New Taxes In The Healthcare Reform Proposal

HR 3962 “Affordable Health Care For America” was introduced in the House of Representatives on Thursday.  On Thursday, Americans For Tax Reform printed a list of the new taxes the bill would create. 

  • Employers who do not pay 72.5 percent of a single employees’ health care premium or 65 percent of a family employee must pay an excise tax.  The percentage of the tax increases according to the amount of the payroll of the company.   (Page 275)
  • If a person fails to obtain acceptable private healthcare coverage, he must pay a tax of 2.5 percent of modified adjusted gross income (MAGI) or the average premium.  (Page 296)
  • Health savings accounts (HSAs), flexible spending accounts (FSAs), or health reimbursement arrangements (HRAs) could no longer be used to cover non-prescription medications (with the exception of insulin).  That means that over-the-counter allergy medicine or cough drops, etc. would no long be included.  (Page 324)
  • There would be an annual cap on FSAs of $2500 (currently uncapped).  (Page 325)
  • 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.).  (Page 326)
  • No tax deduction for employer health plans coordinating with Medicare Part D.  (Page 327)
  • Surtax on individuals and small businesses that would raise the top marginal tax rate in 2011 from 39.6 percent under current law to 45 percent–a new effective top rate.  (Page 336)
  • Excise tax on medical device manufacturers equal to 2.5 percent of the wholesale price.  (Page 339)
  • 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. (Page 344)
  • Delays for nine years the worldwide allocation of interest, a corporate tax relief provision from the American Jobs Creation Act.  (Page 345)
  • Increases taxes on U.S. employers with overseas operations looking to avoid double taxation of earnings.  (Page 346)
  • 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.  (Page 349)
  • 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.  (Page 357)

I apologize for the length of this list, but actually I think Congress should apologize for the length of this list.  This is a disgusting government money and power grab that needs to be stopped in its tracks.  It took about twenty pages to create the American government, if Congress can’t reform healthcare in less than fifty pages, they shouldn’t call it reform.