Relief from ObamaCare taxes should be on the agenda for Congress

Relief from ObamaCare taxes should be on the agenda for Congress
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Last year saw Republicans pass generational, comprehensive tax reform legislation. With this bill, the GOP simplified the tax code and reduced the tax burden on American families and businesses, leading to increased economic growth, more jobs, and more take-home pay.

While this was a monumental victory for Americans across the country, this does not mean every tax issue has been addressed.

Congress still needs to ensure taxpayers are granted relief from the trillion dollars in new or higher taxes imposed by ObamaCare. While the ideal outcome is full repeal of all taxes, this is likely difficult to achieve in the near term given the polarization in Washington.

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Absent full repeal of these taxes, the best path forward should be delaying as many taxes as possible. One option is through passing legislation proposed by Republican members of the House Ways and Means Committee led by Chairman Kevin BradyKevin Patrick BradyHow the Trump tax law passed: Breaking the gridlock  House GOP bill a mixed bag for retirement savers China imposes new tariffs on billion of US goods: report MORE (R-Texas).

 

These bills would provide temporary relief from ObamaCare’s health insurance tax, medical device tax, tax on over-the-counter medications, Cadillac tax on employer provided health insurance, and employer mandate tax penalty.

Even as Congress passed sweeping tax reform, they failed to prevent two ObamaCare taxes — the health insurance tax and medical device tax — from going into effect on Jan. 1, 2018. These taxes will cause higher premiums and higher costs for middle class families, seniors, and small businesses. Both must be part of any bill reforming the nation’s healthcare system.

In particular, repeal or delay of the health insurance tax should be an obvious solution to the widespread (and justified) concerns over increasing healthcare premiums.

The health insurance tax is imposed directly on premiums and hits an estimated 11 million households that purchase through the individual insurance market and 23 million households covered through their jobs.

This tax is estimated to increase premiums by between two and three percent, equating to a $5,000 increase per family over a decade, according to the American Action Forum. 

It is also highly regressive — half of it is felt by those earning less than $50,000 a year

The 2.3 percent medical device tax is similarly harmful to Americans, as it leads to higher costs and suppresses job creation. The tax — which is imposed on all devices including X-ray and MRI machines, surgical instruments and pacemakers – could cost as many as 25,000 jobs by 2021, and result in higher costs in the form of more expensive medical devices.

While these two taxes are taking effect in 2018, they are not the only taxes harming patients, consumers, and taxpayers.

ObamaCare imposed taxes on other healthcare products, including a $28 billion tax on innovative medicines that is driving up the cost of life-saving and life-preserving medicines.

The law also imposed multiple taxes on Health Savings Accounts and Flexible Spending Accounts, including a prohibition on using HSAs to purchase over-the-counter medications. These tax preferred accounts are used by 20 million and  30 million Americans respectively to save for healthcare expenses, so limiting their use will only limit the ability of families to pay for care.

Businesses are also hit by the law through the employer mandate tax penalty, which penalizes businesses $2,260 per employee for failing to purchase government approved health insurance, or through the “Cadillac tax” on employer provided care, which taxes the benefits that employers provide over a threshold of $10,800 for an individual and $29,100 for a family.

ObamaCare even imposed taxes unrelated to healthcare, such as the 3.8 percent net investment income tax on capital gains income and pass-through businesses, and the 0.9 Medicare payroll tax increase. Both of these taxes suppress economic growth and job creation.

All of these taxes should be repealed — either outright or incrementally.

While healthcare can be a politically sensitive issue, lawmakers should not shy from offering relief from ObamaCare taxes. In fact, Congress has taken one step toward offering relief from some of these taxes.

The tax reform plan passed in December repealed the individual mandate tax penalty and paused the income tax hike on Americans with high medical bills.

Repeal of the individual mandate is especially notable, as it offered direct tax relief to 6,665,480 households who will no longer be penalized for failing to purchase unaffordable health insurance. Of those households, 79 percent had annual income below $50,000, while 37 percent had annual income below $25,000.

While this is a step in the right direction, Congress must provide relief from ObamaCare’s remaining taxes, through outright repeal or incremental delay.

Grover Norquist is president of Americans for Tax Reform, and Alex Hendrie is the group's director of tax policy.