Obamacare’s Latest Broken Promise: It’s Raising Taxes on the Middle Class

by Grace-Marie Turner & Tyler Hartsfield

When the president said in his first inaugural address that middle-income Americans “will not see your taxes increased a single dime,” most still believed in his supreme powers to solve the nation’s toughest problems, including health reform, that had so thwarted his predecessors.

We now know that the total hit to the U.S. economy from Obamacare will be more than $1 trillion over the next decade, nearly double the $569 billion that Congress’ Joint Committee on Taxation estimated for its first ten years when the law passed in 2010.

This broken promise has received little attention, but it is the one that likely impacts the greatest number of Americans. 

I write at Investor’s Business Daily about the long list of taxes in the health overhaul law that do hit middle-income Americans: The first wave of new income taxes on saving and investment hits higher-income earners ($200,000 or more) hardest, but working Americans already are paying an avalanche of new Obamacare taxes.

For example, the law caps at $2,500 a year the amount of income that employees can put tax-free into their Flexible Spending Accounts for health-care savings. Thousands of families with special-needs children and many others with predictably large health costs will have to pay expenses above the cap with after-tax dollars. 

People with high medical bills also face a new limit on what they can deduct for medical expenses – a threshold of 10 percent of their adjusted gross income instead of the previous 7.5 percent trigger. Together, these two taxes will raise about $43 billion over 10 years.

Obamacare also imposes a new sales tax on health insurance companies, which is already increasing health-insurance premiums. The Joint Committee on Taxation estimates that the health-insurance tax will exceed $100 billion over the next 10 years. Virtually all of that tax will be passed along to consumers in the form of higher health-insurance premiums.

Obamacare also has a “transitional reinsurance tax” that amounts to a $63 a year fee on every person with private health insurance, designed to raise $25 billion. Labor unions have been particularly incensed about this tax because they run their own health plans, while the proceeds of the fee go to compensate health insurers for high-risk patients in the Obamacare health-insurance exchanges.

An early Obamacare tax is already hitting innovator drug companies, collecting $34 billion from the pharmaceutical industry over ten years. This tax burdens middle-income consumers with higher prices and, equally important, has already reduced investment in research for new medicines.

A tax on medical-device manufacturers took effect last year, siphoning $29 billion from creators of surgical instruments, artificial joints, and even routine medical devices. The 2.3 percent excise tax is imposed on revenues, which means it’s paid by companies whether or not they have any profit. Many companies say that this tax is reducing significantly their investment in research for the next generation of medical devices.

There are other taxes in the law that hit middle-income Americans, including the tanning-salon tax, the smokers’ tax, and, soon, the Cadillac tax on expensive health plans.

Not only do the taxes break a clear promise that the president made to win support for his plan, but they are sapping resources from our economy as it still struggles to recover. It’s time to take a serious look at the many alternatives being offered by Republicans.