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Health care tax increases for 2013 may be just a start



Published: Wed, December 26, 2012 @ 12:00 a.m.

Associated Press

WASHINGTON

New taxes are coming Jan. 1 to help finance President Barack Obama’s health care overhaul. Most people may not notice. But they will pay attention if Congress decides to start taxing employer-sponsored health insurance, one option in play if lawmakers can ever agree on a budget deal to reduce federal deficits.

The tax hikes already on the books, taking effect in 2013, fall mainly on people who make lots of money and on the health care industry. But about half of Americans benefit from the tax-free status of employer health insurance. Workers pay no income or payroll taxes on what their employer contributes for health insurance, and in most cases on their own share of premiums as well.

It’s the single biggest tax break the government allows, outstripping the mortgage interest deduction, the deduction for charitable giving and other better-known benefits. If the value of job-based health insurance were taxed like regular income, it would raise nearly $150 billion in 2013, according to congressional estimates. By comparison, wiping away the mortgage interest deduction would bring in only about $90 billion.

“If you are looking to raise revenue to pay for tax reform, that is the biggest pot of money of all,” said Martin Sullivan, chief economist with Tax Analysts, a nonpartisan publisher of tax information.

It’s hard to see how lawmakers can avoid touching health insurance if they want to eliminate loopholes and curtail deductions so as to raise revenue and lower tax rates. Congress probably wouldn’t do away with the health care tax break, but limit it in some form. Such limits could be keyed to the cost of a particular health insurance plan, the income level of taxpayers or a combination.

Many economists think some kind of limit would be a good thing because it would force consumers to watch costs, and that could help keep health care spending in check. Obama’s health law took a tentative step toward limits by imposing a tax on high-value health insurance plans. But that doesn’t start until 2018.

Next spring will be three years since Congress passed the health care overhaul but, because of a long phase-in, many of the taxes to finance the plan are only now coming into effect. Medicare spending cuts that help pay for covering the uninsured have started to take effect, but they also are staggered. The law’s main benefit, coverage for 30 million uninsured people, will take a little longer. It doesn’t start until Jan. 1, 2014.

The biggest tax hike from the health care law has a bit of mystery to it. The legislation calls it a “Medicare contribution,” but none of the revenue will go to the Medicare trust fund. Instead, it’s funneled into the government’s general fund, which does pay the lion’s share of Medicare outpatient and prescription costs, but also covers most other things the government does.


Comments

1redeye1(4620 comments)posted 1 year, 11 months ago

Typical Gov't double talk, They never say what they really mean. This Obammy care plan is going to ruin this country with all the BS fees that we the working public will have to pay for the lazy welfare rats As the headlines states this is just the beginning. Hang onto your wallets.

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2Photoman(1013 comments)posted 1 year, 11 months ago

I am also concerned about "Also covers most other things the government does". Can anyone pin down what that means?

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3redvert(2090 comments)posted 1 year, 11 months ago

Obviously most of you in the valley wanted these healthcare taxes cause you voted for the clown so don't whine!

Don't have a problem with healthcare for those that legitimately can not afford it but when it comes to the freeloaders that could get a job but refuse, that is a different thing.

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4southsidedave(4805 comments)posted 1 year, 10 months ago

Oh yes, by all means raise taxes on those least able to afford...the American way, outstanding!

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