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Who Really Pays for ObamaCare?
By now you are probably sick and tired of hearing about Obamacare. I mean really, the law is already enacted, it's being enforced, well sort of. So what's new, what is this about a skeleton in the closet?
Truth be told, the real cost of ObamaCare is only just now starting to come to light. Interesting isn't it how the facts come out after wards? Anyway, let's take a look and see how the real story of ObamaCare is really nothing more than a robbing Peter to pay Paul kind of story.
First up, understand that nothing is ever for free. Free is just a way of saying the cost is not made visible. Here's a real world example for you: all those internet retailers with free shipping? Do you think for a moment that UPS or the USPS delivers for free? Of course not. Either the retailer takes less profit or the shipping is included in the price. A small example to be sure, but pay attention to how this shows up in ObamaCare.
Keep in mind that the government (at any level) does not make or produce anything. Besides providing for our national defense (thanks for that one by the way), the government at all levels only ever serves to redistribute resources. Your payroll Medicare taxes funds the current recipients of Medicare, that kind of thing.
ObamaCare (actually, to be fair, the Affordable Care Act) is funded by a couple of taxes. These taxes became effective on January 1, 2013. In other words, if these new taxes apply to you, you have already seen them yanked out of your paycheck.
Truth be told, the Affordable Care Act (ACA) actually brings us no less than 21 tax law changes. However to make this easier to digest, this article will only focus on the biggest increases. The first of these is an additional 0.09% tax added to the normal Medicare tax. Keep in mind that Medicare taxes are removed from your paycheck before anything else, before 401(k) or other retirement plan contributions, essentially Medicare taxes get first dibs on your hard earned money.
Hold on there. Before the proponents of Obamacare click away in disgust, do note that this additional Medicare tax is supposed to only ever apply to specific income group. That is, those who earn wages or self-employment income above $250,000 for a married tax filer or $200,000 for a single individual.
In case you are sitting there doing the math in your head, that's about another $200 to $250 per year. Are you thinking that's no big deal? Are you thinking that anyone that earns over $200,000 can afford another $200 with no problem? That's not the point here, but it does speak to the politics of the ACA.
Tax increase number two comes from a brand new tax on net investment income. Aptly named a surtax (which in plain English is a tax on a tax), this new improved tax on a tax whacks an additional 3.8% surtax on net investment income. Yes, it is true, this tax is triggered once the modified adjusted income of a married couple tops the $250,000 mark (or $200,000 for a single person) but once again that is not the point.
Two other ACA taxes that you want to know about are the changes in the uninsured medical expense threshold and the change in flexible spending accounts. Do you remember that for years and years, the threshold for uninsured medical expenses was 7.5%? Well no longer, now that threshold has been raised to a whopping 10%. It was hard enough for most people to even get close to the 7.5% threshold. This new threshold basically means most people will end up eating their uninsured medical expenses.
Next up is the change in Flexible Spending Accounts (FSA). Recall that lots of people traditionally used their FSA to cover over the counter medications, insurance deductibles, that sort of thing. Well, now the amount has been dropped to only $2,500.
You do see the point here do you not? The thing to get here is that good intentions aside, the ACA is in fact paid for by more taxes. Depending on your personal financial situation, you may see more or less of a direct effect on your personal taxes, which, by the way highlights more than ever the need to consider the use of a tax professional as discussed here.