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Obamacare Packs Crushing New Taxes

January 18, 2011

Friday, 14 Jan 2011 08:53 AM Newsmax.com

By Grover Norquist

From the ATR website.

Next week, the U.S. House of Representatives will be voting on a historic repeal of the Obamacare law.

While there are many reasons to oppose this flawed government health insurance law, it is important to remember that Obamacare is also one of the largest tax increases in American history.

Below is a comprehensive list of the two dozen new or higher taxes that pay for Obamcare’s expansion of government spending and interference between doctors and patients.

Individual Mandate Excise Tax (January 2014): anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following.


	1 Adult	2 Adults	3+ Adults
2014	1% AGI/$95	1% AGI/$190	1% AGI/$285
2015	2% AGI/$325	2% AGI/$650	2% AGI/$975
2016+	2.5% AGI/$695	2.5% AGI/$1,390	2.5% AGI/$2,085

Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS).

Employer Mandate Tax (January 2014): If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2,000 for all full-time employees. This provision applies to all employers with 50 or more employees.

If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3,000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

Combined score of individual and employer mandate tax penalty: $65 billion/10 years.

Surtax on Investment Income ($123 billion/January 2013): This increase involves the creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single). This would result in the following top tax rates on investment income.

	Capital Gains	Dividends	Other*
2010	15%	15%	35%
2011-2012 (now)	20%	39.6%	39.6%
2011-2012 (budget)	20%	20%	39.6%
2013+ (now)	23.8%	43.4%	43.4%
2013+ (budget)	23.8%	23.8%	43.4%

*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations. It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income. It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans. The 3.8 percent surtax does not apply to non-resident aliens.

Excise Tax on Comprehensive Health Insurance Plans ($32 billion /January 2018): New 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). For early retirees and high-risk professions exists a higher threshold ($11,500 single/$29,450 family). CPI +1 percentage point indexed.

Hike in Medicare Payroll Tax ($86.8 billion/January 2013): Current law and changes:

	First $200,000 ($250,000 Married) Employer/Employee	All Remaining Wages Employer/Employee
Current Law	1.45%/1.45% 2.9% self-employed	1.45%/1.45% 2.9% self-employed
Obama Tax Hike	1.45%/1.45% 2.9% self-employed	1.45%/2.35% 3.8% self-employed

Medicine Cabinet Tax ($5 billion/January 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

HSA Withdrawal Tax Hike($1.4 billion/January 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Flexible Spending Account Cap — “Special Needs Kids Tax” ($13 billion/January 2013): Imposes cap of $2,500 (indexed to inflation after 2013) on FSAs (now unlimited). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.

There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.

Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.

Tax on Medical Device Manufacturers($20 billion/January 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3 percent excise tax. Exemptions include items retailing for less than $100.

Raise “Haircut” for Medical Itemized Deduction From 7.5 percent to 10 Percent of AGI ($15.2 billion/January 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI).

The new provision imposes a threshold of 10 percent of AGI; it is waived for taxpayers 65 or older in 2013-2016 only.

Tax on Indoor Tanning Services ($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons.

Elimination of Tax Deduction for Employer-Provided Retirement Rx Drug Coverage in Coordination With Medicare Part D ($4.5 billion/January 2013)

Blue Cross/Blue Shield Tax Hike ($0.4 billion/January 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services.

Excise Tax on Charitable Hospitals(Min/immediate): $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS.

Tax on Innovator Drug Companies($22.2 billion/January 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Health Insurers($60.1 billion/January 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. The stipulation phases in gradually until 2018, and is fully-imposed on firms with $50 million in profits.

$500,000 Annual Executive Compensation Limit for Health Insurance Executives ($0.6 billion/January 2013)

Employer Reporting of Insurance on W-2 (Min./January 2011): Preamble to taxing health benefits on individual tax returns.

Corporate 1099-MISC Information Reporting ($17.1 billion/January 2012): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers.

“Black Liquor”($23.6 billion): This is a tax increase on a type of bio-fuel.

Codification of the “Economic Substance Doctrine” ($4.5 billion): This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed.

Read more on Newsmax.com: Obamacare Packs Crushing New Taxes

Comments: (0) Tags: Government, Small Business, Taxes

The Good, the Bad and the Ugly of the Tax Deal

January 3, 2011

Compared to ideal tax policy, the deal announced this week between congressional Republicans and President Obama is terrible. But compared to what many expected to happen, the deal is pretty good. In other words, grading this package depends on your benchmark. This is why reaction has been all over the map, says Daniel J. Mitchell, a senior fellow at the Cato Institute.

The Good.

The good part of the agreement is the avoidance of bad things, sort of the political version of the Hippocratic oath — do no harm.

Tax rates next year are not going to increase.

