The New Year brings new resolutions, regulations and, unfortunately, new taxes. Among those most closely watched this year will be new tax rules implemented by President Obama's signature health care reform legislation.
This year will mark the third wave of new taxes from the president's 2010 health care law, ahead of major structural reform to take place next year. But for now, here's a look at some of the new taxes we should brace for in 2013:
The most controversial of the latest ObamaCare taxes is the Medical Device Tax that hits entrepreneurial firms making equipment such as heart valves and hip replacement parts. They face a 2.3% profit on gross sales – a tax they must pay even if they have no profit at all. Many firms say this tax – slated to collect $29 billion over 10 years – will soak up virtually all of their research budgets.
The medical device industry employs more than 400,000 people in 12,000 factories across the country, often small, entrepreneurial firms with a small product line. Many say that to survive, they will have no choice but to relocate abroad – taking much-needed, high-tech jobs with them. These lost jobs will be more casualties of ObamaCare. And the tax means that medical devices will be more expensive, driving up health cost even further.
A new Surtax on Investment Income impacts individuals making more than $200,000 a year or couples with $250,000 or more. They must pay a new 3.8% levy on income from investments, possibly including profits from the sale of a home.
A new Medicare Tax adds to ObamaCare’s pain. These same high-earners must pay an additional .9% Medicare payroll tax on wages above $200,000 for individuals and $250,000 for couples. This means the current 2.9% Medicare payroll tax will be increased to a total of 3.8% — a big hit especially for the self-employed.
Together, these new Medicare taxes are expected to raise $318 billion to help fund ObamaCare.
The new Flexible Spending Account Tax limits the amount of money that workers can set aside tax-free for medical costs. ObamaCare sets the cap at $2,500 in order to collect another $13 billion from taxpayers. (Previously there was no cap; however some employers limited the amount worker could set aside.)
Those who find the accounts most valuable are those with the greatest health needs – parents of special needs children, people who have had organ transplants and who must take maintenance drugs, and others facing major medical expenses.
Beginning January 1, ObamaCare also tightens the screws on Itemized Medical Deductions. The law raises the threshold for allowed deductions from 7.5% of adjusted gross income to 10%, further burdening those with the largest medical expenses by limiting how much of these costs they can deduct on their taxes. Hit to these taxpayers: $19 billion.
Phew. Sadly, that's not all. These taxes come in addition to the so-called "tax penalties" for individuals and businesses who don't comply with the law's coverage mandate. This compliance tax alone is estimated to net $160 billion in government revenue in the first 10 years alone.
Happy New Year!