Health care tax increases: Who pays?

Associated Press

WASHINGTON

Who gets thumped by higher taxes in President Barack Obama’s health care law? The wealthiest 2 percent of Americans will take the biggest hit, starting next year. And the pain will be shared by some who aren’t so well off — people swept up in a hodgepodge of smaller tax changes that will help finance health coverage for millions in need.

For the vast majority of people, however, the health care law won’t mean sending more money to the IRS.

And roughly 20 million people eventually will benefit from tax credits that start in 2014 to help them pay insurance premiums.

The tax increases — plus a mandate that nearly everyone have health coverage — are helping make the law an election-year scorcher. Obama is campaigning on the benefits for the uninsured, women and young adults. His rival, Mitt Romney, and Republican lawmakers are vowing to repeal “Obamacare,” saying some health care reforms are needed but not at this cost.

Lots of the noise is about the financial consequences for people who decline to get coverage and businesses that don’t offer their workers an adequate health plan. Some 4 million individuals without insurance are expected to pay about $55 billion over eight years, according to the Congressional Budget Office’s estimates. Employers could be dinged an estimated $106 billion for failing to meet the mandate, which starts in 2014.

But that mandate money, whether it’s called taxes or penalties, is overwhelmed by other taxes, fees and shrunken tax breaks in the law. These other levies could top $675 billion over the next 10 years, under the CBO’s projections of how much revenue the government would lose if the law were repealed.

A rundown of the most significant tax changes — and who pays:

THE 2 PERCENT

Who pays: About 2.5 million households — individuals making more than $200,000 per year, couples $250,000.

How much: A 0.9 percent Medicare tax on wages above those threshold amounts; an additional 3.8 percent tax on investment income. Should raise $318 billion over 10 years.

The lowdown: These are the biggest tax increases in the health care law.

When: 2013.

ARTIFICIAL-SUN WORSHIPPERS

Who pays: The 28 million people who visit tanning booths and beds each year — most of them women under 30, according to the Journal of the American Academy of Dermatology.

How much: A 10 percent tax on the price of tanning. Expected to raise $1.5 billion over 10 years.

The lowdown: Tanning salons were singled out because of wide agreement among medical experts that baking under ultraviolet lights increases the risk of skin cancer.

When: Took effect in 2010.

THE ‘CADILLACS’ OF COVERAGE

Who pays: Insurance companies or businesses that provide plans with premiums of more than $10,200 per person or $27,500 per family, not including dental or vision coverage.

How much: 40 percent excise tax on any amount of premium that exceeds the threshold. Expected to raise $111 billion over five years.

The lowdown: The majority of plans aren’t affected because they don’t cost enough: Workplace family coverage now averages about $15,000, including the portion paid by the employer, according to the Kaiser Family Foundation’s survey.

When: 2018.

BUSINESSES SET TO BOOM

Who pays: Insurers, drug companies, medical device makers. And some of their customers.

How much: More than $165 billion over 10 years

The lowdown: New taxes and fees target businesses expected to profit as more Americans get insurance. The companies will pass along these expenses as higher prices when they can.

When: Began last year for drug companies; starts in 2013 for device makers, 2014 for insurance companies.

THRIFTY SAVERS

Who pays: People who set aside tax-free savings to pay for health care.

How much: About $33 billion over 10 years.

The lowdown: The law limits annual contri- butions to medical Flexible Spending Accounts to $2,500; there was no government limit before. But the average contribution was only $1,400 per year, so relatively few workers will be affected.

When: Contribution limit begins in 2013.

TAXPAYERS WHO TAKE WRITE-OFFS

Who pays: People with big medical or dental bills who itemize deductions.

How much: Almost $19 billion over 10 years.

The lowdown: Most Americans don’t have enough out-of-pocket expenses, those not paid by insurance, to meet even the lower threshold.

When: 2013 (delayed until 2017 for taxpayers age 65 or over).