The poorly-named Affordable Care Act imposed a long list of tax hikes on families and businesses. Fortunately, the Senate Obamacare repeal bill abolishes these taxes, providing relief for tens of millions of middle-income households.
In 2008, then-candidate Barack Obama promised not to raise any form of tax on anyone making less than $250,000 per year. He vowed, "I can make a firm pledge. Under my plan no family making less than $250,000 a year will see any form of tax increase." But his signature piece of legislation shattered that promise.
For example, the Obamacare chronic care tax increased the threshold at which families could begin to deduct their medical expenses from their income from 7.5 percent to 10 percent – raising income taxes on people who, by definition, are both sick and low-income. The chronic care tax hiked income taxes on 10 million households. These families make an average of $53,000 per year, and Obamacare makes them pay between $200 and $400 in higher income taxes.
Obamacare unleashed a number of unwelcome surprises on the 30 million people who use Flexible Spending Accounts and the 20 million Americans covered by Health Savings Accounts.
First, Obamacare imposed a $6 billion medicine cabinet tax on HSAs and FSAs. Before Obamacare, families with HSAs and FSAs were able to use these accounts to buy necessary medical supplies using pre-tax income. Obamacare limited the items that families can purchase using HSAs and FSAs, which means that account holders face new taxes on essential items like cold and flu medicine, allergy relief medication, and dozens of other common health items.
Second, Obamacare imposed a $2,500 federal cap on the amount that individuals can save in FSAs. Before Obamacare, middle-class families were able to accumulate unlimited pre-tax savings that they could spend on healthcare and dental expenses. Now, these families face $32 billion in higher taxes over the next decade.
The Neurological and Physical Abilitation Center writes this FSA tax "will especially hurt parents of special needs kids because many use FSAs to pay for special needs education." Capping pre-tax spending accounts at $2,500 makes it more difficult for middle-class families to afford quality special needs education, which can often cost thousands of dollars. The United States Census Bureau estimates there are about 2.8 million school-aged children with disabilities, so this Obamacare tax again falls on the truly needy in society.
Third, Obamacare increased taxes on non-medical HSA withdrawals, meaning that individuals who have to make emergency withdrawals will be able to access less of their savings. This tax will cost families $100 million over the next decade. Because the Left opposes individually-controlled, consumer-driven healthcare, they saddled HSAs with this tax in order to make the accounts less attractive.
Even the Obamacare 3.8 percent Net Income Investment Tax (NIIT) and 0.9 percent Medicare Payroll Tax negatively impact those at all income levels.
The House Ways and Means Committee notes the NIIT hits small businesses filing as pass-through entities. This raises the top tax rate of many businesses to 44.6 percent. Such high taxes stifle a company's ability to invest, grow, and hire more employees. According to the Tax Foundation, repealing the NIIT would add 133,000 jobs to the economy and median households would earn an additional $375 per year.
Meanwhile, the 0.9 percent Medicare Payroll Tax falls on wages and self-employment income. This tax is particularly troubling for the 15 million self-employed business owners in the U.S., 3.7 million of whom hire paid employees. Based on CBO estimates, repeal of the Medicare Payroll Tax would be a $59 billion tax cut.
Taxes on businesses negatively affect employees and consumers. The $145 billion Obamacare health insurance tax may fall on insurance companies, but indirectly, this tax increased insurance premiums by up to $5,000 for working families. The American Action Forum found half of this tax is paid by people making less than $50,000 per year.
The conservative movement has expressed broad-based support for repealing the Obamacare taxes. Forty-seven groups, led by Americans for Tax Reform, sent a letter to Senate Finance Committee Chairman Orrin Hatch, R-Utah, urging the Senate, "True repeal of Obamacare means repealing the Obamacare taxes and the Senate should resist the urge to deprive taxpayers of relief in order to pay for higher spending."
Obamacare's taxes deprive working families and businesses of their hard-earned income. The Senate's Obamacare repeal bill abolishes these taxes and returns much-needed purchasing power to taxpayers.
Elizabeth McKee is a federal affairs associate at Americans for Tax Reform.
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