Guest editorial: Brace Yourself for ObamaCare Taxes

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 Now that President Obama’s health insurance overhaul has become law, we
can brace ourselves for the new taxes. What new taxes? Aren’t they only on the
“rich” and on large companies?

It’s true that the Obama plan includes new taxes on upper-income people.
For example, the Medicare tax will now be applied to investment income. People
making more than $200,000, will now have to pay a 3.8 percent tax on
investment income over that limit. For people earning salaries of more than
$200,000, their payroll tax will rise from 1.45 to 2.35 percent on the
amount over that limit. (The so-called employer’s share will remain the same.)

All told, the new Medicare taxes are projected to take in $184 billion
by 2019, although that assumes the tax targets are stationary and unable to
take evasive action. That is highly doubtful.

Other new taxes include the levy on high-end employer-purchased health
insurance. Since this tax was offensive to labor unions, which negotiates
so-called Cadillac plans for their members, it was put off until 2018 (when a
two-term Obama would be out of office), so there’s plenty of time to modify it.
There are also assorted large fees on drug and medical-device companies. “Fees”
charged by government is a euphemism for “taxes.”

One might expect the corporate targets of such “fees” to object, but
there’s been no objection. The companies supported ObamaCare in principle if
not in every particular. Why? One reason is that along with the new charges
comes the mandate compelling al U.S. residents to buy insurance (or have it
bought for them). Big taxpayer subsidies are in the offing. Compulsory
insurance therefore is money in the companies’ pockets; the new “fees” will be
worked into the prices charged their captive clientele. Why do you think those
companies’ stock prices are rising?

Moreover, big companies can always grapple with new taxes and
regulations more easily than smaller companies can. So taxes and regulations
have a way of concentrating industries by diminishing competition. ObamaCare is
a classic government-backed cartel.

At any rate, those are not the taxes I am not referring to when I say we
should brace ourselves. The taxes I mean are the implicit taxes that ObamaCare
will impose on most productive people. What’s an implicit tax?

Everyone knows what a tax is. It’s a government decree that individuals
or businesses pay a sum of money or face penalties ranging from fines to imprisonment.
Taxes are levied on all sorts of things, including incomes and the sale of
products and services. The essence of a tax, then, is the payment of money
under duress created by politicians.

Once we understand this, we can see that the state is able to tax us
indirectly as well as directly. For example, when government imposes a tariff
on foreign goods, this tax is not formally imposed on consumers. But if the
tariff leads to higher prices for the foreign goods and their domestic
counterparts (which is usually the purpose), consumers end up paying the tax in
those higher prices. The formal target is irrelevant. It’s a tax on consumers.

Government can tax us even more indirectly. The pending cap-and-trade
proposal, by charging companies for permits to emit carbon dioxide, will raise
the price of energy and products embodying that energy. The difference between
prices with and without cap-and-trade is a tax because the higher
payment is the result of a government decree. It doesn’t matter that Congress passed
no formal tax.

Now we can see how ObamaCare will tax much of the middle class. Under
the new law, everyone everyone will have to buy government-defined medical
coverage or have it bought for him by his employer, reducing cash wages. Thus,
anyone who would not have bought insurance or would have bought a
less-expensive policy will pay an implicit tax.

But that’s not all. When government subsidizes demand, as ObamaCare
will, prices rise. So under ObamaCare, everyone paying his own way will pay
more for medical services (and insurance) than otherwise. That difference is a
tax because it results from a government decree.

Thus, ObamaCare is a massive tax increase on the middle class. How soon
can it be repealed?

* Sheldon Richman is senior fellow at The Future
of Freedom Foundation, author of “Tethered
Citizens: Time to Repeal the Welfare State,” and is
editor of The Freeman
magazine. Visit his blog “Free Association” at www.sheldonrichman.com. 

About CFLive Staff

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