Experts warn about impending Obamacare tax increases
by Betsi Fores
December 11, 2012
Source: The Daily Caller
Five major tax increases will go into effect starting in 2013 as a result of Obamacare, regardless of what happens with the fiscal cliff.
Three of those tax hikes will mostly affect the middle class.
The medical-device tax, for example, will apply to hip replacements and “affect everyone who needs those devices,” John C. Goodman, president of the National Center for Policy Analysis, told The Daily Caller News Foundation.
Americans for Tax Reform, the Washington-based group headed by Grover Norquist, estimates the overall tax burden of the medical-device tax will be $20 billion.
Another tax, in the form of a limited deduction, will be placed on Flexible Spending Accounts (FSAs). Those accounts are used by an estimated 30 million Americans.
“Right now there is no limit on how much [pre-tax dollars] can go into those accounts,” Goodman explained, noting that people typically put in approximately $5,000.
Under the new health care law, deductions will be capped at $2,500. ATR estimates this tax burden will amount to $13 billion.
The third middle-class tax hit is the new limit on itemized deductions, which Goodman described as a “tax on the sick.”
Americans who face high medical bills are allowed to deduct medical expenses that exceed 7.5 percent of their adjusted gross income. Starting in 2013, that tax threshold goes up to 10 percent, with a projected gain in revenue of $15.2 billion.
“It is taking away a tax break that helped people who had high medical expenses. This really is a tax on the sick,” Goodman argued.
“It’s hard to understand any of this, except that they just wanted money,” he continued. ”It could be several years before the health exchanges get and running, and that’s what this money is for: To fund them.”
The major tax that will hit the rich is the 3.8 percent tax increase on investment income for high earners, or couples that make more than $250,000 a year.
The 3.8 percent increase on investment would be added on to the increase that will result from the expiration of the Bush-era tax cuts on investment income. Taxes on investment income may be as high as 43.4 percent in 2013.
“Obama keeps saying the wealthy have to pay more. He keeps talking about returning to Clinton era tax rates, but if you add on this 3.8 percent, we’re going to go beyond Clinton-era tax rates,” Goodman said.