Now a lot of people want to do a
postmortem and try and pin blame of people or parties or institutions. The
President, Congress, Obama, Clinton, Bush, Liberals, Conservatives, Free
Traders, Outsourcers or take your pick are all thrown into the Blame Pot.
Looking backwards rarely gets
you where you want to go. We know where we have been what we want is something
better! So let’s look forward to January 1st, 2013 and see if these
new five new or higher taxes of the twenty new or higher taxes from Washington on
Health Care are going to help or hurt businesses and families.
Medical Device Tax – a $20 billion tax increase: Medical device manufacturers
employ 409,000 people in 12,000 plants across the country. Healthcare imposes a
new 2.3 percent excise tax on gross sales – even if the company does not earn a
profit in a given year. In addition to killing small business jobs and
impacting research and development budgets, this will increase the cost of your
health care – making everything from pacemakers to prosthetics more expensive.
“Special Needs Kids Tax” –
a $13 billion tax increase: The 30-35 million Americans who use a Flexible Spending Account
(FSA) at work to pay for their family’s basic medical needs will face a new government
cap of $2,500 (currently the accounts are unlimited under federal law, though
employers are allowed to set a cap).
There is one
group of FSA owners for whom this new cap will be particularly cruel and
onerous: parents of special needs children. There are several million families
with special needs children in the United States, and many of them use FSAs to
pay for special needs education. Tuition rates at one leading school that
teaches special needs children in Washington, D.C. (National Child Research
Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be
used to pay for this type of special needs education. This Healthcare tax
provision will limit the options available to these families.
Surtax on Investment Income
– a $123 billion tax increase: This is a new, 3.8 percentage point surtax on
investment income earned in households making at least $250,000 ($200,000 single).
This would result in the following top tax rates on investment income:
|
Capital Gains
|
Dividends
|
Other*
|
2012
|
15%
|
15%
|
35%
|
2013+ (current law)
|
23.8%
|
43.4%
|
43.4%
|
The table above also incorporates the scheduled hike in the
capital gains rate from 15 to 20 percent, and the scheduled hike in dividends
rate from 15 to 39.6 percent.
Medical Itemized Deductions
– a $15.2 billion tax increase: Currently, Americans facing high medical expenses are allowed a
deduction to the extent that those expenses exceed 7.5 percent of adjusted
gross income (AGI). This tax increase imposes a threshold of 10 percent of AGI.
By limiting this deduction, the net widens
to capture taxable income for the sickest Americans. This tax provision will
most harm near retirees and those with modest incomes but high medical bills.
Medicare Payroll Tax Hike
-- an $86.8 billion tax increase: The Medicare payroll tax is currently 2.9 percent on all wages and
self-employment profits. Under this tax hike, wages and profits exceeding
$200,000 ($250,000 in the case of married couples) will face a 3.8 percent rate
instead. This is a direct marginal income tax hike on small business owners,
who are liable for self-employment tax in most cases. The table below compares
current law vs. the Medicare Payroll Tax Hike:
|
First
$200,000
($250,000 Married)
Employer/Employee
|
All
Remaining Wages
Employer/Employee
|
Current
Law
|
1.45%/1.45%
2.9% self-employed
|
1.45%/1.45%
2.9% self-employed
|
Tax Hike
|
1.45%/1.45%
2.9% self-employed
|
1.45%/2.35%
3.8% self-employed
|
These do not seem to be taxes only on the rich. Higher taxes
at a time of lower median income will hurt families. Business taxes are a cost
of doing business and passed onto consumers. Money paid directly or indirectly in
taxes cannot go to food, clothes, housing, education, medical, etc… The less
purchases made the less is made and the less made means fewer jobs and the
cycle repeats.
These taxes come from Washington and no one from the
President, to the House to the Senate is working to help! These numbers do not
reflect any State, County or City level taxes such as rising Property Taxes on
lower Property Values.
We cannot tax ourselves to prosperity and regardless of the
social value of government programs. They are not sustainable “as is”. Change
is coming and the question is whether we control those changes to create
sustainable value in tax funded programs or like lemmings follow others off the
cliff. Red, Blue, Liberal, Progressive, Conservative, Democrat or Republican is
anybody listening or frankly anybody care?