The Affordable Care Act - also known as Obamacare - contains 21 new or higher taxes on the American people. Eight of the tax hikes have already gone into effect, and a year from now five more will take force. These taxes will increase health care costs, cause significant job losses and restrict Americans’ health care options.
In January 2013, Obamacare will impose a medical-device tax on everything from pacemakers and prosthetic limbs to hospital beds and CT scanners. This 2.3 percent federal excise tax will be applied to all sales revenue and levied on each and every one of the 6,000 domestic medical-device manufacturing plants, whether or not the respective plants turn a profit.
The tax will have a negative impact on medical innovation and lead to higher consumer cost, the latter fact confirmed by the Obama administration in an April 2010 report published by the Centers for Medicare & Medicaid Services (CMS). “We anticipate that these fees and the excise tax would generally be passed through to health consumers in the form of higher drug and device prices and higher insurance premiums” wrote chief CMS actuary Richard S. Foster.
The medical-device tax is already causing direct job losses. Stryker Corp., a Michigan-based manufacturer of orthopedic devices, announced in November its plan to lay off 5 percent of its workforce - about 1,000 workers - to prepare for the burden imposed by the impending tax.
As reported by the trade publication MassDevice.com, Stryker CEO Stephen MacMillan summed it up by saying, “Here we are, one of the greatest industries in the country, and we’re staring down on January 1, 2013, and the addition of a 2.3 percent excise tax, while meanwhile on the other side, all the discussion in Washington is about creating jobs.”
American companies already face the world’s highest corporate income-tax rate. By adding yet another layer of taxation with the medical-device tax, President Obama puts domestic manufacturers and their employees at a severe competitive disadvantage.
President Obama will have some explaining to do when there are further job losses in crucial med-tech manufacturing states such as Minnesota, Wisconsin, Michigan, Indiana, Ohio, Pennsylvania and North Carolina, which also happen to be electoral swing states.
But there’s more: In 2013, Obamacare will saddle the economy with a 3.8 percent surtax on capital gains and dividend income and a 3.8 percent Medicare payroll tax on all wages and profits exceeding $200,000 per year.
The new Obamacare tax hikes hitting in 2013 will continue to restrict consumer-driven health care options with the imposition of a federal government cap of $2,500 on Flexible Spending Accounts. Currently, these pre-tax accounts do not have federal contribution limits, allowing individuals and families with high medical costs to plan ahead. With the cost of one set of dental braces easily exceeding $5,000, the new cap will affect everyday kitchen-table decisions.
This rarely-reported Obamacare provision may prove to be particularly onerous for families who use flex accounts to pay for special-needs tuition and related expenses, which can cost thousands of dollars per year.
The new 2013 FSA cap comes on the heels of Obamacare’s 2011 medicine-cabinet tax, which prevents millions of people from using their flex accounts and Health Savings Accounts to purchase over-the-counter medicines. Because Americans are no longer allowed to use these pre-tax accounts to buy hundreds of qualified products like pain relievers, antihistamines and cough medicine, every trip to the drugstore now costs more.
The fifth and final Obamacare tax taking effect in 2013 will be the “haircut” to the medical itemized deduction. Currently, those facing significant medical expense are allowed a deduction to the extent total health expenses exceed 7.5 percent of one’s adjusted gross income.Courtesy of Obamacare, the threshold will rise to 10 percent, increasing the tax burden on Americans with the highest medical bills.
President Obama made a “firm pledge” during his first campaign: “No family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital-gains taxes, not any of your taxes.” It didn’t take him long to break this promise. On the 16th day of his presidency, he signed into law a 156 percent increase in the federal excise tax on tobacco, raising the cost of a pack of cigarettes by 62 cents (the median income of smokers is approximately $36,000). When the Associated Press called out the Obama administration for the broken promise, the White House suddenly tried to claim that Mr. Obama’s “any form of tax increase” promise applied only to “income or payroll taxes.”
About a year later, in March 2010, President Obama again broke his pledge when he signed the health care bill into law. Seven of the 22 new or higher taxes in Obamacare hit families making less than $250,000 per year.
John Kartch is director of communications at Americans for Tax Reform.