Sunday, December 13, 2015
Cadillac Taxes Will Be What We Pay for ObamaCare
Taxes are what we pay for civilized society.
Oliver Wendell Holmes, Jr. (1841-1935), Supreme Court Justice
There is one difference between a tax collector and a taxidermist – the taxidermist leaves the hide.
Mortimer Caplan, Director of IRS, Time, 1963
You may not have noticed, but Bernie Sanders, Hillary Clinton, GOP candidates for President, unions, employers, and Congress are moving to repeal or delay the Cadillac tax . If things go as scheduled with ACA, this 40% tax, as mandated by the Health Law, will be placed in 2018 upon employers who offer generous health benefits, $10,200 for individuals and $27,500 for families.
The Cadillac tax is in keeping with the Supreme Court decision in 2012 that ObamaCare is a tax. It joins 20 other tax hikes, limits to deductions, tax credits, and tax breaks related to ObamaCare.
These 20 tax-related issues include:
• 2.3% Tax on Medical Device Manufacturers began in 2014
• 10% Tax on Indoor Tanning Services began in 2014
• Blue Cross/Blue Shield Tax Hike
• Excise Tax on Charitable Hospitals that fail to comply with the requirements of ObamaCare
• Tax on Brand Name Drugs
• Tax on Health Insurers
• $500,000 Annual Executive Compensation Limit for Health Insurance Executives
• Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D
• Employer Mandate on business with over 50 full-time equivalent employees to provide health insurance to full-time employees. $2,000 per employee – $3,000 if employee uses tax credits to buy insurance on the exchange (AKA the marketplace). (starting 2015 for employers with 100 or more FTE and 2016 for those with 50 or more.)
• Medicare Tax on Investment Income. 3.8% over $200k/$250k
• Medicare Part A Tax increase of .9% over $200k/$250k
• Employer Reporting of Insurance on W-2
• Corporate 1099-MISC Information Reporting (repealed)
• Codification of the “economic substance doctrine”
• An annual $63 fee levied by ObamaCare on all plans (decreased each year until 2017 when pre-existing conditions are eliminated) to help pay for insurance companies covering the costs of high-risk pools.
• Medicine Cabinet Tax - Over the counter medicines no longer qualified as medical expenses for flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), health savings accounts (HSAs), and Archer Medical Saving accounts (MSAs).
• Additional Tax on HSA/MSA Distribution- Health savings account or an Archer medical savings account, penalties for spending money on non-qualified medical expenses. 10% to 20% in the case of a HSA and from 15% to 20% in the case of a MSA.
• Flexible Spending Account Cap began in 2013 - Contributions to FSAs are reduced to $2,500 from $5,000.
• Medical Deduction Threshold tax increase began in 2013
Threshold to deduct medical expenses as an itemized deduction increases to 10% from 7.5%
• Individual Mandate (the tax for not purchasing insurance if you can afford it). Starting in 2014, anyone not buying “qualifying” health insurance must pay an income tax surtax at a rate of 1% or $95 in 2014, to 2.5% in 2016 on profitable income above the tax threshold. The total penalty amount cannot exceed the national average of the annual premiums of a “bronze level” health insurance plan on ObamaCare exchanges
• Premium Tax Credits for Small Businesses began in 2014
• Advanced Premium Tax Credits for Individuals and Families began in 2014
• Medical Loss Ratio (MLR): Premium rebates (not a tax)
The Cadillac Tax is futile federal-attempt to use taxes :
1) to control health care spending
2) to pay for ObamaCare, which may cost the nation $1 trillion over its 10 year course and through 2025.
The Congressional Business Office estimates the Cadillac Tax could cut U.S. spending by 3% to 4% and could generate $89 billion in tax revenues by 2015.
The Cadillac Tax is scheduled to take effect in 2018. If it isn’t enacted then, who is going to pay for America’s lavish health care spending , which reached $3 trillion this year?
Government now spends 50% of that $3 trillion, and its contribution is growing over 6%, and up to 10% a year.
Who will pay? The “rich,” of course, but there are never enough rich to carry the burden of paying for any general government program.
It will come from taxes on the middle class, Chevy drivers, who, according to a December 9 PEW report, now contribute only 43% of the nation’s wealth compared to 61% four decades ago, who now represent a minority of Americans, and who say they are mad as hell and aren’t going to take it anymore. (See Pew Research Center, “The American Middle Class Is Losing Ground, December 9. 2015, and Dan Balz, “The Rise of Trump Coincides with Decline of Middle Class,” Washington Post, December 12, 2015).