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Health care tax hikes for 2013 may be just a start

Published on NewsOK Modified: December 25, 2012 at 11:10 am •  Published: December 25, 2012
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The new tax is a 3.8 percent levy on investment income that applies to individuals making more than $200,000 or married couples above $250,000. Projected to raise $123 billion from 2013-2019, it comes on top of other taxes on investment income. While it does apply to profits from home sales, the vast majority of sellers will not have to worry since another law allows individuals to shield up to $250,000 in gains on their home from taxation. (Married couples can exclude up to $500,000 in home sale gains.)

Investors have already been taking steps to avoid the tax, selling assets this year before it takes effect. The impact of the investment tax will be compounded if Obama and Republicans can't stave off the automatic tax increases coming next year if there's no budget agreement.

High earners will face another new tax under the health care law Jan. 1. It's an additional Medicare payroll tax of 0.9 percent on wage income above $200,000 for an individual or $250,000 for couples. This one does go to the Medicare trust fund.

Donald Marron, director of the nonpartisan Tax Policy Center, says the health care law's tax increases are medium-sized by historical standards. The center, a joint project of the Brookings Institution and the Urban Institute, provides in-depth analyses on tax issues.

They also foreshadow the current debate about raising taxes on people with high incomes. "These were an example of the president winning, and raising taxes on upper-income people," said Marron. "They are going to happen."

Other health care law tax increases taking effect Jan. 1:

— A 2.3 percent sales tax on medical devices used by hospitals and doctors. Industry is trying to delay or repeal the tax, saying it will lead to a loss of jobs. Several economists say manufacturers should be able to pass on most of the cost.

— A limit on the amount employees can contribute to tax-free flexible spending accounts for medical expenses. It's set at $2,500 for 2013, and indexed thereafter for inflation.