There has been a lot of talk over the past week about the possibility of the Senate Republicans keeping many or all of the taxes that were hidden in Obamacare. But what are those taxes and why were they in Obamacare to begin with?
When Barack Obama ran for the White House, he promised that he would not raise taxes on middle and lower-class Americans. Then he turned around and tried to hide 20 different tax increases in the Affordable Care Act, most of which directly and indirectly impact the middle and lower-class people. Publicly, it appeared that Obama was keeping his promise not to raise taxes on most of us, while secretly, he was raising taxes, enough to generate close $1 trillion a year.
And now, reports are indicating that the GOP Senators working on their healthcare plan to replace Obamacare, will likely keep most, if not all, of those hidden tax increases.
Obamacare contains at least 20 different provisions which either raise existing taxes or creates new ones and many of these affect Americans making less than $250,000 per year which is his definition of middle class. Worse yet is that five of these taxes will impact the elderly the most; who in most cases can least afford it.
First is an increase tax on dividends which began on January 2013. The prior tax rate for dividend income was 15%, but that increased to 39.6% for anyone receiving dividend income. Previously, taxpayers 55 years and older received nearly 70% of paid dividends according to an analysis of IRS data. Anyone making more than $250,000 per year now have to pay an additional 3.8% surtax on dividends which makes their dividend tax a whopping 43.4%.
The second tax also took effect in 2013 and that is the medical device excise tax. All medical device manufactures now pay an excise tax on all of the medial devices they produce such as wheelchairs, pacemakers, walkers, knee braces, back braces, insulin pumps, home hospital beds, etc. Seniors are the largest purchasers of these devices and will assuredly see the prices for them increase to offset the taxes paid by the manufacturers.
The third tax issue that is being felt by all Americans is the reduction in the allowable medical itemized deductions on your federal income taxes. Previously, taxpayers had to subtract 7.5% of their adjustable gross income from their itemized medical deductions. As of 2013, everyone has to subtract 10% of the adjustable gross income instead of 7.5%, thus reducing the amount of medical deductions one can claim on their federal income taxes. If a couples adjusted gross income was $50,000 a year, they have to subtract $5,000 from the medical expenses instead of the $3,750, a difference of $1,250, which is a lot for many families and seniors. Again, according to IRS figures, about 60% of those claiming itemized medical deductions are 55-years-old and older.
The fourth tax to impact the elderly the most was the excise tax penalty for those who were not in compliance with the individual mandate part of Obamacare. As of 2014 those individuals who do not have qualified health insurance will pay a penalty in the form of an excise tax when filing their federal income taxes. In 2016, that penalty was increase to 2.5% of your adjusted gross income or $1,390 for anyone making less than $55,600 per year. A number of younger retirees are not old enough for Medicare and no longer are covered by their former employer’s coverage. This group is going to get hit the hardest. Additionally, many elderly are trying to survive on very tight budgets and cannot afford any kind of health insurance. This excise tax will also hit them hard.
The fifth tax is commonly referred to as the Cadillac Plan excise tax which is scheduled to take effect in 2018. Believe it or not, this plan will impose a 40% excise tax on high –cost insurance plans. For senior couples, this means if you are paying more than $29,450 for a family plan, you will be imposed a 40% excise tax for your exorbitant health insurance. A single senior paying more than $11,500 a year will also be slapped with the 40% excise tax. Seniors with extra insurance to cover such things as cancer and chronic illnesses or disabilities will be the ones most likely to be gouged with the Cadillac Plan excise tax. In other words, if you are paying for extra coverage to cover life threatening illnesses and disabilities, you either need to lower your coverage so it will cost you more out of pocket or Obamacare will tax you more which will cost you more out of pocket.
Mind you that these five taxes are all on top of the other fifteen taxes that will affect everyone including seniors. It’s just that these five will hit seniors harder than they will the rest of Americans.
President Trump is promising a new healthcare plan that will be great for everyone, but if that’s the case, then why keep the hidden taxes which hurts seniors and many middle and lower-class Americans? It doesn’t make sense, but when you realize that any form of nationalized healthcare is a socialist plan, then you quickly realize that no replacement will be good for the people or the economy.