Health care mandate is a tax; more taxes coming

Demonstrators protest as they await a decision by the US Supreme Court on the constitutionality of the Affordable Healthcare Act, US President Barack Obama's signature healthcare legislation, outside the Supreme Court in Washington, DC, June 28, 2012. / Getty Images

(MoneyWatch) COMMENTARY The Supreme Court's healthcare ruling may well turn your friendly neighborhood tax collector suicidal. The ruling effectively says that federal government can't force you to buy something, but can tax you if you don't. Thus, any future expansion of government's reach into your personal decision making will likely be done through the tax code.

That turns the Internal Revenue Service into Big Brother. Frankly, IRS agents probably like that less than you do.

Of course, the tax code already provides a Christmas tree of benefits and baubles for those who act as the government deems proper. Finance a home, you get a tax deduction. Have children. Send them to daycare, then to college...tax breaks will follow. Throw out that gas guzzler and buy a hybrid, the tax authorities will reward you. Replace the water heater; cover those windows; go solar. You'll be showered in tax credits. Even the right investments -- stocks versus bonds; long-term vs. short-term gains -- will nab you breaks on your federal tax bill.

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Indeed, there are now so many deductions and credits for following specific behaviors that only about half the country pays federal income tax beyond Social Security and Medicare. It's only those recalcitrant free thinkers, who fail to follow the government's wishes who must shoulder the weight of the rest of society. Among the few things that are not "incentivized" with a credit, deduction or a cut-rate are working and earning a lot of money.

The health care law extends that formula by boosting the tax rate of high income filers to help pay for the law. There are a series of tax increases that are scheduled to take effect next year, says Tim Steffen, director of financial planning with Robert W. Baird & Co. in Milwaukee. As the result of the Supreme Court decision, all of them are likely to take effect.

They are:

A new 3.8% tax on investment income will be applied to those earning more than $200,000 single or $250,000 when married. The tax will effectively boost the applicable capital gains rate on any investment income that's claimed when total income exceeds those thresholds.

Medicare taxes on high income filers will also increase. Currently, everyone pays 1.45% on all income into the Medicare program. Now, if a single filer earns more than $200,000 or a married couple earns more than $250,000, they'll need to pay 2.35% into Medicare.

Finally, the law makes it harder to deduct medical expenses. Currently medical expenses are deductible once they exceed 7.5% of your adjusted gross income. Next year, the threshold will be raised to 10% of AGI.

Anyone else draw parallels to Kurt Vonnegut's story Harrison Bergeron?

[wjss75606]

Here in my opinion is the problem. FRAUD. We all know someone who is taking benefits they shouldn't. Whether it is food stamps or what ever they are gaming the system. Proof is hard to come by and ethical behavior and moral conviction don't count for them. Don't get married, live together. That way wife only counts her income when applying for food stamps, EIC, medicaid, free lunches at school, free school supplies. They then live high on his income and take cruises on the tax refund she recieves. Legal? Yes because they aren't married and she doesn't have to report that she is getting everything else paid for by him. Not part of her income. Those are the people we need to remove from the roles. Really hurts those who do need the help. This crosses all party lines, both liberal & conservatives are guilty. That is what needs fixing. We don't need more taxes just a better quality of people.

[petere11]

Whatever you call it, it has the freeloaders finally contributing for their care....THIS IS A GOOD THING.

[AAnnie52]

papadoc-1000 - a lot depends on where you live. $40K a year (before or after taxes, you don't say) for a family of three as you describe are not poor for many parts of the country but would be living in cardboard boxes in large urban areas where costs are much higher.

By the way, given earnings of $40K, the government's EIC calculator says that for a married couple with one child, they would be eligible for $177 in 2011. Must be a helluva income property.

[AAnnie52]

Some weird math here. KK writes "Currently, everyone pays 1.45% on all income into the Medicare program. Now, if a single filer earns more than $200,000 or a married couple earns more than $250,000, they'll need to pay 2.35% into Medicare."

So, 2.35 - 1.45 = 0.90%. Assuming that's $200,000 AGI (adjusted gross income, after deductions) we're talking an additional $180 a year from someone clearing over $200K. Oh, the horror....................

[listener60]

I think it's more like 1800

[sjc_1]

So that is an extra $100 out of each $10,000 pay check. Well there goes the GPS option in the new Beemer.

[AAnnie52]

msfit32 - most of the ACA doesn't even go into effect until 2014 so if you are seeing premiums and deductibles rising, it's your insurer getting in as much as they can before ACA requires them to limit what they can use of your money to their bottom line. They will have to use at least 80% on paying for actual health care rather than "administrative costs". You don't say what state you live in but many of them have lower cost group insurance policies based on income - you might want to google to find out. If you look at the Kaiser Foundation site, they have an interactive map showing which states already have the federally mandated insurance exchanges set up and ready to go come 1/1/14, those which are in process, and the handful who won't do it (in which case the feds will come in and do it for them.)

http://statehealthfacts.kff.org/comparemaptable.jsp?ind=962&cat=17

[papadoc-1000]

Here are the rest of the taxes, including taxes on medical equipment, high medical costs, and special taxes on charitable hospitals and special needs kids.
http://www.newsmax.com/GroverNorquist/obamacare-taxes/2011/01/14/id/382849

[dog10001]

Court gave green light, now congress can "tax" (or penalize) you for everything and every way. Next penalty - breathing air for prolonging your life.
General public should structure their income as mentioned in "in your face IRS: zero taxes", ISBN 978-1477640456 ; as the book says it is a rigged game, they can change rule whenever they want.

[pgb]

One critically important point was missed in this article. EVERY "tax the rich" initiative eventually trickles down to the rest of us. Through inflation, median incomes will rise until nearly all taxpayers are hit with taxes initially described as "only for the rich." Our masters in Washington are counting on this, and they distract us while they play the long game.

[skeezix06]

Roberts and the republicans couldn't afford to alienate the insurance companies months before a presidential election.

[TechnoPagan1907]

This is less of an opinion piece and more of an election ad.