The Five Tax Hikes in Obamacare that Most Hurt Seniors

The jobs-killing Obamacare law contains 20 new or higher taxes on American families and employers. Many of these tax increases fall on families making less than $250,000 — a direct violation of candidate Obama’s promise not to raise “any form” of taxes on these families. In less than a week, the second anniversary of Obamacare being signed into law will take place. The Supreme Court will be hearing oral arguments about the constitutionality of Obamacare next week.

Out of the 20 new or higher taxes in Obamacare, there are five that fall most directly on seniors.

The first is the excise tax penalty for failure to comply with Obamacare’s individual mandate. Many seniors face a coverage gap between retirement and Medicare eligibility. Obamacare raises taxes on these younger seniors by punishing them if they don’t purchase “qualifying health insurance.” Set to go into effect in 2014, the excise tax penalty for mandate non-compliance will in 2016 rise to 2.5% of adjusted gross income for a senior couple (or $1,390 for those making less than $55,600).

Why does Obamacare raise taxes on seniors just as they are entering retirement? Many of these seniors will face this “stick” but find themselves with too much income to qualify for the “carrot” of tax credits to purchase Obamacare health insurance plans in an exchange. Many will be forced to keep working just to avoid paying this tax.

The second tax hike on seniors is the so-called “Cadillac Plan” excise tax. Starting in 2018, Obamacare imposes a whopping 40% excise tax on high-cost (“Cadillac plan”) health insurance plans. This is defined for seniors as a plan whose premiums exceed $29,450 for a family plan, or $11,500 for a single senior. Seniors often face higher costs in health insurance premiums due to chronic health conditions and other risk factors. This tax will fall almost exclusively on the seniors with the greatest health insurance needs.

Third is Obamacare’s dividends tax hike. Starting in 2013, the top tax rate on dividends is scheduled to rise from 15% today to 39.6%. In addition, Obamacare imposes a dividend “surtax” of 3.8% on families making more than $250,000 per year. That would create a top dividend tax rate of 43.4%, nearly triple today’s rate. This will fall very hard on seniors. According to the Tax Foundation’s analysis of IRS data, 70% of households over age 55 receive dividend income. Seventy-one percent of all dividends paid flow to these households. To raise taxes on dividends is to raise taxes on seniors.

Then there’s the medical device excise tax. Obamacare imposes a new excise tax on medical device manufacturers in 2013. These companies will surely build the cost of this new tax into the price of what they sell. Who buys medical devices? Who buys pacemakers, wheelchairs and other costly medical devices? Seniors do.

Finally, Obamacare reduces allowable medical itemized deductions. Under current law, medical itemized deductions can be claimed on tax returns, but they must be reduced by 7.5% of adjusted gross income. Obamacare increases this “haircut” to 10% of AGI in 2013. This will mean that millions of Americans claiming medical itemized deductions will no longer be able to. The same IRS data as above tells us that 60% of all tax filers claiming this deduction are over age 55.

All of the tax increases in Obamacare will hurt seniors, but these five fall on them directly and hardest.

Grover Norquist is president of Americans for Tax Reform and co-author (with John Lott) of Debacle: Obama’s War on Jobs and Growth and What We Can Do Now to Regain Our Future. This post first appeared at the Daily Caller.

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6 replies »

  1. Gotta love people who use human shields to rationalize political agendas.

    As long as a population group is convenient and gullible to utilize, eh, Mr Norquist? Not that he will be reading this thread, but his ilk and his equally annoying and extremist opposites of the liberal ilk will pontificate until exhaustion and malaise set in for readers moderate and independent of these Republocrat shouting matches.

    Wait til more Boomers get over 65 and suffocate the culture with “what’s in it for me” screams. Remember, I’m one of them, so don’t bash me falsely!

  2. Another Harvard elitist trying to manipulate the system for their own ends.
    I wasn’t aware that one could deduct the cost of a pacemaker as he implies. Is that true? I also don’t get the objection to taxing the “cadillac” plan. Do many retired people pay more than that limit for their insurance? I don’t know but it would surprise me if they did.
    Lastly, I object to his referring to seniors as those over 55. I will be 55 this summer and I resent that remark!

  3. I wonder if Grover supports higher FICA taxes to pay for all these senior benefits that he also says are bankrupting the country?

  4. I get the politics, but I don’t get Grover’s math. Take point #3 – if I’m a senior making more than $250,000 a year in dividend income, I think I’m okay to pay back into the system, for all the benefits I had growing up to that golden age. In fact, if I’m concerned about making too much money a year, I can always accelerate my philanthropic interests and lower my taxable income a la trust (which I probably have done already). Philanthropy…not a bad option since I have more free time to contribute. And if it happens that I’m concerned whether I received my fair share of benefits over the years, I need only look at the billions that were borrowed to shore up our military, savings and loan, our grade and secondary schools that educated our children so they could support themselves and their families, and oh I’m probably leaving out details on subsidies for cheap gas, cheap food, and a congress that plays games with their pet projects and mistress’ on the company dollar. Anyway, it’s always refreshing to hear there are people concerned with my well being in my old age. Now where did I leave my bag of silver coins?

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