Are the American people going to like the 13 Health Care Reform tax changes?

http://www.kiplinger.com/businessresource/forecast/archive/health-care-reform-tax-hikes-on-the-way.html

1. A new 10% excise tax on indoor tanning services on services provided after June 30, 2010.

2. The new law gives small firms tax credits as incentives to provide coverage, starting this tax year. Employers with 10 or fewer workers and average annual wages of less than $ 25,000 can receive a credit of up to 35% of their health premium costs each year through 2013. The credit is phased out for firms larger than that and disappears completely if a company has more than 25 employees or average annual wages of $ 50,000 or more.

Beginning in 2014, the system changes. The law requires each state to establish a health insurance exchange — a marketplace where individuals, the self-employed and small businesses can buy health insurance coverage. The government-regulated exchanges would offer insurance policies with different levels of coverage and price tags. Small firms that sign up with one of the health exchanges to be created can receive a credit of up to 50% of their costs — with the same phaseouts for average income and size as the earlier program. The credit disappears after 2015.

3. A requirement that businesses include the value of the health care benefits they provide to employees on W-2s, beginning with W-2s for 2011. The amount reported is not considered taxable income.

4. Elimination of a deduction employers now take for providing Medicare Part D prescription drug coverage to their retirees to the extent that the federal government subsidizes the coverage. This will not take effect until 2013.

5. Doubling the penalty for nonqualified distributions from health savings accounts, to 20%, beginning in 2011.

6. A limit on the amount that employees can contribute to health care flexible spending accounts to $ 2,500 a year, but the cap won’t take effect until 2013. This was previously left to the employer’s discretion, with many firms choosing a limit of $ 4,000 to $ 5,000 or so

7. A ban on using funds from flexible spending accounts, health reimbursement arrangements or health savings accounts for the cost of over-the-counter medications, starting in 2011.

8. Starting in 2013, a 0.9% Medicare surtax will apply to wages in excess of $ 200,000 for single taxpayers and over $ 250,000 for married couples. Also, for the first time ever, a Medicare tax will apply to investment income of high earners. The 3.8% levy will hit the lesser of (1) their unearned income or (2) the amount by which their adjusted gross income exceeds the $ 200,000 or $ 250,000 threshold amounts. The new law defines unearned income as interest, dividends, capital gains, annuities, royalties, and rents. Tax-exempt interest won’t be included, nor will income from retirement accounts.

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9. A hike in the 7.5% floor on itemized deductions for medical expenses to 10%, beginning in 2013. But taxpayers age 65 and over are exempt from the cutback through 2016.

10. A new 40% excise tax, beginning in 2018, on high-cost health plans, levied on the portion that exceeds $ 10,200 for individuals and $ 27,500 for families. The provision is aimed mostly at gold-plated plans offered by employers, although it can affect individual policies

11. A new tax on individuals who don’t obtain adequate health coverage by 2014 — this is often referred to as the individual mandate.. The tax is to be phased in over three years, starting at the greater of $ 95, or 1% of income, in 2014, and rising to the greater of $ 695, or 2.5% of gross income, in 2016.

12. Providing a refundable tax credit, once the individual mandate takes effect in 2014, to help low-income folks purchase coverage. To be eligible, a person’s household income must be between 100% and 400% of the federal poverty level, generally around $ 11,000 to $ 44,000 for singles and $ 22,000 to $ 88,000 for families. The credit is a sliding scale, based on income. Low-incomers get a credit for all costs. Then, as income rises, the credit phases out.

13. A nondeductible fee charged to businesses with 50 or more employees if the firms fail to offer adequate coverage. The fee will equal $ 2,000 times the number of employees, though it won’t count the first 30 workers in that calculation.

WASHINGTON — Rep. Paul Ryan (R-Wis.) said on Sunday that House Republicans would oppose President Barack Obama’s payroll tax cuts for both employers and employees, arguing that the policy had already failed to provide a sufficient boost to the economy. “It hasn’t worked,” Ryan said, suggesting the current temporary tax cut should be allowed to expire, which will amount to a 50 percent tax hike on workers making less than $ 106,000 per year.

He also said he opposes the president’s proposal to require millionaires to pay the same tax rate as the middle class, known as the Buffett plan. “Class warfare might make for good politics, but it makes for rotten economics,” Ryan said.

As chairman of the House Budget Committee and the author of a long-term plan that radically alters Medicare and slashes tax rates for the wealthy as well as social spending, Ryan serves as something of an economic spokesman for House Republicans.

GOP presidential candidate Herman Cain, who followed Ryan on “Fox News Sunday,” seconded his opposition to the tax on millionaires as well as the payroll tax cut extensions. “It’s too little, too late,” said Cain.

Senate Minority Leader Mitch McConnell (R-Ky.), appearing later on NBC’s “Meet The Press,” said he too would oppose taxing millionaires at a higher rate, citing Obama’s own comments from 2010, when the president argued that taxes shouldn’t be raised during rough economic times. “I think what he said then still applies,” McConnell said, insisting that small businesses would be hurt by such a tax plan.

As for the namesake of the Buffett plan, McConnell said that if billionaire investor Warren Buffett feels like he’s not paying his fair share, “he should send us a check.”

“If Warren Buffett would like to give up some of his benefits, we’d be happy to talk about that,” McConnell said, suggesting his benefits be means-tested.

Ryan, while backing a payroll tax hike, nevertheless said that tax hikes cannot be part of the deficit-cutting proposal that the super committee comes up with. As part of his explanation, Ryan made it clear that he sees no difference between raising taxes proactively and allowing tax breaks to expire. “You already have a $ 1.5 trillion tax increase coming in 2013,” he said, referring to the expiration of the Bush tax cuts that were extended by President Obama for two years. Ryan’s reference to the expiration as an “increase” gives greater weight to his willingness to let tax cuts for the middle class expire.

Because of the looming Bush tax cut expiration, said Ryan, the super committee should eschew tax hikes. “Why on earth would we go with that, especially when the problem is spending?” he said.

“You’re basically saying there’s going to be no bargain, no compromise,” host Chris Wallace pointed out.

“Clearly, Democrats could work with us” and get $ 1.5 trillion in spending cuts with no additional revenue, Ryan said. “That shouldn’t be that tough.”

As for the budgetary woes outside Washington, Ryan said, “We just don’t think we should be bailing out state governments.” He added, “That’s the constitutional responsibility of state governments, not federal governments.”

Former President Bill Clinton, appearing on CBS’s “Face The Nation,” backed Obama’s tax hike on millionaires, but suggested that the singular focus should be on job creation, with tax increases on the wealthy coming once the economy improves. “I don’t have any objection to talking about it now,” said Clinton. “Whether it’s good politics or not, it’s an honorable thing to do.”

Clinton urged passage of the payroll tax cut extension and the creation of an infrastructure bank to fund investments. He also hit at the major drag on the economy. “I don’t believe America can return to the full employment days of the ’90s until we can clear this bank debt from the mortgage crisis,” he said.