Healthcare reform must include repeal of all ObamaCare taxes

When it was signed into law in 2010, ObamaCare imposed roughly one trillion dollars in taxes on the American people.

The nearly 20 new or higher taxes hit middle class families and small businesses, raised the cost of healthcare, and reduced access to care. These taxes must be repealed in healthcare reform legislation.

{mosads}The House-passed American Health Care Act was a great start, repealing these burdensome taxes. In the coming weeks and months, the Senate will construct their own healthcare package.

While any changes to legislation that further increase access to care and lower costs should be welcomed, repeal of all ObamaCare taxes must be non-negotiable.

Many of these taxes are integral to enforcing ObamaCare’s regulations, like the individual mandate and employer mandate tax penalty. A family of four that fails to buy government-approved health insurance faces an income tax totaling $2,000 for a family of four. Eight million Americans paid this tax in 2014, most of whom are in the middle class.

Similarly, businesses that fail to offer government-approved health insurance face a penalty of $2,000 per employee. In total, these mandates increase taxes on businesses and families by more than $165 billion over the next decade.

In addition to these mandates, the law imposed taxes that directly impact the ability of Americans to meet healthcare expenses.

Most notably, ObamaCare imposed a tax increase on families with high medical bills. Around 10 million families pay $200 to $400 in higher income taxes each year because the law increases the threshold at which families can deduct medical expenses paid out of pocket.

Prior to the law, the threshold was 7.5 percent of AGI, but ObamaCare increased this to 10 percent. The taxpayers affected by this tax hike earned an average of $53,000 prior to implementation.

ObamaCare even makes it harder for individuals to save for their own healthcare choices.

Roughly 20 million Americans use tax-advantaged Health Savings Accounts (HSAs) to save for healthcare costs. Another 30 million use Flexible Spending Accounts. ObamaCare imposed several taxes on savings accounts totaling billions of dollars, including restricting the ability to purchase over the counter medicines, imposing a $2,500 cap on FSAs, and increasing the tax on early withdrawals from HSAs. 

Other ObamaCare taxes hit healthcare industries, but are inevitably passed onto American families. It’s a basic principle that if you impose a tax on a necessary good like healthcare, that tax is borne by consumers. These taxes directly increase the cost of goods and services used by the American people.

One of the largest of these is the $145 billion tax on health insurance, which is borne by small businesses, individuals and families through higher premiums, including seniors that use Medicare Advantage coverage and low-income Americans that rely on Medicaid managed care. According to one estimate, this tax will result in $5,000 in higher premiums over a decade. Half of the tax will be paid by those earning less than $50,000 a year.

Similarly, the $28 billion tax on prescription medicines increases the cost of life-saving and life-preserving medicines, even as many have called for reforms that reduce the costs of drugs. Repealing this tax should be the obvious first step in lowering the cost of medicines.

Some ObamaCare taxes are not even related to healthcare, like the 3.8 percent net investment income tax. The tax falls on capital gains, dividends, and other investment realized by individuals and businesses organized as pass-through entities, so it directly suppresses economic growth at a time when the economy remains stagnant.

Repealing ObamaCare taxes is also step one in achieving pro-growth tax reform. In addition to reducing taxes by one trillion dollars, the AHCA also reduced spending by more than one trillion dollars, leading to a dramatic reduction in the budget baseline and the size of the federal government. In turn, this will achieve President Trump’s goal of stronger economic growth, more jobs and higher wages.

Repealing all of ObamaCare’s taxes achieves not one, but two goals for President Trump and conservatives: repeal of ObamaCare, and providing tax relief for families and businesses. The trillion dollars in new or higher ObamaCare taxes has should be step one in achieving a patient-centered, free market health care system.

Alex Hendrie is director of tax policy at Americans for Tax Reform (@TaxReformer).

The views expressed by contributors are their own and are not the views of The Hill.