Despite the many protestations to the contrary; the new Health Care law has a GIANT new tax increase for ALL AMERICANS, regardless of their income or retirement status....
Documentation / proof - http://www.thomas.gov Enter HR 3590 in the search box...look at CRS Summaries.
Summarized - Title IX Revenue provisions - Subtitle A - REQUIRES employers to include on the W-2 form of each employee the aggregate cost of applicable employer-sponsored group health coverage that is excludable from the employess gross income.
Starting in Jan ....2011...EVERYONE ( regardless of income / retirement status ) ....will have their respective incomes increased by the value of the health insurance provided ....AND....( wait-for-it ) will be required to pay Federal Income Tax on the increased amount.
Example - A fairly typical health plan costs about $1,100 per month ...employees pay a portion, usually based on their income, lower salaried employees pay less ....higher salaried employees pay more ...this way a secretary or entry level employee can AFFORD a quality health plan. Lets assume that the executive level employees pay $350 per month and the lower level employees pay $150 per month ....( about right )
The lower level employee will now be taxed on the aproximate $950 per month of employer provided health care ....the executive will be hit with about $750 in additional income per month ....( remember - This is the LAW of the land and there are NO EXCEPTIONS )
So .... the entry level employee will find his respective W-2 INCREASED about $11,400 per year and the executive by about $9,000. Assume a rough 20% tax rate for the lower level employee and guestimate a 30% overall rate for the executive ....equates to an IMMEDIATE tax increase of $2,280- $2,700 for each person ....more if you happen to move across the overall tax brackets ...
Figure that most people will NOT adjust their respective tax withholdings from the prior year ...and ( Bamm ! ) most Americans will go from getting a small tax refund ...to a debit / tax bill between $2,000-$3,000 dollars ....
This political talk about "not one dime of tax increase for those making less than $250,000 per year" is hokum ....bullshinto....OR...phrased nicely... simply NOT the truth.
ETY and similiar tax-advantaged investments should become more and more popular as investors seek shelter from the coming tax storms brought on by the simple REDEFINITION of income ....and the almost 40% tax rate on dividends scheduled to begin on Jan 1, 2011.
Hope this proves helpful ....
Hello everyone, needless to say, the potential for a huge new tax increase was disturbing, so I've been doing some due diligence and I think this post may have reached an incorrect conclusion.
It's very true that the new health care law "requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer-sponsored group health coverage that is excludable from the employee's gross income." However, that does not mean that the added amount on the W-2 is subject to tax. The W-2 serves as a general reporting mechanism to the federal government, and there are items on my W-2 which are reported there but which are not taxable to me. The new law mandates that employers provide health insurance for employees, so W-2 reporting is a way for the feds to ensure compliance with that requirement.
There's a good summary of the new health care law on Wikipedia: http://en.wikipedia.org/wiki/Patient_Protection_and_Affordable_Care_Act#Legislative_history. The Wikipedia summary explains that the W-2 reporting requirement is essentially a disclosure mechanism: "Employers must disclose the value of the benefits they provided beginning in 2011 for each employee's health insurance coverage on the employees' annual Form W-2's."
Don't often get involved in these but am hearing similar points from family and friends in Texas and Missouri. I don't like increases but IMHO the W-2 reporting has a non-sneaky rational as follows:
WHAT HAPPENS IN 2018
*An excise tax on high cost employer-provided plans is imposed. The first $27,500 of a family plan and $10,200 for individual coverage is exempt from the tax. Higher levels are set for plans covering retirees and people in high risk professions."
The above gotcha requires some reporting.
Personally don't care for what reads like they're singling out a group for a special tax. But nothing is free as investors on this board very well know. Am guessing we have to decide who we are and what we want then step up to it. For my own part, I don't need the new health care plan nor even social security but I've been blessed in my financial life.
As far as "news" goes it pays to remember that if it's not fact it's PR. And that politics very systematically run on PR.