The main provisions of the 2001 and 2003 tax acts are extended for two years — including the lower tax rates on dividends and capital gains.

Another bit of good news is that the death tax will be 35 percent for two years, rather than 55 percent, as would have happened without an agreement.

Last but not least, there is a one-year provision allowing businesses to”expense” new investment rather than have it taxed.

The Bad.

The burden of government spending is going to increase.

Unemployment benefits are extended for 13 months.

And there is no effort to reduce spending elsewhere to “pay for” this new budgetary burden.

The Ugly.

As happens so often when politicians make decisions, the deal includes all sorts of special-interest provisions.

Moreover, the temporary nature of the package is disappointing, and there will be very little economic boost from this deal.

Source: Daniel J. Mitchell, “The Good, the Bad and the Ugly of the Tax Deal,” Cato-at-Liberty.org, December 7, 2010.

For text:

http://www.cato-at-liberty.org/the-good-the-bad-and-the-ugly-of-the-tax-deal/

source: http://www.ncpa.org/sub/dpd/index.php?Article_ID=20118&utm_source=newsletter&utm_medium=email&utm_campaign=DPD

Comments: (0) Tags: Economic, Economic Impact, Government, News, Taxes

Unemployment Insurance Kills Small Business

December 27, 2010

December 10, 2010

from the website: http://www.ncpa.org/sub/dpd/index.php?Article_ID=20126&utm_source=newsletter&utm_medium=email&utm

While politicians in Washington negotiate a deal to provide welcome temporary payroll, income and estate tax relief to America’s workers, struggling employers wonder how long they’ll have to pay for the compassion of others — and whether they can survive, says Michelle Malkin.

The Beltway deal hinges on extending federal unemployment insurance (UI) for another 13 months. This would mark the sixth time that the deadline has been extended since June 2008.

The cost of the joint federal-state program is borne by employers who pay state and federal taxes on a portion of wages paid to each employee in a calendar year. (At the federal level, employers must pay 6.2 percent of the first $7,000 of income to keep the system afloat.)

The combined burden of these hidden state and federal payroll taxes has exploded during the recession as economic recovery interventions backfire and the jobless rate remains stuck near double-digits. State Unemployment Insurance funds have gone broke in nearly half the states. As of April 2010, 35 states and jurisdictions had unemployment fund-related debts worth $39.5 billion, says Malkin.

In an interminable money shuffle, these bankrupt state Unemployment Insurance funds are now borrowing money from the feds, whose own regular unemployment benefits account and extended benefits account are both in the red.

In Colorado, small and midsize firms have been saddled with eye-popping unemployment insurance bills that have doubled, tripled and more in the past year.

Greg Howard, owner of McCabe’s Tavern in Colorado Springs, told the Colorado Springs Gazette his bill spiked a whopping 600 percent.

A small commercial painting contractor say that her nine-person company’s first quarter Unemployment Insurance bill has gone from $1,000 to more than $6,500 over the past three years.

Source: Michelle Malkin, “Unemployment Insurance Kills Small Business,” Washington Examiner, December 8, 2010.

For text:

http://washingtonexaminer.com/opinion/columnists/2010/12/michelle-malkin-unemployment-insurance-kills-small-business

Comments: (0) Tags: Economy, Federal Spending, Government, Small Business, Taxes

What Is Fed’s QE2, and What Will It Do? Experts Explain in Everyday English.

November 16, 2010

QE2 sounds like a luxury ocean liner. But many wonder if the Federal Reserve’s second round of “quantitative easing” would be more aptly named the Titanic, says the Dallas Morning News.

“The book has not been written whether QE2 is a good idea or a bad idea,” said Sam Manning, general partner of the Blagden Fund in Dallas. “There are many highly educated, brilliant minds on both sides of the argument.”

But here are some basics about quantitative easing that most agree on:

The way it’s supposed to work is that the Fed buys securities in the open market, paying with a government “check.” The sellers deposit those checks into their banks.

The banks redeploy those deposits as loans to consumers and business. The money supply expands and, in turn, so does the economy — or so the theory goes. The likely — and intended — effect is inflation.

The Fed is worried about deflation and the psychological effect of our seeing assets such as 401(k)s, houses and stocks devalue. It’s the “wealth effect” in reverse, says the Dallas Morning News.

But some fear that the cure could be worse than the disease.

Bob McTeer, distinguished fellow with the National Center for Policy Analysis, disagrees: “Everybody’s treating this as a very unusual, draconian thing that’s extremely risky, probably won’t work and likely to have adverse consequences. I think they’re overdoing it.”

If successful, the action will create a manageable inflation rate that could push the stock market and housing prices higher, entice businesses to go ahead with projects and banks to lend to them.

If QE2 is too successful at unleashing money, inflation could shift into hyperdrive. Then the Fed will have to engage a completely different set of steering mechanisms.

