New Health Care Reform Law Means Tax Increase for Middle Class

From the Joint Committee on Taxation:

By Jay Heflin - 04/12/10 02:37 PM ET

Taxpayers earning less than $200,000 a year will pay roughly $3.9 billion more in taxes — in 2019 alone — due to healthcare reform, according to the Joint Committee on Taxation, Congress's official scorekeeper.

The new law raises $15.2 billion over 10 years by limiting the medical expense deduction, a provision widely used by taxpayers who either have a serious illness or are older.

Taxpayers can currently deduct medical expenses in excess of 7.5 percent of their adjusted gross income. Starting in 2013, most taxpayers will only be able to deduct expenses greater than 10 percent of AGI. Older taxpayers are hit by this threshold increase in 2017.

Once the law is fully implemented in 2019, the JCT estimates the deduction limitation will affect 14.8 million taxpayers — 14.7 million of them will earn less than $200,000 a year. These taxpayers are single and joint filers, as well as heads of households.

"Loss of this deduction will mean higher taxes for 14.7 million individuals and families making under $200,000 a year in 2019," Sen. Chuck Grassley (R-Iowa) told The Hill. "The new subsidy for health insurance would not be available to offset this tax increase for most of these households."

The healthcare law contains tax breaks for individuals purchasing health insurance, but the breaks phase out for those making $88,000 a year.

Grassley, the ranking member on the tax-writing Senate Finance Committee, voted against the health reform bill.

Couples earning less than $250,000 will also nicked by the tax, but the exact number is unclear. The JCT lumps this income level in with those making at least $500,000. It estimates that 58,000 taxpayers earning between $200,000 and $500,000 annually will pay $74 million more in taxes in 2019.

About 5,000 taxpayers earning over $500,000 a year will pay $43 million more in tax because of the limitation.

Erin Shields, a spokesperson for Senate Finance Chairman Max Baucus (D-Mont.), told The Hill that looking just at the tax increase is "misleading and dishonest" since it "only accounts for a sliver of the whole pie."

"Health reform will lower premiums and cap out-of-pocket costs families pay when someone gets sick, which addresses the reason the medical expense tax deduction was created in the first place," she said.

When asked, Shields did not say the information in the article was inaccurate. Her comments were added to the story after its original posting.

The JCT figures were supplied to The Hill by Senate Republican staffers. The numbers were calculated in December but have not been materially altered. The JCT does not comment to the press on its calculations.

President Barack Obama in his Saturday radio address said the healthcare law keeps his campaign pledge to not raise taxes on the middle class. In his bid for the White House, he promised that individuals earning less than $200,000 and joint filers earning less than $250,000 would not see a tax increase under his watch.

JCT: Healthcare law to sock middle class with a $3.9 billion tax increase in 2019

Pelosi bill: Jail for no insurance

By Dick Morris and Eileen McGann

The nonpartisan Joint Committee on Taxation reported that the House version of the healthcare bill specifies that those who don’t buy health insurance and do not pay the fine of about 2.5 percent of their income for failing to do so can face a penalty of up to five years in prison!

The bill describes the penalties as follows:

• Section 7203 — misdemeanor willful failure to pay is punishable by a fine of up to $25,000 and/or imprisonment of up to one year.

• Section 7201 — felony willful evasion is punishable by a fine of up to $250,000 and/or imprisonment of up to five years.” [page 3]

That anyone should face prison for not buying health insurance is simply incredible.

And how much will the stay-out-of-jail insurance cost?

Read more

CONFIRMED: BUY HEALTH INSURANCE OR GO TO JAIL!!!

FROM POLITICO

September 25, 2009
Categories: Senate

Ensign receives handwritten confirmation

This doesn't happen often enough.

Sen. John Ensign (R-Nev.) received a handwritten note Thursday from Joint Committee on Taxation Chief of Staff Tom Barthold confirming the penalty for failing to pay the up to $1,900 fee for not buying health insurance.

Violators could be charged with a misdemeanor and could face up to a year in jail or a $25,000 penalty, Barthold wrote on JCT letterhead. He signed it "Sincerely, Thomas A. Barthold."

