Healthcare bill raises taxes on families making less than $250,000 per year

Americans for Tax ReformOct 22 2009

Over and over again, President Obama has promised not to raise "any form" of taxes on families making less than $250,000 per year. Yet, the U.S. Senate is getting ready to consider a government healthcare bill which does just that. Here's how:

Health Insurance Mandate Taxes on Working Families

• Individual Mandate Excise Tax. Americans who do not sign up for health insurance will have to pay an excise tax in the following range:

300 percent of the federal poverty line is well under $250,000. For a family of four, it's $67,000. For an individual, it's about $30,000.

• Employer Mandate Tax. $400 per employee if health coverage is not offered. Note: this is a huge incentive to drop coverage, as $400 is much less than the average plan cost of $11,000 for families or $5000 for singles (Source: AHIP)

Small businesses pay their tax liability on their owners' 1040 forms. This $400 employer mandate tax does not hold harmless business owners making less than $250,000

Tax Hikes on Healthcare Spending Accounts

• Cap on Flex-Spending Account (FSA) contributions at $2500: Currently, the contribution level is unlimited
• Medicine Cabinet Tax : Americans would no longer be able to purchase over-the-counter medicines with their FSA, Health Savings Account (HSA), or Health Reimbursement Arrangement (HRA)
• Increase in the Non-Qualified HSA Distribution Penalty from 10% to 20%: This makes HSAs less attractive, and paves the way for HSA pre-verification

There are 30 million Americans with FSAs. About 8 million Americans have an HSA. Virtually all of them make less than $250,000 per year. These are clear tax hikes on these families.

Denying a Tax Deduction for Medical Costs

• Increase "haircut" of medical itemized deductions from 7.5% to 10% of adjusted gross income (AGI), further denying medical itemized deductions

There is no exemption made here for families making less than $250,000 per year.