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  • Life’s certainties: Death and health reform’s taxes

    The Daily Caller, April 6, 2010

    President Obama’s health care reform package was just a week old when it started to cost taxpayers more money.

    By signing the reconciliation bill last Tuesday—the last step in his legislative two-step—the president raised the price of the original health care reform measure by $65 billion, to $940 billion over the next decade.

    Reform is indeed necessary, as health costs are spiraling out of control. But this “reform” bill does nothing to stop the spiral. In fact, it burdens Americans with billions in new taxes just when they—and the economy—can least bear them.

    Let’s take a look at some of the health care bill’s most onerous levies.

    Take the increase in the Medicare payroll tax. Starting in 2013, individuals with incomes over $200,000 a year and families making more than $250,000 will see their payroll taxes rise from 1.45 to 2.35 percent.

    These individuals and families will also be burdened by an entirely new tax—a 3.8 percent Medicare tax on interest, rental income, capital gains, and dividend income.

    In one fell swoop, Democrats are punishing upwardly mobile families and discouraging them from saving. A substantial number of small businesses will also face these taxes. Money that could have gone to creating jobs or investing in their firms will instead be siphoned off by Washington.

    With these two new job-killing taxes, don’t expect the recession to end any time soon.

    These aren’t the only tax hikes scheduled for 2013. The bill halves the amount of money people can set aside in Flexible Spending Accounts for routine medical expenses, from $5,000 to $2,500. And people who face catastrophic health care expenses in a given year will not be permitted to deduct as much from their taxes.

    These changes hurt the middle- and lower-class people the president claims he wants to help. After all, half of those who take advantage of the medical-expense deduction make less than $50,000 a year.

    The health reform package doesn’t just hit individuals’ wallets—it reserves a healthy dose of pain for American businesses, too.

    Pharmaceutical firms, for instance, must pay fees that steadily increase until they level off in a decade: $2.5 billion next year, $3 billion a year from 2012 to 2016, $4.2 billion in 2018, and $2.8 billion in 2019 and beyond. These new charges will hamstring efforts to research and discover breakthrough cures. Current patients can also look forward to higher prices for the medicines they need, as drug companies will undoubtedly pass the cost of these fees along to consumers.

    Insurers will pay even more. They must fork over $8 billion a year starting in 2014 and $14.3 billion annually four years after that. The insurance levy will then increase every year at the rate of premium growth. Team Obama promised to get tough with the insurance industry, but taxes like these will only make life tough for American families.

    By comparison, medical device companies get off easy. Starting in 2011, they must pay a 2.3 percent excise tax on devices they sell, excluding eyeglasses, contact lenses, and hearing aids. This tax is expected to extract some $20 billion from the industry. Patients can thus look forward to paying more for stents, pacemakers, and other life-saving machines. Worse, the next generation will have to get by with fewer innovative devices, as the new levies will destroy research and development initiatives.

    Some of the bill’s biggest taxes don’t take effect for several years. In 2018, so-called Cadillac plans will be subject to a 40-percent excise tax. The tax will ensnare employer-sponsored policies with premiums higher than $10,200 for individuals and $27,500 for families. Such policies may seem excessive, but by 2018, it’s entirely possible that even bare-bones insurance will cost that much.

    Then, of course, there’s the bill’s most absurd tax—a 10 percent levy on indoor tanning. Many salon owners worry that it will force them to cut jobs—or even put them out of business.

    With these legions of new taxes, President Obama and congressional Democrats appear to have sacrificed economic growth in favor of government direction of the health sector. Generations of taxpayers to come will be left holding the bag for President Obama’s expensive health care experiment. In order to cut the deficit and bring down the massive debt, might a new value-added tax be around the corner?

    Sally C. Pipes is President and CEO of the Pacific Research Institute. Her latest book is “The Top Ten Myths of American Health Care: A Citizen’s Guide.” Follow her on Twitter @sallypipes.

    Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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