House Healthcare Bill Totals $1.2 Trillion

Monday, November 2, 2009 11:26 PM Article Font Size

WASHINGTON – The health care bill headed for a vote in the House this week costs $1.2 trillion or more over a decade, according to numerous Democratic officials and figures contained in an analysis by congressional budget experts, far higher than the $900 billion cited by President Barack Obama as a price tag for his reform plan. While the Congressional Budget Office has put the cost of expanding coverage in the legislation at roughly $1 trillion, Democrats added billions more on higher spending for public health, a reinsurance program to hold down retiree health costs, payments for preventive services and more. Many of the additions are designed to improve benefits

Employer Mandate Excise Tax (Page 275): If an employer does not pay 72.5 percent of a single

Individual Mandate Surtax (Page 296): If an individual fails to obtain qualifying coverage, he must pay

Medicine Cabinet Tax (Page 324): Non-prescription medications would no longer be able to be

Cap on FSAs (Page 325): FSAs would face an annual cap of $2500 (currently uncapped).

Increased Additional Tax on Non-Qualified HSA Distributions (Page 326): Non-qualified

Denial of Tax Deduction for Employer Health Plans Coordinating with Medicare Part D (Page

Surtax on Individuals and Small Businesses (Page 336): Imposes an income surtax of 5.4 percent on

Excise Tax on Medical Devices (Page 339): Imposes a new excise tax on medical device manufacturers

Corporate 1099-MISC Information Reporting (Page 344): Requires that 1099-MISC forms be issued to

Delay in Worldwide Allocation of Interest (Page 345): Delays for nine years the worldwide allocation

Limitation on Tax Treaty Benefits for Certain Payments (Page 346): Increases taxes on U.S.

Codification of the “Economic Substance Doctrine” (Page 349): Empowers the IRS to disallow a

Application of “More Likely Than Not” Rule (Page 357): Publicly-traded partnerships and

COMPREHENSIVE LIST OF ALL TAX HIKES

IN HOUSE GOVERNMENT HEALTH BILL

• Employer Mandate Excise Tax (Page 275): If an employer does not pay 72.5 percent of a single

employee’s health premium (65 percent of a family employee), the employer must pay an excise tax equal

to 8 percent of average wages. Small employers (measured by payroll size) have smaller payroll tax rates

of 0 percent (<$500,000), 2 percent ($500,000-$585,000), 4 percent ($585,000-$670,000), and 6 percent

($670,000-$750,000).

• Individual Mandate Surtax (Page 296): If an individual fails to obtain qualifying coverage, he must pay

an income surtax equal to the lesser of 2.5 percent of modified adjusted gross income (MAGI) or the

average premium. MAGI adds back in the foreign earned income exclusion and municipal bond interest.

• Medicine Cabinet Tax (Page 324): Non-prescription medications would no longer be able to be

purchased from health savings accounts (HSAs), flexible spending accounts (FSAs), or health

reimbursement arrangements (HRAs). Insulin excepted.

• Cap on FSAs (Page 325): FSAs would face an annual cap of $2500 (currently uncapped).
• Increased Additional Tax on Non-Qualified HSA Distributions (Page 326): Non-qualified

distributions from HSAs would face an additional tax of 20 percent (current law is 10 percent). This

disadvantages HSAs relative to other tax-free accounts (e.g. IRAs, 401(k)s, 529 plans, etc.)

• Denial of Tax Deduction for Employer Health Plans Coordinating with Medicare Part D (Page

327): This would further erode private sector participation in delivery of Medicare services.

• Surtax on Individuals and Small Businesses (Page 336): Imposes an income surtax of 5.4 percent on

MAGI over $500,000 ($1 million married filing jointly). MAGI adds back in the itemized deduction for

margin loan interest. This would raise the top marginal tax rate in 2011 from 39.6 percent under current

law to 45 percent—a new effective top rate.

• Excise Tax on Medical Devices (Page 339): Imposes a new excise tax on medical device manufacturers

equal to 2.5 percent of the wholesale price. It excludes retail sales and unspecified medical devices sold to

the general public.

• Corporate 1099-MISC Information Reporting (Page 344): Requires that 1099-MISC forms be issued to

corporations as well as persons for trade or business payments. Current law limits to just persons for

small business compliance complexity reasons. Also expands reporting to exchanges of property.

• Delay in Worldwide Allocation of Interest (Page 345): Delays for nine years the worldwide allocation

of interest, a corporate tax relief provision from the American Jobs Creation Act

• Limitation on Tax Treaty Benefits for Certain Payments (Page 346): Increases taxes on U.S.

employers with overseas operations looking to avoid double taxation of earnings.

• Codification of the “Economic Substance Doctrine” (Page 349): Empowers the IRS to disallow a

perfectly legal tax deduction or other tax relief merely because the IRS deems that the motive of the

taxpayer was not primarily business-related.

• Application of “More Likely Than Not” Rule (Page 357): Publicly-traded partnerships and

corporations with annual gross receipts in excess of $100 million have raised standards on penalties. If

there is a tax underpayment by these taxpayers, they must be able to prove that the estimated tax paid

would have more likely than not been sufficient to cover final tax liability.