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Reply #111: Health Care Excise Tax = A Big Middle Class Tax Increase [View All]

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IndianaGreen Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jan-07-10 05:56 PM
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111. Health Care Excise Tax = A Big Middle Class Tax Increase
Impact of the Excise Tax on the Middle Class

Health Care Excise Tax = A Big Middle Class Tax Increase

Revised December 17, 2009

JCT data shows excise tax in the Senate bill would strike at the heart of the middle class

Health care legislation under consideration in the U.S. Senate would raise $149 billion over ten years by imposing a 40 percent excise tax above certain thresholds on insurance company health plans and self-insured plans offered by companies to their workers. This tax would have a dramatic effect on those plans forcing steep reductions in benefits, shifting of costs to workers and a significant increase in taxes on millions of middle-class families.

Contrary to claims by proponents that it will affect only Cadillac health plans, like those enjoyed by Goldman Sachs executives, according to Joint Committee on Taxation(i) data the excise tax will:

Affect 19 percent of workers with employer-sponsored health coverage in 2016.
Affect nearly 25 million households(ii) in 2019, including one-fifth of middle-class households making between $50,000 and $75,000.
Affect about 25 percent of health plans by 2019.
Cost affected households an additional $7,500 in taxes on average between 2013 and 2019, or more than $1,000 a year.
In 2019, cost affected taxpayers who are millionaires an extra $2,600 in taxes and those making between $50,000 to $75,000 an extra $1,100 in taxes, but the wealthy taxpayers income will be at least 13 to 20 times greater.
Be a tax increase of 0.1 percent of income for those households affected that make more than $1 million a year and be a tax increase of 1.4 percent for those households affected that make $50,000 to $75,000.

The JCT assumes that 82.5 percent of the revenue raised from the tax will be generated by increased wages to make up for health benefits cuts and increased cost sharing. However, most employers say they will not increase workers wages in response:

Only 9 percent of human resource executives in a recent Towers-Perrin survey said if health care reform reduced their benefit costs would they increase salary or direct compensation; 78 percent said they would retain the savings in the business as profit.
Just 16 percent of health plan sponsors in a recent Mercer survey said they would convert any health care cost savings into higher pay for their workers.


(i) Figures 1 to 5 in this report were prepared by CWA based on data from the Joint Committee on Taxation in a letter to Rep. Joe Courtney (D-Conn.), from Thomas A. Barthold, Chief of Staff, Dec. 8, 2009.

(ii) In this report households refers to individuals and families paying taxes. Based on JCT data showing that 24.6 million tax units would be affected by the excise tax in 2019, Citizens for Tax Justice estimates that 12.6 million are married couples, 3 million are single parents and 9.1 million are childless single people for a total of 58 million men, women and children affected.
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