Overview:
Obamacare will be partially funded by raising $589,000,000,000 in new taxes. Most of the tax revenue will come from income, medical devices, medications, insurance plans. It is unclear how the “Affordable Care Act” will make medical expenses more affordable by increasing expenses for everybody that provides medical care.
- Investment Income Tax: 3.8% medicare tax will be applied to capital gains and interest for income earners above $200,000. For a more detailed description of the tax read here.
- Medical devices: 2.3% tax on medical devices.
- Medicare tax: Increases from 2.9% to 3.8% of income above $200,000 (3 days of your life will be spent working to fund part of this plan)
- Medications: Extra taxes will be applied to brand name medications. A specific % was not written. A tax amount of $2,500,000,000 to $4,200,000,000 will be obtained. This allows for increases in taxes as brand name drugs lose their patents and fewer new drugs are left on the market for the government to squeeze.
- Deduction limit increase: The percentage of income spent on medical care after which taxes may be deducted will rise from 7.5 to 10.
- Health Insurance taxes: A percentage was not given. Just a looting goal starting at $8,000,000,000 and moving up to $14,300,000,000 by 2018. The tax will be based on market share. This allows for an increase in the tax rate as the “Affordible Care Act” runs an increasing number of insurance companies out of business.
- Cadillac Health Plans: Plans that cost greater than $10,500 ($27,500 for families) will have a 40% excise tax. This is indexed to inflation (not the growing cost of insurance). Most plans will experience this tax by 2018. (tax exemptions for friends of Obama)
- Tanning bed: 5% tax on all tanning bed treatments.
Topics In Depth
Investment Income Tax
Arguements in Favor:
The investment income tax is pitched as an “unearned income” tax on high net worth individuals. It is important to frame the tax as a something taken from people who didn’t work for it and can afford to part with the money. The us hasn’t entirely embraced the “from each according to his ability to each according to his need” Marxian philosophy just yet, so attacking this sector of capital as something unearned is important to win the public over. Especially when the Obama administration can combine the arguement with pandering to human jealousy (class warefare) by only effecting a small minority of citizens who earn over $125K a year (in a two-income marrage) or $200K as individuals.
Arguements Against:
If you want less of something, tax that thing. In this case, the government is taxing the gains of people’s post-income tax money that they have saved and risked by investing into the economy. Not only is there a philisophical problem with the double and triple taxation involved with investments in US enterprises, but it is also the lifeblood of a market economy. The tax discourages people from injecting money into companies that create jobs and innovations that make our country great. The tax is in addtion to the 33% raise in capital gains and over 250% raise in dividends tax scheduled for the the end of 2012. Even hard left economists like the demand-side Godfather John Meynerd Keynes and Christina Romer (Obama’s former chair of economic advisors) believe that raising marginal tax rates cool the economy (read here and here)
Medical Device Tax
Arguments in favor:
The primary arguement for the medical device tax falls into the “get over it, you are going to be fine” category of reasoning. The belief is that the tax is small enough that it will not shift production overseas since the tax is applied to devices sold in the US regardless of where they are produced. The majority of the taxes will be paid by large medical device companies such as Medtronic and J&J. Companies that can afford the tax. Any loss in margins will be made up by the increased income from expanded coverage of 33 million Americans who are currently out of the system.
Detailed Arguments:
Who says it best:
Arguments Against:
If you decrease the reward for something, you will get less of that thing. It is that simple. The hundreds of millions of dollars that companies like Medtronic and J&J will have to pay in new taxes will no longer be available for R&D and hiring new people. Important devices with low profit margins will come off of the market. Fewer small medical device companies will be bought by larger medical device companies so the incentive to invest tens of millions of dollars to hopefully get through the FDA and then face smaller returns and a decreased chance of being bought will stifle innovation. The economists who crunch numbers assume that these long term decisions are not being made in the minds of the “peons” who put money and time at risk to develop new medical devices. 2.3% doesn’t look like much, but if your device sells with a 10% profit margin, you just cut your reason for selling that device by 23%. Your new hires and investment into the next great technology just went down 23%. Some papers estimate that the marigns for various companies could be cut by anywhere from 10% – 40%. Another arguement used in support of the tax is that it will drive MORE innovation by forcing companies to create more cost effective care. The logic is no different than saying I could make someone a more efficient and prolific typist by cutting off the pinky finger of each hand. Apparently, in the minds of policy “experts”, the supposed fat profit margins of US companies competing in a global cut-throat industry have made them inefficient and lazy to innovate. The medical device is extremely expensive and risky with very little room for waste. The medical device tax will only make the lives of domestic innovaters harder and the margins in foreign markets look better. The final arguement in support of the tax is that the medical device companies will benifit from increased coverage of the tens of millions of Americans who are currently not paying for medical care. The simple problem with this reasoning is that the people consuming medical devices are Medicare/Medicaid patients and those with insurance. The grand majority of those not covered are younger and would not consume medical devices even with full insurance coverage.
Detailed Arguements:
Health insurance taxes
Arguments in favor:
Wealthy insurance companies should help pay for medical care. They should give back to the system. The wealthiest plans should fund the less fortunate.
Arguments Against:
Creating a goal figure instead of a number means a government agency can raise taxes without approval of the legislature. This is an admittance that increases taxes decreases marginal return. The industry has one of the lowest profit margins in the country (3.3%). Even a small tax can make the whole industry nonviable. Some might say that is the goal Obamacare, some people like Obama.
Cadillac plans will be taxed at 40%. The only exceptions to this tax are unions and other democrat contributors. The tax will make it nearly impossible for everybody else. Translation: only friends of Obama get really good insurance.
Medication tax
Argument in favor:
Wealthy pharmaceutical companies should pay into the medical system. Their margins are too high on prescription medications and they should contribute some of those profits back into the system.
Argument against:
What do the architects of the “AFFORDABLE Care Act” think taxes medications will do to the price of medications. The same people have NO idea how the industry works. It can cost upwards of 1 billion dollars (4 billion if you count failures) to bring a new drug on the market. Law suits can also run in the billions (21 billion for Fen Phen). The large costs of new medications lead to further innovation. If you wipe out the profits, you stop medical innovation. This is not a difficult concept to follow, unless you got an economics degree at Harvard.