Source: Cheryl Hall, “What Is Fed’s QE2, and What Will It Do? Experts Explain in Everyday English,” Dallas Morning News, November 10, 2010.

For full text:

http://www.dallasnews.com/sharedcontent/dws/bus/columnists/chall/stories/DN-Hallonline_10bus.State.Edition1.3d7e691.html

Comments: (0) Tags: Economic Impact, Economy, Government

Economy 101: Who benefits from new banking rules?

September 14, 2010

By PALLAVI GOGOI (AP)

NEW YORK — At the core of an international agreement to head off future financial meltdowns is a requirement that banks keep more money on hand in case of trouble.The new rule released Sunday by the Basel Committee on Banking Supervision aims to fortify banks worldwide and prevent them from spiraling into the kind of global financial crisis that brought the world to its knees in 2008.Banks will have about eight years to comply fully with the rules, but the proposed changes could have immediate effects on the U.S. economy. Some questions and answers about the new global banking rules:

Q. What is Basel and how does it have so much power?

A. The Basel Committee is a group of top central bankers from 27 nations who meet regularly and look for ways to manage risk for banks worldwide. The U.S. is represented by Federal Reserve Chairman Ben Bernanke. It is the only forum that the world relies on to create a common standard for large global banks.

Q. What’s the main change this year?

A. The most dramatic change proposed by the Basel Committee was a more than three-fold increase, from 2 percent to 7 percent, in the “core capital ratio,” or the amount of money banks need to set aside to help absorb losses on loans. The fear is that if banks have less capital than their losses, they cannot meet payments on their own debt, and they usually fail. Capital is expressed as a percentage of a bank’s assets.

Q. Who stands to benefit?

A. Consumers and some shareholders, perhaps. Most American banks already meet the new standard, and some actually exceed it, according to Richard Bove, banking analyst at investment firm Rochdale Securities. Many of the larger U.S. banks raised enormous amounts of capital after American regulators required them to do so last year on the heels of the financial crisis.That means the rules could help free up some capital for lending to American consumers, in the form of mortgages or credit cards. It will also benefit shareholders of the stronger banks who will likely see higher dividends.It “should be a positive catalyst for banks with strong capital and in a position to increase dividends,” Fred Cannon, banking analyst at Keefe, Bruyette & Woods, said in a report.

Q. Who stands to lose?

A. Smaller community banks or credit unions that are already struggling with high loan losses and foreclosures. Many of them have found it hard to raise capital, and they will struggle with the new requirements.

Small businesses that rely on community banks for their borrowing needs could have an even tougher time getting loans. That could hurt job creation.

“Right now, we need banks to lend in local economies, not focus on new requirements,” said Sean Egan, managing director of Egan Jones Rating Agency. Egan believes that smaller banks will rush to comply with the rules rather than waiting years to comply. “They will try to make up for the higher capital requirements by lending at higher rates and stiffer terms,” Egan said.

Q. Will these new rules prevent another meltdown?

A. Possibly. If banks are forced to hold a higher percentage of capital for all the loans they write, it will prevent the kind of zero-down, zero-interest loans that were offered during the real estate boom. And if banks are stronger, they will be able to withstand the kind of losses that they faced during the last financial crisis.

However, not everyone agrees that the capital requirements are strong enough to avoid another meltdown.

Said Simon Johnson, an economics professor at the Massachusetts Institute of Technology and a former International Monetary Fund chief economist: “Lehman Brothers had 11.6 percent (of the same kind of) capital one day before it failed. The new capital requirements will not even reach that inadequate level.”

Comments: (0) Tags: Economic, Economic Impact, Government

ObamaCare: the Burden on Small Business

August 26, 2010

August 17, 2010 – 12:03 ET

By Michael F. Cannon (@mfcannon)

How will ObamaCare affect a small business owner who’s married with two kids?

For one thing, he and his business will pay higher health premiums beginning this year.

He and his employees will have to purchase unlimited lifetime coverage and unlimited annual coverage (this requirement phases in between now and 2014). The Obama administration estimates that these mandates alone could increase premiums for some businesses by 7 percent.

He and his employees will have to purchase coverage for dependent children without any waiting periods for pre-existing conditions. Another mandate will require them to purchase coverage for dependents up to age 26. One private estimate puts the cost of this “slacker” mandate an average of 2 percent, but our small-business owner’s premiums may rise even more. Perversely, the cost may force him to drop dependent coverage entirely.If his health plan loses its “grandfathered” status—as most small businesses will—he and his workers will have to purchase 100-percent coverage for a long list of preventive services. The administration estimates this mandate will increase premiums on average by 1.5 percent, but private estimates are in the range of 3-4 percent.

The Obama administration also acknowledges there is “tremendous,” “substantial,” and “considerable” uncertainty about these mandates’ costs. That is, they may be higher than the administration says.