Good response....and I agree that the law ( HR 3590 ) has been written in a fashion that makes it unclear ....
However...Title IX Revenue Provisions- Subtitle A; Revenue offset - ( first clue that they are raising taxes is the title of this provision in HR 3590 ) ....clearly states...Sec 9002 - "requires employers to include in the W-2 form of each employee THE AGGREGATE COST OF APPLICABLE EMPLOYEE-SPONSORED GROUP HEALTH COVERAGE."
That is vastly different from requiring the W-2 form to detail the amount of 401-k contributions or the amount of social security taxes paid during the calander year ....as suggested by the Wikipedia summary ...If that were true ...the amount would be unimportant ...and a simple box could be checked ....which answers the question ..." Coverered by employer health plan ? - YES / NO ... or exactly the way the W-2 reporting requirements detail coverage by an employer pension plan....YES / NO.
I would again note that the FICA taxes and 401-k contributions were NOT added to the W-2 form under a provision labeled ..."REVENUE PROVISIONS" of the Internal Revenue Tax code ....and submit that the name betrays the real intention of our Congressional leadership....ie ...they are looking for a way to dramatically INCREASE tax revenue ...without calling it a tax increase.
Here is a question to consider: The cost of Medicare to our retirees would probably have to be considered a health plan coverage ....probably at least $1,000 per month of benefit coverage ( conservative estimate ) ...This approximate $12,000 per year of "benefit" would be added to the Social Security income recieved ....many citizens recieve about $18,000 per year from social security ...( which was "guaranteed" not to be taxed when incepted,by the way ...)...So a low income retiree earning $18,000 per year ...would now sport a W-2 of $30,000....and ASSUMING an overall tax rate of just 15% ...would have a Federal Income tax bill of $4,500..( 15% of $30,000) ...or an effective 25% tax rate of his true $18,000 income .... This is a GIGANTIC tax increase .... but wait ...there more ...$30,000 W-2 earners, under the proposed Administration's new tax rates for 2011 ...will NOT be paying 15% ...but a much higher rate ...lets say a marginal 20% ...Thats a $6,000 tax bill ...or 33% of pre-tax ACTUAL income ...again ...most people will NOT have adjusted their respective W-4 withholding forms ....( especially seniors living on a fixed income ) and will be staring at a huge tax bill come next April 15, 2012 when the 2011 taxes come due ...This will be a cruel hardship for many ...
Summary - I hope you are RIGHT and the conclusion reached is incorrect. The history of Congress and taxation tends to support the contention that this is in fact a tax increase ...the name of the paragraph that requires compliance to the tax code lists this as a "revenue-provision" ....and common sense dictates that if this were truely a simple "reporting requirement" ...such as the Employer Pension coverage ...the tax code would not dictate that the value be added to the income recieved to form a new and higher "aggregate" income amount.
Thanks for the reply ...Let's hope that you are right ....regards....
There's another stealth tax increase starting in 2013, I heard; an additional 3.8% tax to help fund medicare on any income over $200K, whether it be investment income, earned income, sale of a house or business, whatever.
I thought that with the changes that turned into a
"... Medicare payroll tax is raised to 2.35 percent from 1.45 percent for individuals earning more than $200,000 and married couples with incomes over $250,000. The tax is imposed on some investment income for that income group."
Guess we shd NOT be suprised by politicians telling lies about taxation ....but the sheer gall to stand there and wag their fingers...saying that MOST Americans got tax cuts is in a league of dispicability all by itself.
The irony ....low income folks will see the biggest jump in taxable income and taxes since most employers pay more of their health costs... so much for their protecting the 'little-guy' line...
There was also a "Gold-Coin" special tax hidden in the Health care bill along with a Tanning-Salon tax ....
Congress EXEMPTED themselves from the provisions of HR 3590 on page three of the 2700 page law ....now that is what I call "LEADERSHIP BY EXAMPLE"