New Health Care Taxes Tag Wealthiest — and Tanners
Who gets thumped by higher taxes in President Barack Obama's health care law? The wealthiest 2 percent of Americans will take the biggest hit, starting next year.
And the pain will be shared by some who aren't so well off — people swept up in a hodgepodge of smaller tax changes that will help finance health coverage for millions in need.
But for the vast majority of people, the health care law won't mean sending more money to the IRS.
And roughly 20 million people eventually will benefit from tax credits that start in 2014 to help them pay insurance premiums.
The tax increases — plus a mandate that nearly everyone have health coverage — are helping make the law an election-year scorcher. Obama is campaigning on the benefits for the uninsured, women and young adults. His rival, Mitt Romney, and Republican lawmakers are vowing to repeal "Obamacare," saying some reforms are needed but not at this cost.
Lots of the noise is about the financial consequences for people who decline to get coverage and businesses that don't offer their workers an adequate health plan.
About 4 million individuals without insurance are expected to pay about $55 billion over eight years, according to the Congressional Budget Office's estimates. Employers could be dinged an estimated $106 billion for failing to meet the mandate, which starts in 2014.
But that mandate money, whether it's called taxes or penalties, is overwhelmed by other taxes, fees and shrunken tax breaks in the law. These other levies could top $675 billion over the next 10 years, under the CBO's projections of how much revenue the government would lose if the law were repealed.
The biggest chunk is in new taxes on the nation's top 2 percent of earners — about $318 billion over a decade.
Other major taxes are aimed at the health care industry, and some of that cost is sure to be passed along to consumers as higher prices.
A rundown of the most significant tax changes:
The 2 percent
Who pays: About 2.5 million households — individuals making more than $200,000 per year, couples $250,000.
How much: A 0.9 percent Medicare tax on wages above those threshold amounts; an additional 3.8 percent tax on investment income. Should raise $318 billion over 10 years.
The lowdown:Together these are the biggest tax increase in the health care law.
Who pays:The 28 million people who visit tanning booths and beds each year — most of them women under 30, according to the Journal of the American Academy of Dermatology.
How much:A 10 percent tax on the price of tanning. Expected to raise $1.5 billion over 10 years.
The lowdown: Tanning salons were singled out because of wide agreement among medical experts that baking under ultraviolet lights increases the risk of skin cancer.
When: Took effect in 2010.
"Cadillacs" of coverage
Who pays: Insurance companies or businesses that provide plans with premiums of more than $10,200 per person or $27,500 per family, not including dental or vision coverage. Employees covered by these so-called "Cadillac" benefits probably will feel the pinch.
How much: 40 percent excise tax on any amount of premium that exceeds the threshold. Expected to raise $111 billion over five years.
The lowdown:The majority of health plans aren't affected because they don't cost enough, but some middle-class workers have plans that exceed the threshold. Also hit are corporate bigwigs whose employer-paid plans cover virtually all expenses.
Who pays: People who set aside tax-free savings to pay for health care.
How much: About $33 billion over 10 years
The lowdown: The law limits annual contributions to medical Flexible Spending Accounts to $2,500; there was no government limit before.