These mandates are a double-whammy for our small-business owner. He already faces some of the highest premiums out there. Yet he also provides some of the least comprehensive health plans. So his premiums will rise more than larger employers’ premiums will.

According to HHS, these added costs will likely push him to switch health plans, and he will likely switch to a plan that complies with the mandates, but places tight restrictions on accessing care.

If he offers his workers a health savings account (HSA), medical savings account (MSA), flexible spending account (FSA), or health reimbursement arrangement (HRA), its employees will lose the ability to purchase over-the-counter drugs tax-free. If they make non-medical withdrawals from their HSA or MSA, the penalty will double from 10 percent to 20 percent.

If his small business is a tanning salon, it is already paying a new 10-percent tax on its sales.

The Obama administration is quick to note that beginning in 2010, one third of small businesses may be able to get a tax credit that covers up to 35 percent of their health-benefits. But that credit is not a long-term solution to rising costs; it disappears after 6 years, and often sooner. It will also discourage hiring, because hiring too many workers will reduce or eliminate the credit.

By 2013, all businesses will have to fill out an IRS Form 1099 every time they purchase more than $600 worth of stuff from a vendor. If our small-business owner owns a trucking company, he will have to ask gas stations for their tax ID numbers. If the gas stations don’t cooperate, he will have to withhold money (i.e., send it to the IRS) for gas expenses. This will be the biggest nightmare in the bill for small businesses. Ironically, it will also hit many doctors, journalists, and others who supported ObamaCare, but run their own small business on the side.

If our small-business owner and his wife make over $250,000, they’ll pay the new, higher Medicare “payroll” tax of 3.8 percent, starting in 2013. (It’s currently 2.9 percent).

But it’s 2014 where things really get messy. That’s when the government will require everyone to purchase even more yet-unspecified types of coverage, which will cause premiums to rise even more.

If our small-business owner has 50 or more employees – or fewer full-time employees and lots of part-timers – he faces the prospect of tens of thousands of dollars in penalties under ObamaCare’s employer mandate if he does not provide “adequate” coverage to his workers.

The worst part is that these penalties will be triggered by factors that are unpredictable, unobservable, and totally beyond the control of our small-business owner. He could get hit with those penalties simply because a worker’s spouse loses or changes jobs. Or if a worker’s spouse moves out or dies. Or if an employee’s parents move in.

This creates so much uncertainty that a small-business owner with 55 employees may have to fire six of them just to eliminate that potential liability.

But if he splits his 60-employee small business into two 25-employee businesses, then the federal government—maybe the IRS—will start snooping around to determine whether he did so for legitimate business reasons or just to avoid the mandate.

No matter the size of his firm, if he or his workers earn around $30,000 to $100,000 and get coverage through one of the new health insurance exchanges, their implicit marginal tax rates will jump from around 30-40 percent all the way up to 60-75 percent!

In many cases, if his employees get a raise or work more hours, ObamaCare will leave them with less take-home pay, because the higher earnings will cause them to lose thousands of dollars in subsidies. Their implicit marginal tax rate will exceed 100 percent!

Our small-business owner is paying all these costs now – and so are his workers, and the unemployed.

ObamaCare has created enormous uncertainty. Our small-business owner doesn’t have any idea what ObamaCare’s mandates will cost him in 2011, 2012, 2013, or 2014. Or what additional benefits he will have to provide. Or what kind of insurance options will be available by then. All he knows is that these things will cost him more – possibly a lot more – and that he’s going to be spending lots of time and money, for the foreseeable future, on tax accountants and attorneys.

And he’s going to be much less likely to take on new commitments like expanding or hiring new workers.

Michael F. Cannon is director of health policy studies at the Cato Institute and co-author of Healthy Competition: What’s Holding Back Health Care and How to Free It.

Comments: (0) Tags: Economic, Economic Policies, Government, Health Care, Small Business

Economic and Financial Developments

February 5, 2010

There were monumental changes in both the economy and economic policies this past year. While business activity continued to decline during the first half of the year, by mid-year the economy began to grow.

Some attribute the turnaround in the economy to an unprecedented 18% increase in federal government spending. However, in spite of much talk about government stimulus, increases in federal spending tend to be associated with economic weakness rather than strength.
Some economists believe that government spending can boost total spending. This view first emerged during the 1930s when total spending collapsed and prices were falling. Few associated the collapse in spending with the Federal Reserve’s monetary restraint. Desperate to restore spending, politicians and economists reasoned that if government increased its spending then total spending would also increase. The problem with this line of reasoning is that the federal government cannot spend money without first taking it from someone else.

Read the rest of this entry »

Comments: (0) Tags: Economic, Economic Policies, Economy, Federal Spending, Financial Spending, Government

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