Skip to comments.Health Care Reform: Life Just Got Harder
Posted on 03/31/2010 8:20:07 PM PDT by fightinJAG
NEWS ALERT: Tune In Thursday Morning, April 1st at 10 a.m. to Ric on FOX Business Network (FBN). Ric will be speaking with Stuart Varney about the new health care bill and what it means for you. Check your local station listings for the FOX Business Network (FBN) channel in your area.
-------------------------------------------------------------------------------- Here is my latest special report on Health Care Reform: "Life Just Got Harder." The report is also available on the home page of RicEdelman.com.
Health Care Reform: Life Just Got Harder
The health care bill is now law. As a result, taxes are rising. Many middle-class working Americans will soon incur greater expenses for services they have already been receiving. As a humanitarian, I dont believe anybody can argue with the principle of providing health insurance to 32 million Americans who have not had access to it. But those benefits have a high cost, and middle-class working Americans will be the ones paying for it.
Lets take a look at the new taxes that the 2010 health care law has created. Most will be phased in over the next few years and are as follows:
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(Excerpt) Read more at ricedelman.com ...
Starting July 1, indoor tanning salons will charge a 10% sales tax.
Pharmaceutical manufacturers will collectively pay a new excise tax, starting at $2.5 billion and rising over time. The drug makers will no doubt pass this new cost onto consumers.
Non-qualified distributions from Health Savings Accounts will be taxed at 20% instead of the current rate of 10%. Thats a 100% tax increase.
Private insurance plans will be forced to pay the government $1 or $2 each year for each participant. If you have health insurance through a private insurance plan, you will likely be required to pay this charge.
Medicare payroll taxes will rise 62% for those earning more than $200,000 a year ($250,000 if you are married filing jointly). The tax on wages in excess of $200,000 (or $250,000) is rising from 1.45% to 2.35%. Thats an additional tax of 0.9%, or a 62% increase.
There will also be a new 3.8% tax on gross investment income for those earning more than $200,000 ($250,000 for married filing jointly). Investment income includes interest, dividends, capital gains, rental income, annuities and royalties. In addition to this new tax, capital gains taxes are set to rise in 2011 from 15% to 20% thats a 33% increase. Therefore, for people who are making over $200,000 a year ($250,000 if you are married filing jointly), the total tax on capital gains is jumping from 15% to 23.8%. Thats a 59% increase.
Medical device manufacturers must collect a new national sales tax of 2.9%. You will directly pay this tax, but it will not apply to eyeglasses, contact lenses or hearing aids.
Employers will no longer receive a subsidy for providing retiree prescription drug coverage. Companies will pay more to provide such benefits as a result (AT&T has already announced that it will pay $1 billion in new taxes annually because of this provision). Similar announcements have been made by John Deere ($150 million), Caterpillar ($100 million), 3M Company ($90 million) and AK Steele ($31 million), and many more companies in the Fortune 500 are expected to make similar announcements soon. It is widely expected that Corporate America will pass these costs onto consumers in the form of higher prices for their goods and services, reduce the benefits they provide to their retired employees (who will in turn be forced to pay higher health care costs) or both.
You will not be able to deduct medical expenses on your tax return until youve spent 10% of your Adjusted Gross Income. Currently, you can begin deductions after you spend 7.5% of your AGI. Therefore, this is a 33% increase in the threshold.
Contributions to Flexible Spending Accounts will be capped at $2,500 per year, and you will no longer be able to use the money to buy over-the-counter drugs. This change will cause some taxpayers to pay as much as several thousand dollars more in health care expenses and in annual income taxes.
If youre an executive in the health insurance industry and earn more than half a million dollars a year, taxes will effectively double for all of your income above $500,000.
Employers with more than 50 employees that do not provide health insurance to their employees will pay a $2,000 penalty per employee per year, starting with the 31st employee.
