The Democratic Party released its platform, which calls for end to Obamacare tax. The Republicans have been saying it for years. Hillary has more recently agreed, and the might of the Democratic party is now saying it too. You can read the 2016 Democratic Party Platform here. But finding the official statement isn’t easy. It is buried in a single sentence on page 35:
We will repeal the excise tax on high-cost health insurance and find revenue to offset it because we need to contain the long-term growth of health care costs, but should not risk passing on too much of the burden to workers.”
It has become difficult for the Democratic Party to face labor unions who have long opposed the tax. And in that sense, the Democratic position is no surprise. But what should be a surprise is the “find revenue” part. There is no question that the Cadillac tax was supposed to rake in huge dollars to help pay for Obamacare. And if the tax is now doomed as it appears, the numerous other–but less aggressive–Obamacare taxes will need to be reevaluated.
The Cadillac tax is a 40% tax on the cost of employer-sponsored health coverage exceeding certain thresholds: $10,800 for self-only coverage, and $29,100 for family coverage. The cost of wellness programs, on-site clinics and other plan features meant to reduce expenses are also included. Vast number of participants in numerous employer-sponsored plans will be affected. Several bills are pending to repeal it.
Many consider Obamacare a health care law, but with its many taxes, the Supreme Court upheld it as a tax law. The Cadillac tax is a whopping 40% on top of all other federal taxes. The clever delayed effective date made it easier for all of us to swallow. Obamacare was passed in 2010, but the Cadillac tax was deferred until 2018. Later, Congress rolled it back two more years, to 2020. That delayed effective date clearly de-emphasized the importance of the provision.
It was supposed to target overly generous employer-provided health care plans. Unions often negotiate for rich benefits and may be willing to take lower cash wages as a trade-off. Unions that have negotiated for generous health benefits may now wish they hadn’t. The Cadillac tax puts pressure on employers to offer less-generous health insurance plans. In evaluating the thresholds, both employer and worker contributions are included. The tax applies to every dollar above those thresholds. Like a cliff, the dollars are taxed at a 40% rate, and the tax is not even tax deductible by the employer.
The tax is projected to collect $80 billion by 2023. That was a rich piece of the planned funding. But there are also many other Obamacare taxes, including these:
- 2.3% Tax on Medical Device Manufacturers (this doesn’t hit you directly, but indirectly it sure can).
- 3.8% Net Investment Income Tax. This one is a big one. Depending on your income, it adds a 3.8% tax on top of your interest, dividends and capital gains.
- Employer Mandate on business with over 50 full-time equivalent employees to provide health insurance to full-time employees. $2000 per employee $3000 if employee uses tax credits to buy insurance on the exchange.
- 40% Excise Tax on high-end (Cadillac) Health Insurance Plans (40% excise tax on the portion of employer-sponsored health coverage that exceeds $10,200 a year and $27,500 for families).
- Medical Deduction Threshold tax increase (threshold to deduct medical expenses as an itemized deduction increases to 10% from 7.5%).
- Individual Mandate (a tax for not purchasing insurance, though the tax penalty is called a Shared Responsibility Payment, the greater of 1% of your income above the filing threshold of $10,150 for singles and $20,300 for married couples filing jointly or $95 per adult ($47.50 per child), with a maximum of $285 for a family, whichever is higher. It goes up in 2015.
- Excise Tax on Charitable Hospitals which fail to comply with the requirements of ObamaCare.
- Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D.
- Medicare Part A Tax increase of .9% over $200k/$250k.
- 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 qualify 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 Distributions
- Health savings accounts or Archer medical savings accounts, penalties for non-qualified medical expenses of 10% to 20% in the case of a HSA and from 15% to 20% for an MSA.
Check out this full list of taxes provisions from the IRS, plus the joint tax committee on the Affordable Care Act. Even with all these taxes, it is worth asking where the revenue will come from to prop up the ironically named Affordable Care Act.
For alerts to future tax articles, email me at Wood@WoodLLP.com. This discussion is not legal advice.
via The Tax Lawyer http://ift.tt/2aaxDZW