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ObamaCare: Trillion Dollar Tax Hike that Hurts Small Businesses

March 31, 2015

Tomorrow, the Ways and Means Subcommittee on Oversight will examine the tax provisions contained in ObamaCare.  Estimates by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) confirm that the Democrats’ health law is a trillion-dollar tax hike that families and employers simply cannot afford.  Additionally, the Administration’s own documents state that the compliance burden of the new tax rules it has thus far written pursuant to ObamaCare will add over 40 million hours of paperwork per year to individuals and job creators.

Small businesses have long cited ObamaCare as a major obstacle to job creation.  Hearing witness Shelly Sun, co-founder and CEO of Brightstar Franchising, will note that “The Affordable Care Act is anything but affordable.  It adds taxes, costs, and fees, while threatening the economic viability and job creation opportunities for many of our nation’s small businesses.”

The JCT today released “Present Law and Background Relating to the Tax-Related Provisions in the Affordable Care Act,” which contains 100 pages of details on the law’s new taxes.  The chart below illustrates the 21 tax increases contained within ObamaCare, a dozen of which – marked with an asterisk (*) below – target Americans earning less than $200,000 per year for singles and $250,000 per year for married couples, in clear violation of the President’s pledge to avoid tax hikes on low- and middle-income taxpayers.

Provision  March 2010 Estimate

 June/July 2012

Additional 0.9 percent payroll tax on wages and self-employment income and new 3.8 percent tax on dividends, capital gains, and other investment income for taxpayers earning over $200,000 (singles)/$250,000 (married)  210.2  317.7
“Cadillac tax” on high-cost plans *  32.0  111.0
Employer mandate *  52.0  106.0
Annual tax on health insurance providers *  60.1  101.7
Individual mandate *  17.0  55.0
Annual tax on drug manufacturers / importers *  27.0  34.2
2.3 percent excise tax on medical device manufacturers / importers *
 20.0  29.1
Limit FSAs in cafeteria plans *  13.0  24.0
Raise 7.5 percent AGI floor on medical expense deduction to 10 percent *  15.2  18.7
Deny eligibility of “black liquor” for cellulosic biofuel producer credit
 23.6  15.5
Codify economic substance doctrine  4.5  5.3
Increase penalty for nonqualified HSA distributions *  1.4  4.5
Impose limitations on the use of HSAs, FSAs, HRAs, and Archer MSAs to purchase over-the-counter medicines *  5.0  4.0
Impose fee on insured and self-insured health plans; patient-centered outcomes research trust fund *  2.6  3.8
Eliminate deduction for expenses allocable to Medicare Part D subsidy  4.5  3.1
Impose 10 percent tax on tanning services *  2.7  1.5
Limit deduction for compensation to officers, employees, directors, and service providers of certain health insurance providers  0.6  0.8
Modify section 833 treatment of certain health organizations  0.4  0.4
Other revenue effects  60.3  222.01
Additional requirements for section 501(c)(3) hospitals  Negligible Negligible
Employer W-2 reporting of value of health benefits  Negligible  Negligible
1099 reporting for small businesses  17.1  Repealed by P.L. 112-9
 569.2  1,058.3

Prepared by Ways and Means Committee Staff – July 24, 2012

1Includes CBO’s $216.0 billion estimate for “Associated Effects of Coverage Provisions on Tax Revenues” and $6.0 billion within CBO’s “Other Revenue Provisions” category that is not otherwise accounted for in the CBO or JCT estimates.