Health Tax Madness

There’s a new kind of tax in town, and it should be called the Baucus tax. Unlike property tax, sales tax, and income tax, the Baucus tax could be applied to practically everything you own, and even a few things you don’t.

A summary provided by the office of Sen. Mitch McConnell (R.-Ky.) points out just a few of the tax madness in Baucus’ Senate Finance Committee health care bill. If the bill is passed in its current version, the Baucus tax will apply to:

People who don’t have health insurance

The move to make health insurance mandatory will impose an extra expense on a lot of people — from college graduates still living off savings to people between jobs — willing to take a chance on staying healthy. By 2019, the Congressional Budget Office (CBO) estimates that penalty payments by uninsured individuals would total $4 billion.

Employers who can’t provide coverage

Companies with more than 50 full-time employees who do not provide coverage will be subject to a fine. Such a fine could quickly stunt the growth of small to medium-sized businesses. According to John L. Ligon at the Heritage Foundation, “[F]or many companies, it is too costly to offer health benefits in addition to current wage and other compensation. For example, if a firm with 49 employees decides to expand by one employee, then the potential marginal cost of the 50th employee could be $20,000–a capped amount of $400 multiplied by 50, the new number of employees at the firm — plus other costs of hiring this employee.” By 2019, the CBO estimates that penalty payments by employers would total $23 billion.

Employers who do provide coverage

Premiums above $21,000 (for families) or $8,000 (for individuals) are subject to a tax. The Heritage Foundation found that although this fine is meant to target the high-priced “Cadillac” health insurance plans, a domino effect — extra fees passed down from insurers to employers to workers — means before long it will hit low- and middle-income workers. Defenders say this will induce competition to create better plans. Critics say workers will wind up with less effective coverage overall. According to the CBO, the Baucus excise tax will raise over $200 billion in the first 10 years.

People who use pacemakers or hearing aids

The provision in the bill referring to a tax on medical devices resulted in a lot of unflattering attention earlier this month when people realized that the FDA’s definition of the term “medical device” includes items ranging from tongue depressors to tampons.
The outcry over that particular bit of nonsense was loud enough that the Committee redrafted the provision to levy the tax against only class II medical devices: those that cost more than $100.

Pacemakers and hearing aids might not be an every-day expense, but to the people who need them, they tend to be quite necessary. It is not just old folks, or folks with a serious medical condition who will be affected, however. Breast pumps fall under the revised provision, as well, which has already earned it a new name: the Mommy Tax.

People who take prescription drugs

An Oct. 8, 2009 report by the non-partisan Joint Committee on Taxation found that the annual fee on manufacturers and importers of branded drugs would add up to $22.2 billion by 2019. Naturally, those fees would be passed on to both insurers and consumers. “In effect, the Baucus proposal would tax the sick to subsidize insurance for the healthy, and many of the taxes would be imposed on the same people ‘helped’ by the subsidies,” according to the Heritage Foundation.

At least the Baucus bill has something for everybody. If you can’t find yourself—probably more than once — in the list of groups who would be subject to further taxation under the Baucus bill, you aren’t trying hard enough.