2013: The Year of Obamacare Tax Hikes

Although Obamacare was signed into law in 2010, very few of its rules and regulations have gone into law. This was by design: the Obama Administration wanted to give executive departments time to set definitions, insurance companies time to adjust to the new reality, and didn’t want Americans shocked – and perhaps outraged – by all the ways their lives would be affected. Including by taxes.

In 2013, though, some of the new tax hikes will start to be phased in. As Sally Pipes of the Pacific Research Institute writes, there are five major tax changes that will affect Americans in the coming year:

On January 1, 2013, a 2.3-percent excise tax on the total revenues of medical-device companies — regardless of whether they turn a profit or suffer a loss — will take effect. The tax will hit everything they sell, from x-ray machines and pacemakers to surgical tools and artificial hips. The levy could extract as much as $29 billion over the next 10 years.

Individuals with annual incomes higher than $200,000 and couples who make more than $250,000 a year will face two new taxes — a 0.9-percent increase in the 1.45-percent Medicare levy on earnings above those income thresholds and a new 3.8-percent tax on investment income. Together, these two taxes are expected to raise about $318 billion over the next decade — roughly half of the law’s new tax revenue.

Obamacare’s tax hikes aren’t just confined to the rich. The law raises the floor for the deduction of medical expenses, from 7.5 percent of income to 10 percent. So only expenses beyond 10 percent of a person’s income will be deductible. This change could add hundreds of dollars to the tax bills of those struggling with major medical bills.

Obamacare also halves the maximum contribution to flexible spending accounts (FSAs), from $5,000 to $2,500. Many consumers use FSAs to cover routine medical expenses, like vision care, orthodontia, and prescription drugs. They won’t have nearly as much money to work with in 2013.

That’s just for 2013. In 2014, a lot of the major provisions of Obamacare come into effect, including the mandate tax and the “Cadillac tax” on high-value insurance plans.

Of 2013’s taxes, the Medicare tax increase and the hike on investment taxes are of particular import. This is why it’s disingenuous of progressives to claim that all that the President is pushing for when it comes to tax rates is a return to Clinton-era tax rates on the wealthy. These high-income taxes will push the highest tax rates decidedly beyond what existed in the 1990s. The government will be taking a much larger share of income from “the rich” at that point.

It’s part of a pattern of progressives that the only people who would have to pay for an expanded welfare state are “the rich.” Truthfully, even tax hikes confined only to “the rich” are insufficient. There’s still a massive budget deficit, and there will remain a massive budget deficit even in the wildest fevered dreams of progressive soak-the-rich policies.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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