Taxes and lies
I was talking to an employee the other day and asked her if she knew about all of the new taxes that were coming from the new so-called healthcare law. She had heard some vague rumors from friends but really didn’t know anything specific. I showed her a synopsis that I had of the current and coming taxes that were now law because of the Supreme Court decision that I had received from an organization dedicated to tax reform. The memo contained information regarding the tax hikes that were included in the new law that would affect us all, families and small businesses alike.While I normally cover topics that are more local in nature, the overwhelming impact of this $500 billion-plus hike in our taxes over the next 10 years, complete with the references to where you can find them in the bill, I thought that perhaps this was a topic that was about as local as you can get. I don’t think a comprehensive discussion is forthcoming from other media, so perhaps a look at some of this information would be of interest to you. It might help explain why some people are very fearful of what our future holds.
It starts with those taxes that took effect in 2010 and includes six new taxes. If you would like to obtain a copy of this information, please go to www.atr.org and look for the June 28, 2012, press release or go to our website. First, there is a $50,000 excise tax on charitable hospitals if they don’t meet “community health assessment needs,” “financial assistance” and “billing and collection” rules set out by the federal government. Where do you think that money is going to come from, what are these new rules and why are the feds involved? Then there is the codification of the “economic substance doctrine” where the IRS can disallow completely legal deductions and other tax-minimizing plans because the IRS decides that the deduction is simply to reduce taxes owed. That’s a tax hike of $4.5 billion.
Next we have the “black liquor” tax of $23.6 billion for a type of bio-fuel and a $2.3 billion ANNUAL tax on innovator drug companies that is relative to the share of sales made that year. There is the Blue Cross/Blue Shield tax of $4 billion due in January 2010 if 85% or more of premium revenues are not spent on clinical services. I have already received a letter this last week about a refund due me for my employees’ health insurance. And finally, for 2010 there is the 10% excise tax on Americans using indoor tanning salons that brought in $2.7 billion July 1, 2010.
In 2011 two new “health care” taxes went into effect. The medicine cabinet tax of $5 billion, where we can no longer use health savings accounts, flexible spending accounts or health reimbursement pre-tax dollars to purchase non-prescription medicines except insulin. Then, for $1.4 billion there is an additional tax for non-medical early withdrawals from a health savings account from 10 to 20%.
For those of us unaware, in 2012, employers are now required to report insurance benefits for employees on their W-2s that is a preamble to taxing those health benefits on individual tax returns. I wonder how my employees will feel about that when I tell them about it? I’m sure they’ll love the extra work, too.
Next year is going to be a doozy, because it will have significant impacts on jobs and income for anyone and everyone. While it states that it only applies to those earning $250,000 (family) or $200,000 (single), anybody whose employer depends on investment income as many do, had better worry about losing their job. This 3.8% surtax will bring in $123 billion and will change as follows: 2012 capital gains-15%, 2013-23.8%; 2012 dividends-15%, 2013-43.4%; other income from interest, annuities, royalties rents or passive income 2012-35%, 2013-43.4%. Yikes!
There is also a raise under the new “health care” act for self-employed people like me and many others from 2.9% to 3.8% for all income over $200,000. Another hit on my employees! This is the Medicare Payroll Tax that will bring in $86.8 billion. Another $20 billion will come in from medical device manufacturers who employ 360,000 people in 6,000 plants in this country. This will be a new 2.3% excise tax. Where do you think that cost is going to be passed on to? You? Me?
Currently, people with high medical expenses may deduct them if they exceed 7.9% of their adjusted gross income (AGI). This is being raised to 10% except for those 65+ taxpayers in 2013-2016 only. This is expected to raise an addition $15.2 billion for the government.