If you do not have health insurance, you and each member of your household will pay a new tax of 1% of household income (at least $95 per person per year). This tax will rise to 2.5% per year (at least $695 per person) by 2016.
Health insurance plans that cost more than $10,200 for individuals ($27,500 per family) will pay a new 40% tax on any coverage that exceeds the limit. Plan sponsors will no doubt pass this cost along to you.
In addition to these new taxes, the new health care law cuts federal funding of Medicare by $500 billion over the next decade. The states will find themselves forced to deal with this cutback, and they will have little choice but to increase state income taxes, force Medicare patients to pay more of their health care costs, or both.
Medicare is not the only entitlement program likely to see cuts. According to the Congressional Budget Office, 2010 will be the first year that Social Security pays out more in benefits than it collects in payroll taxes. This was not expected to occur until 2016. Based on current projections, Social Security will be broke by 2037 unless changes are made. That means taxes will rise, and benefits will be delayed or reduced, or all three.
Retirees are already feeling pressure. There was no cost of living adjustment (COLA) for Social Security in 2010, and none is expected for 2011 either. This represents a net decrease in income for retirees, because Medicare taxes continue to rise despite the fact that there is no offsetting increase in Social Security benefits.
Meanwhile, the Center for Retirement Research at Boston College released a study in March 2010 showing that married retirees who are both 65 years of age and currently free of chronic disease will spend $197,000 on health care during retirement. And a 2008 study from the Schwab Center for Financial Research says that one-third of baby boomers are currently providing financial assistance to parents, and 50% are providing support to children, proving that millions of Americans are true members of the so-called Sandwich Generation.
All these statistics help explain why 84% of Americans say they are not confident that they will ever be able to retire, according to the Employee Benefit Research Institutes 2010 Retirement Confidence Survey.
Read rest of report at the link.
Wow. Did you know your guvmint could just not be liking your industry and so make YOU pay way more in taxes than the other guy?
Ric is a good financial planner and seems to be a good investment advisor. An economist, however, he is not.
Basically, States no longer exist except as administrative pass-throughs. The feds totally own a State's budget priorities when it can force it to spend whatever it takes to fulfill unfunded federal mandates. The 9th Circuit recently ruled that a State could NOT cut Medicaid -- no matter that the State was going flat broke -- because it must "maintain equal access to healthcare for the poor."
Ric better watch out or he’ll be hauled up to D.C. to explain to Henry Waxman why he isn’t telling people Obamacare is going to lower their premiums 3000%.
Can someone translate that? Does it mean that if your plan costs $14,200 you will pay a 40% tax on $4000?
It kinda sounds like that. It's so poorly written that it's hard to tell.
And here I was working toward the day when my health insurance policy would be a catastrophic care plan with a $10,000 annual deductible. “No,” sez Big Brother. Blew a massive hole in my business plan, too. Guess I’ll scrap the whole idea of starting my own company and just stick to my government job- that’s the only growth sector of the economy. When that falls apart, it’s back to subsistence farming, hunting and gathering for awhile until I can get my blacksmith business going.
Thats interesting because according to the CBO the average single policy will cost 12,000.00 and the family will pay 15,750.00. So the single person will have to pay the tax
because the Govmt or the Insurance Co. says the policy will be over 10K. The logic of this whole fiasco boggles the mind .
Sad. I feel like a chump for having sunk a lot of money into longterm care insurance. You know, trying to provide for family who have debiltating illness.
Also, what in the world is this about providing health insurance? This focus on providing insurance, not health care services, is nothing but a naked money grab to redistribute wealth.
Insurance is meaningless in and of itself.
Obviously, Waxman is incensed because this seems to put the lie to the promise that if you like your current plan, nothing will change. But this was never true. Medicare Advantage beneficiaries are basically going to see their generous benefits slashed, retiree drug benefits suddenly cost more and may now be discontinued, and ultimately, more than a few employers will almost certainly find it cheaper to shut down their plans. If Congress didn't want those things to happen, it should have passed a different law.
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