As the new health care law counts its first birthday, it’s time to measure the more than $500 billion in new taxes – or about $4,600 per household over the next decade. Americans are known worldwide for their distaste for taxes. Indeed, it was a tax on tea that triggered the Revolutionary War. In light of this, Democrats had to resort to every trick in their playbook to sneak through these taxes (and pay for the new law) without arousing taxpayers.
Trick Number 1: “Don’t tax you, don’t tax me, tax that fellow behind the tree.” This saying was coined by Senator Russell Long, who acquired his tax expertise over nearly four decades in the U.S. Senate. He recognized that one politically feasible way of raising taxes was to make it appear they would be paid by someone else. Not surprisingly, more than $170 billion of new taxes under the Affordable Care Act take the form of taxes on businesses–businesses that ultimately will turn around and pass them onto consumers or workers. These include taxes on health insurers ($92.7 billion), pharmaceutical manufacturers ($27 billion), medical device manufacturers ($20 billion), employers who offer prescription drug coverage to retirees ($4.5 billion) and tanning parlors ($2.7 billion) as well as the elimination of tax credits for bio-fuels ($23.6 billion). Congress is counting on consumers to blame companies for higher prices rather than connect them back to a healthcare law adopted in 2010.
Trick Number 2: The inflation tax. Part of the strategy for taxing that fellow behind the tree was to raise $210.2 billion through higher taxes on “the rich,” i.e., individuals with annual incomes above $200,000 and families whose income exceeded $250,000. However, Congress cleverly avoided adopting any sort of inflation adjustment for these income thresholds. Anyone who knows the history of the Alternative Minimum Tax is aware that it was originally enacted to target 155 very wealthy households that paid no taxes. However, the lack of an inflation adjuster has resulted in about 4 million households now being subjected to the AMT. The same will happen with several of the taxes under Obamacare. As a consequence, the Congressional Budget Office estimates bracket creep alone will more than double the amount of new health law taxes collected in 2035 compared to 2020.
Trick Number 3: Boiling the frog. Everyone knows a frog placed in a pot of boiling water will jump out. But a frog placed in cold water that is gradually heated will boil to death. These taxes ultimately will collect $500 billion, but they were carefully phased in over time. It should surprise no one to learn that the taxes that began in 2010 generated only a modest amount, averaging $3.1 billion a year. After the 2012 election is over, revenue-raising begins in earnest. The levies starting in 2013 average $25 billion a year, those in 2014 average $12.5 billion and those that starting in 2018 average $3.2 billion. By spreading these over nearly 20 different levies starting at different points in time, Congress is banking on its taxpayer frogs to remain complacently in the pot.
Trick Number 4: Untruth in labeling. Some $65 billion of revenues being raised come in the form of surtaxes on individuals and employers who do not comply with the mandates to buy or provide health insurance. While vociferously defended as “penalties” during the health care debate, the Administration has spent the past year repeatedly insisting in court cases challenging the law’s constitutionality that these actually are taxes. Which lie should Americans believe?
King George’s tax on tea was a pittance compared to the massive stealth taxes duplicitously levied by the new health law. The health law was passed in spite of persistent and unmistakable public opposition. For nearly half a year, Americans have favored repeal by double-digit margins. In light of the law’s massive taxation without representation, is it any wonder Americans are up in arms?
Conover is a research scholar in the Center for Health Policy and Inequalities Research at Duke University.