Back to Basics

For those who claim there are no additional “taxes” imposed by this bill, they should refer to Title IV, Amendments to Internal Revenue Code of 1986 in which you will find “Sec. 401 Tax on Individuals Without Acceptable Health Care Coverage” as the first item to be added.  This bill not only increases government spending but it WILL INCREASE TAXES in more than one way.  Unfortunately, this section constantly refers to the Internal Revenue Code, so without actually looking at that code it is impossible to tell exactly what is being change.  Many of the references include “strike this and add…” and many times this is an increase in percentages or wording changes, so you would have to refer to the IRS code to determine what affect this has.

There are a number of business related changes to the IRS Code, many of which I could not interpret.  So if you are a business owner, especially a small business owner, I would recommend you read this section to see how it would apply to you.  This whole section reads like Greek, and if you have ever tried to read and interpret the IRS manuals this section of the bill is written in the same manner.  Consult your representative or tax accountant for clarification.  Because of this, I have included only portions of the tax code changes that apply to individuals and some general requirements as they apply to businesses.

The first tax is one imposed on individuals who do not have acceptable health care coverage.  This tax is 2.5 percent of the excess of the taxpayer’s modified adjusted gross income (adjusted gross income increased by the amount of interest received or accrued which is exempt from tax) for the year over the amount of gross income specified in section 6012(a)(1).  (I could not locate the reference in the bill to section 6012, so this may be an IRS code reference.)  This tax cannot exceed the national average premium for the taxable year as determined by the Secretary of Health & Human Services, under a basic plan offered in the Health Insurance Exchange.  If an individual resides outside the US they must get coverage, as well as anyone residing in possessions of the US.

This tax shall not apply to any individual who is a non-resident alien.

Acceptable coverage is (a) Qualified health benefits plan, (b) Grandfathered health insurance coverage, coverage under grandfathered employment-based health plan, (c) Medicare Part A, (d) Medicaid, (e) Members of the armed forces and dependents, including Tricare, (f) VA, and (g) Other coverage recognized by the Secretary in coordination with the Commissioner.

There are requirements for anyone who provides acceptable coverage, including a return that contains the name, address and TIN of the primary insured and the name of each individual obtaining coverage under the policy, the period each individual was provided coverage, and other information the Secretary may require.  If the insurance is provided by a governmental unit or agency, then the officer or employee who enters into the agreement to provide the coverage shall make the returns.  There is a penalty for failure to file, which amends sections of the IRS code and without referring to that code you cannot tell what is being amended.

If an employer fails (during any period) to satisfy the health coverage participation requirements a tax of $100 is imposed for each day in the period until the failure is corrected.  If a civil penalty is imposed, then this tax will be reduced by the amount of the civil penalty.

If an employer elects not to provide health benefits, in addition to other taxes imposed, an excise tax equal to 8 percent of the wages paid by him with respect to employment (defined in another section) will be imposed.  Small employers will be charged varied percentages from 0-6 as long as the annual payroll does not exceed $400,000.

There are some clauses with regard to the Small Business Employee Health Coverage Credit, which will not allow credit to highly compensated employees – any employee paid over $80,000 a year.

A surcharge on high income individuals is also being imposed, in addition to any other taxes imposed.  This surcharge is a tax equal to 1 percent of the modified adjusted gross income that exceed $350,000 but under $500,000; 1.5 percent of income over $500,000 but under $1,000,000 and 5.4 percent of income that exceeds $1,000,000.

The disclosure of tax return information of any taxpayer whose income is relevant in determining any affordability credit is permitted.  This information can be released to officers and employees of the Health Choices Administration or state-based health insurance exchange.  This information includes the taxpayer identity information, filing status, modified adjusted gross income, number of dependents, and other information as prescribed by the Secretary that might indicate whether the taxpayer is eligible for affordability credits.

The bill does provide for a religious conscience exemption.  An application for exemption must be filed with the Secretary in a time, form and manner as the Secretary may prescribe.  Any exemption granted by the Secretary shall be effective for such period as the Secretary determines appropriate.  Unless someone would change religions, there should be no reason for this exemption not to remain in effect for the life of the individual.  Also, one would hope the forms required for this exemption are much clearer than the Cash for Clunkers program in which auto dealers’ reimbursements were denied and returned because a form wasn’t filled out accurately.

Bill H.R. 3200 requires everyone to have insurance and every business to offer insurance.  If an individual does not obtain insurance they will be taxed 2.5% of their adjusted gross income – unless you are in illegal alien, then it doesn’t apply.  If a business does not offer insurance they will be taxed 8% of the salaries in addition to $100 per day penalties and potential civil charges and penalties.  Surcharges are also being imposed in addition to the other taxes on anyone making over $350,000 a year.  Even though these individuals may be following all the requirements of the bill, they will be required to pay additional sums just based on their income levels.  That is the government demanding charity!

So anyone that claims this bill does not increase taxes obviously hasn’t read the bill.