Business

Obamacare: Impact on Taxpayers

The hodgepodge of new taxes that have already or will soon take effect as a result of the Patient Protection and Affordable Care Act may not all show up in the income tax tables, but their huge cost is still very real. This cost will become most apparent in lost wages and international competitiveness, and it reduces middle- and low-income families’ wages just as surely as an income tax hike would. These taxes break President Barack Obama’s promise not to raise taxes on families making less than $250,000 per year.

Key Points

  1. The Patient Protection and Affordable Care Act of 2010 will raise taxes on middle-income families in direct violation of President Obama’s pledge not to do so.
  2. Many families that make far less than $250,000 a year have high-end health plans and will be subject to the excise tax.
  3. The increased hospital insurance payroll tax rate will fund a new entitlement separate from Medicare for the first time.
  4. Applying the HI tax to investment income will discourage investment and lead to slower economic growth, fewer jobs, and lower wages.
  5. The individual mandate amounts to a de facto tax on individuals who do not want to purchase insurance.
  6. The biggest tax hikes will take effect after President Obama’s first term and many Members of Congress are out of office.
  7. The health legislation includes a myriad of smaller tax hikes, many of which will fall on middle- and lower-income Americans.

Now that the Patient Protection and Affordable Care Act (PPACA) of 2010 has been passed by Congress and signed into law by President Barack Obama, substantial tax increases can be expected in the near future. Combined, all of these tax increases (including those on employers that do not provide health insurance for their employees and on individuals who do not buy health insurance) will cost taxpayers $503 billion between 2010 and 2019.[1]

These tax hikes will slow economic growth, reduce employment, and suppress wages. Further, in an act reminiscent of George H. W. Bush breaking his “no new taxes” pledge in 1991, the tax hikes in the PPACA will raise taxes on middle-income families in direct violation of President Obama’s oft-stated pledge not to do so. And by delaying the effective date for most of these new taxes, the President and Congress have shown themselves unwilling to implement these taxes on their own watch, raising doubts as to whether future Presidents and Congresses will be willing to do so. This increases even further the likelihood that this bill will substantially increase the deficit, which would break another Obama promise.

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