How will the healthcare ruling by the Supreme Court affect taxes?
The individual mandate is not the only thing about the Affordable Care Act. There are tax changes to consider. Because of the three day hearing about the ACA, here at TaxVox, I believe it is time to ponder some of the revenue provisions.
Provisions in the law allow for tax cuts as well as increases. Unless the whole thing is thrown out, these tax changes would likely remain.
If it can be considered a tax at all, the only one would be the mandate penalty for not purchasing insurance. The Supreme Court will have to decide if this is a penalty or a tax.
Included in the ACA are some very important tax cuts; credits for helping small businesses that purchase insurance for their workers. You may not realize that they are there, as over $1 million has been paid by the NFIB to challenge the ACA.
The NFIB will more than likely think that those subsidies should be thrown out if the Supreme Court rejects any of the key parts of the reform.
There are some tax increases in the new law, including an excise tax for high value health plans that are sponsored by the employer. That would begin in 2018 and make it harder to take itemized deductions on their medical costs.
There are a couple of other tax increases of note. The first tax increase of the bill is a .9% increase for higher income workers in the medicare wage tax. This is for supporting the health system for seniors. The second increase, sometimes referred to as a Medicare surtax, is a 3.8% high income tax on households that enjoy income from investments and non-wage sources.
These new taxes, according to a Tax Policy Center study, would increase taxes on those households earning between $500,000 – $1,000,000 by about $4,600 and those earning $1 million+ by $41,000. Those making $250,000+ ($125,000 single) will also be affected.
It would not be wise, then, to forget these tax changes. We may not have seen the end of the tax code modifications.
- The Supreme Court Decision On Healthcare Will Affect Taxes (2011taxes.org)
- Tax Carnival Ecstasy – March 27, 2012 (2012taxes.org)