Tax increases in the health reform package are drawing attention as people look at how it is going to be paid for. Nothing has been finalized, but so far here is what reform might cost individuals:
For those earning over $200,000 ($250,000 for families), the bill imposes a 3.8 percent tax on returns on investment, which include interest payments, dividends, annuities, royalties, rents, and capital gains -- home sales could be included here. The tax appears to be applied on net investments. People will also pay a 1.9 percent tax on income over these figures. Payments begin in 2013 and go to the Hospital Insurance payroll tax.
People who don't abide the healthcare mandate and buy insurance will be fined by the IRS roughly $700, or 2.5 percent of income by 2016. For families, the penalty is the greater of $2,085 or 2.5 percent of household income. It is unclear if this tax is on gross or adjusted gross income. For those of you who have applied for a loan, household income usually means gross. So dodgers earning $200K a year would have to pay 5 grand - on top of all other taxes.
For employers with 50-plus workers, not offering coverage will cost $2,000 per full-time worker, at a minimum. In other scenarios the penalty is $3,000 per full time worker.
The "Cadillac" tax, which labor unions have fought against, begins in 2018 for high-end policies costing more than $10,200 for individuals and $27,500 for families. However, these thresholds could increase if insurance companies accelerate premium prices too quickly, meaning fewer policies would be subjected to the tax. But the tax man giveth and taketh away because the index for the tax is much slower than the index of medical inflation, meaning over time more policies will be subjected to the tax.
Poorer folks receive tax breaks on a sliding scale based on how close their income comes to the federal poverty level.