Next is the limit on currently unlimited Flexible Spending Account Cap, or what is commonly known as the “special needs kids tax.” This will cruelly reduce the amount of FSA available to the parents of these kids to $2,500 when schools for special needs kids can cost more than $14,000 per year. This is ugly and will cost taxpayers $13 billion as of January 2013. Older Americans are not left untouched either, as there is the elimination of the tax deduction for employer- provided retirement Rx drug coverage along with Medicare Part D. This will cost $4.5 billion.
Finally, for 2013, there is a $500,000 annual executive compensation limit for health insurance executives that is rated at $.6 billion. I’m not sure how I feel about that, since I don’t think it is the government’s prerogative to determine how much someone can earn.
In 2014, less than two years from now, the nasty mandate comes into play where anyone not buying “qualifying” health insurance must pay an income surtax from 1% AGI or $95 per adult, whichever is higher up to 2.5% AGI per adult or $695 in 2016. Exceptions are made for religious objectors, “undocumented immigrants,” prisoners, those earning less than the poverty line, members of Indian tribes and hardship cases. I can see there will be a lot of issues with some of these categories!
To add insult to injury, employers are also socked with additional expenses if they don’t offer health insurance to the tune of $2,000 for all full time employees that is non-deductible. This applies to all employers of 50 or more employees. Bet there will be some downsizing. In addition, if an employee actually gets coverage through an exchange, the employer is further penalized for an additional $1000, so a total of $3,000. Also, if an employer has a waiting period of 30-60 days before enrolling an employee, which many do in order to not have to enroll and then sis enroll an employee who doesn’t work out, the employer is fined and additional $400 per employee or $600 if the waiting period is 60 days or longer. This mandate policy is expected to bring in $65 billion over 10 years.
The health insurance industry is not left unscathed either, as it will be hit with an annual tax based on the premiums they collected that year. This will bring in $60.1 billion.
In 2018, if we still have anything left, we will be charged extra by 40% with an excise tax on so-called “Cadillac” health insurance plans ($10,000 single/$29,450 family). There is a higher threshold for early retirees and high-risk professions. Have I made you sick yet? I guess Justice Roberts had it right – it most certainly has little to do with health care and a lot more to do with raising massive taxes on everyone except Congress and their friends, who have already gotten waivers like the union folks. So you and I are going to pay through the nose whether we like it or not, and those other people are not going to be subject to the same rules. What happened to “equal under the law?” Perhaps someone forgot about that very American concept!
I apologize for writing such a dismal column this week, but there has been so much partisan garbage about this new law that I thought you deserved to know what was actually being put into place and when. I don’t want you to have to read the whole thousands of pages as I did when it first came out, because there is lots more where this came from and it is even more discouraging.
I personally feel, and you can agree or disagree as you like, but I feel like every Senator and Assembly person who voted in favor of this abomination needs to be either voted OUT OF OFFICE this fall or recalled. We are already struggling financially as a nation, and to take our health care system and turn it into a moneymaker for the government is simply disgusting. For them to play God to determine what care you get, how much it is going to cost you or if you even qualify for it, is not what this country is about. We all know what health care is like in other countries, that is why they come here for treatment from all around the globe.
It is clear that while we can certainly make substantial improvements in our system, it still remains the best the world has to offer and everybody, but our leaders apparently know that. What is the matter with them? Do they really want to improve our system or do they just have an insatiable desire to spend more of our money on stupid things? I hear, day after day, speeches by politicians that are so ridiculous in their assumptions that I wonder what they drink and eat in capitals around the country. Something is seriously wrong here, and I know you know that too.
It is time to restore the sanity. We can only do that by changing our leadership, which will be difficult because of all the corruption in our voting system. Except for those few who benefit from the corruption and therefore claim I am blowing smoke, you know I am right. I also know you are mad about it. So what are you going to do? You must participate, and I hope you attended the Board of Supervisors hearing Tuesday in Santa Maria regarding the 6.9-acre parcel in Santa Ynez and their appeal. We cannot lose more land regulations and taxes to people who care nothing for the Valley but only their own pocketbooks.