The note was a follow-up to Ensign's questioning at the markup.

By Carrie Budoff Brown 11:40 AM

Tax Facts

April 10, 2007
By Bruce Bartlett

Just in time for tax-filing season, the Tax Foundation and Congress' Joint Committee on Taxation have compiled some useful facts about the federal tax system. Following are a few worth thinking about as taxpayers write their annual checks to Uncle Sam.

-- In 2005, the federal government took $2.4 trillion out of the pockets of the American people. To put this number into context, it is about the same as the size of the entire U.S. economy in 1959 in inflation-adjusted terms. Only two other countries on earth have economies as large as our federal government: Germany and Japan -- and Germany just barely makes the cut, with a gross domestic product of $2.7 trillion. China, which everyone is so alarmed about, has an economy significantly smaller than the federal government, with a GDP of $1.9 trillion -- about equal to what the United States raises just from taxes on individuals.

-- Contrary to popular belief, the vast bulk of federal taxes are paid by the wealthy. According to the Joint Committee on Taxation, in 2006, 53.7 percent of all federal income taxes were paid by those with incomes over $200,000. Those with incomes between $100,000 and $200,000 paid 28.3 percent of all individual income taxes. Thus those with incomes over $100,000 paid 82 percent of the total. They also paid 44.4 percent of all payroll taxes.

-- Those with incomes below $40,000 paid no federal income taxes at all in the aggregate. The positive liability for those who paid anything was more than offset by tax rebates from the Earned Income Tax Credit for many more who paid nothing. In total, the EITC put $41 billion into the pockets of low-income workers in 2005, 91 percent of it being paid to those with no income tax liability. However, according to the Tax Foundation, three-fifths of Americans believe that it is wrong for anyone to pay no taxes at all, that everyone should pay something to finance the government.

-- So-called tax loopholes -- deductions and exclusions that reduce one's tax liability -- are mainly used by the middle class, not the wealthy. The largest tax expenditures are the exclusions for pension contributions and health benefits for workers. Among the largest deductions are those for mortgage interest and state and local taxes. In 2005, taxpayers saved $62 billion in taxes due to the mortgage interest deduction, with 72 percent of that going to those with incomes below $200,000. The child credit saved taxpayers $46 billion -- almost all of it claimed by the middle class. Just $8 million went to those with incomes over $200,000.

-- Not surprisingly, three-fifths of taxpayers believe their taxes are too high. Only 2 percent think they are too low. About a third of taxpayers would support a reduction in government services in order to achieve further tax cuts. Just 8 percent favor bigger government financed with higher taxes.

-- Support for fundamental tax reform is high. Four-fifths of taxpayers believe that the tax system is too complex. Just 3 percent believe the tax system is fine the way it is. By better than a two-to-one margin, taxpayers would be willing to give up major tax deductions, such as that for mortgage interest or state and local taxes, in order to get lower income tax rates.

-- Almost all taxpayers think that the top federal income tax rate of 35 percent is too high. More than 90 percent of taxpayers believe that the top rate should be no higher than 29 percent, with 70 percent saying that 19 percent should be the maximum.

-- The Alternative Minimum Tax (AMT) is a rapidly growing federal tax. Originally designed to tax only the rich, increasingly it is a tax on the middle class. In 2005, the AMT affected only 1.3 percent of those with incomes between $50,000 and $100,000. Unless Congress acts, this will rise to 42.8 percent this year and over 50 percent next year. This illustrates the problem with all soak-the-rich tax proposals -- eventually, they end up taxing the middle class, too.

For years, Republicans have largely ignored the problem of the AMT -- enacting temporary patches to the tax cut to keep the problem from getting worse, but not even attempting to offer a permanent fix. The latest patch expired at the end of last year, which is why there is such a sharp rise projected in the percentage of taxpayers affected by the AMT.

Consequently, Democrats really have a gun to their heads -- they must do something on the AMT by the end of the year. But because they have pledged to pay for all tax cuts, they must raise taxes somehow to pay for an AMT fix. Republicans aren't likely to offer much help in that area, making tax policy in 2007 an interesting spectator sport.

Copyright 2007 Creators Syndicate Inc.

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