for some deductible payments. ($7.5 billion/ ten years)
10. Economic Substance Payments: Codifies economic substance doctrine and imposes penalties for underpayments. ($5.7 billion/ ten years)

Author: Rea Hederman
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14 Comments

October 29, 2009 Heritage Foundation – House Healthcare Bill a $700 Billion Tax Hike writes:

[...] Pelosi Plan, New Taxes and Public Option [...]

October 30, 2009 b nuckols Texas writes:

Absolutely designed to kill patient ownership of their health care, to run self insured and non-profit insurances out of business and to kill any hope of choice.

October 30, 2009 Bill Smith writes:

Is the $1.3B figure in item 1 an annual figure or an aggregate over 10 years?

Thanks.

October 30, 2009 Morning Bell: The Pelosi Blueprint for Government Run Health Care | Fix Health Care Policy writes:

[...] written, the bill purports to cost only $1.05 trillion over the first ten years and is paid for by over $700 billion in tax increases and cuts to Medicare Advantage and Medicare prescription drug payments. But as troubling as those [...]

October 30, 2009 Mike Brasovan, Fort Worth, TX writes:

Is there anywhere we can get more information on Items 1 through 10 above? I understand some of them but the rest seem to have to to do with some arcane income tax rules. For Example - what are 9 and 10 talking about? What is the Economic Substance Doctrine? If nothing else, these kinds of games point us more towards the FairTax!

October 30, 2009 Freedom of Speech TX writes:

The House Ways and Means Committee.

We’ll find a way and we have the means…

Not if they don’t run the committees.

Vote intelligently in 2010!

October 30, 2009 The Pelosi Blueprint for Government Run Health Care « Conservative Thoughts and Profundity writes:

October 31, 2009 The Greenroom » Forum Archive » Democrats Admit: Our Health Care Proposal is a Cluster*** writes:

[...] * * “ClusterCare” is a $700 billion tax hike that will bankrupt the country as certainly as night follows day. It is 2,000 pages of pure horror, [...]

November 1, 2009 Change, Houston TX writes:

i understand the people with vested interests in the status quo screaming bloody hell about change. the ones i do not get are the misguided who think the elite conservatives have them in mind when they wail against Obama and the Democrats. It is always amusing to hear the people that would benefit from policy changes echo what rich and powerful conservatives rightfully advocate for themselves. i think folks get caught up in wanting to belong to the clique they aspire to be in.But they forget that the big shots are,at the end of the day, just trying to find more ways of fattening their deep pockets. They know how to shape the debate,and the aspiring “conservative” eats it up.

November 1, 2009 Morning Bell: The Pelosi Blueprint for Government Run Health Care | Conservative Principles Now writes:

November 2, 2009 Freedom of Speech TX writes:

Change Houston,

Most of us, I believe, do not think that “elite conservatives have us in mind”.

There is one point. We are going to do everything we can do to “screen” politicians and demand conservative values beginning with taxation, spending, and a balanced budget.

If these people lie, then in two years in th House Elections, we need to get rid of them

No one said democracy was easy. What would YOU have us do? Just give up? Just accept the same garbage from both sides?

This old boy (and old girl) way of doing politics has got to be challenged before there is no Republic left.

November 6, 2009 House Democrat: Pelosi Plan Raises Taxes And Funds Abortion | Fix Health Care Policy writes:

[...] is dead on. The House bill raises taxes by $700 billion at a time when our unemployment rate is already [...]

November 7, 2009 House Democrat: Pelosi Plan Raises Taxes And Funds Abortion « Conservative Thoughts and Profundity writes:

[...] is dead on. The House bill raises taxes by $700 billion at a time when our unemployment rate is already [...]

November 20, 2009 True cost of Obamacare - skicougar’s blog - RedState writes:

[...] bill raises $700 billion in new taxes. That much, you can be sure, is real. In addition to the explicit taxes in the legislation, the [...]

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