The Foundry

In order to pay for a massive health care bill (H.R. 3590), Majority Leader Harry Reid (D-NV) creates a host of new taxes. These taxes will total $370.2 billion in the next ten years, and many of the taxes will start being collected in 2010, even as the economy continues to struggle.

The most shocking tax increase is a payroll tax increase that will permanently sever the link between the Medicare Payroll tax and its contributions to Medicare. This payroll tax increase of .5% on earnings above $200,000 for singles and $250,000 for joint couples will contribute money to the general fund for health care instead of directly for Medicare payments.

This change means that Medicare taxes are no longer solely dedicated to social insurance and safeguarding Medicare. Instead, Medicare payroll taxes will be used for other government programs. It is ironic, that the shift emerges from the liberals as they have long been worried about turning social insurance programs into welfare programs that redistribute wealth. The Reid payroll tax is a huge step down the road of using social insurance payroll taxes as regular taxes to transfer income.

Senator Reid also keeps the excise tax on high value of insurance companies. This tax is expected to be $150 billion and is very similar to the similar tax in the Senate Finance Committee, but at a higher threshold level.

Senator Reid also imposes a host of new taxes on the health insurance industry. These range from taxes on branded drug companies to the makers of medical devices. The effect of these new taxes will be to increase medical costs and premiums for individuals. These taxes do nothing but raise the cost of health care as the companies will pass on these tax increases to the consumers of health care.

Reid Taxes as calculated by the Joint Tax Committee:

1. 40% Excise tax on High Value plans such as $8,500 for Individual and $23,000 for a couple. $149.1 billion in new taxes over the next ten years.
2. 0.5% Hike in Medicare Payroll Tax Hike, for single earners over $200,000 and joint earners over $250,000. $53.8 billion in new taxes over the next ten years.
3. Changes to Health Savings Accounts, Archer Medical Spending Accounts and Health Flexible Spending Accounts and Health Reimbursement Arrangements, $5 billion in new taxes.
4. Cap Flexible Spending Accounts at $2500 in cafeteria plans from the current status of unlimited FSA, $14.6 billion.
5. Increase Penalty for early non-qualified Health Savings Accounts Withdrawals from 10 to 20 Percent, $1.3 Billion.
6. Tax on Branded Drugs: manufacturers and importers of branded drugs that will cost taxpayers $22.2 billion.
7. Annual tax on the health insurers. $60.4 billion in new taxes over ten years.
8. Tax on companies who manufacture or import medical devices that will generate $19.3 billion in new taxes over the next ten years.
9. 0. 5% excise tax on cosmetic surgery. This is basically a new 5% federal sales tax on cosmetic surgeries and procedures. $5.8 Billion in new taxes over ten years.
10. Increase the floor of the Medical Expenses Deduction from 7.5% of Adjusted Gross Income to 10%. The floor for seniors will be maintained at 7.5%. This means that the cost of being sick has increased, and sick taxpayers will pay $15.2 billion in new taxes in the next ten years.
11. Eliminate the Deduction of Medicare Part D(prescription Drug Plan) generates $5.4 billion in new taxes over the next ten years.
12. Cap salaries for all employees of health insurance companies at $500,000 by making any remuneration all of that not deductible for tax purposes. $.6 billion over ten years.
13. Established mandates on employers of companies with more than fifty employees to provide health coverage or pay a fee, and requires individuals to maintain qualified health coverage or pay a fee. Companies would pay a penalty of $750 per employee if any employee obtained coverage through the insurance exchange. Full-time workers would have to accept company coverage unless company coverage would cost more than 9.8 percent when they could be on the government exchange, but companies would still face the $750 penalty yielding $36 billion over ten years.