Is the Obama health-care law a huge tax increase?
Responding to the Supreme Court's historic ruling on the Affordable Care Act, Republicans are refocusing criticism on the tax fallout from health-care reform. Is it a tax hike? Yes. But on whom?
To Republicans, including presidential candidate Mitt Romney, the Affordable Care Act is a mega tax increase that will be paid by everyone from low income Americans and small businesses to gigantic corporations.Skip to next paragraph
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“Obamacare raises taxes on the American people by approximately $500 billion,” said Mr. Romney, responding to the Supreme Court's historic health-care ruling outside the Capitol on Thursday.
For good measure, American Crossroads, the most influential of the conservative "super political-action committees," is launching a national cable TV ad campaign Saturday that claims that health-care reform is a tax hike on the middle class.
Are Romney and his conservative allies correct?
The short answer is a qualified yes. The health-care law does amount to a tax increase, but this increase will mainly hit high-income Americans, such as Romney, who has historically paid much lower tax rates than many middle-income Americans.
If anything, Romney's numbers, which are based on prior government estimates that go out only to 2019, might be low. “If you go out to 2022, it will raise [taxes] $800 billion to $1 trillion,” says Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget in Washington.
Included in the legislation are several major revenue raisers on individuals or companies to pay for the expansion of health-care coverage.
• First is a surcharge of 0.9 percent on the Medicare taxes paid on wages of $200,000 a year for those filing singly or $250,000 for those who are married and filing jointly.
• In addition, there is a 3.8 percent tax on unearned income of over $250,000, such as dividends and capital gains.
According to the congressional Joint Committee on Taxation, these taxes alone are estimated to raise $210 billion over 10 years or about 40 percent of the new revenue. Since Romney gets most of his income from passive investments, based on his income of $42 million over a two-year period, he would owe an additional $1.6 million.
• Another major tax increase is new taxes or fees on medical devices, drug manufacturers, and importers of medical devices. The Congressional Budget Office estimates this group would bring in an additional $107 billion over 10 years.