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The Costs of Obamacare

The Costs of Obamacare

Following the Supreme Court ruling upholding The Affordable Care Act, the financial fallout for the American people must be re-highlighted.  We will have political analysis in the coming days, but for now here are the facts regarding the tax implications of this law

Comprehensive List of Tax Hikes in Obamacare

 

Individual Mandate Excise Tax(Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following

1 Adult 2 Adults 3+ Adults
2014 1% AGI/$95 1% AGI/$190 1% AGI/$285
2015 2% AGI/$325 2% AGI/$650 2% AGI/$975
2016 + 2.5% AGI/$695 2.5% AGI/$1390 2.5% AGI/$2085

Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS)

Employer Mandate Tax(Jan 2014):  If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees.  This provision applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

Combined score of individual and employer mandate tax penalty: $65 billion/10 years

Surtax on Investment Income ($123 billion/Jan. 2013):  This increase involves the creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single).  This would result in the following top tax rates on investment income

Capital Gains Dividends Other*
2010-2012 15% 15% 35%
2013+ (current law) 23.8% 43.4% 43.4%
2013+ (Obama budget) 23.8% 23.8% 43.4%
*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations.  It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income.  It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans.  The 3.8% surtax does not apply to non-resident aliens.

Excise Tax on Comprehensive Health Insurance Plans($32 bil/Jan 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). For early retirees and high-risk professions exists a higher threshold ($11,500 single/$29,450 family).  CPI +1 percentage point indexed.

Hike in Medicare Payroll Tax($86.8 bil/Jan 2013): Current law and changes:

First $200,000 ($250,000 Married) Employer/Employee All Remaining Wages Employer/Employee
Current Law 1.45%/1.45% 2.9% self-employed 1.45%/1.45% 2.9% self-employed
Obamacare Tax Hike 1.45%/1.45% 2.9% self-employed 1.45%/2.35% 3.8% self-employed

Medicine Cabinet Tax($5 bil/Jan 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

HSA Withdrawal Tax Hike($1.4 bil/Jan 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Flexible Spending Account Cap – aka“Special Needs Kids Tax”($13 bil/Jan 2013): Imposes cap of $2500 (Indexed to inflation after 2013) on FSAs (now unlimited). . There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.

Tax on Medical Device Manufacturers($20 bil/Jan 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax.  Exemptions include items retailing for less than $100.

Raise “Haircut” for Medical Itemized Deduction from 7.5% to 10% of AGI($15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI).  The new provision imposes a threshold of 10 percent of AGI; it is waived for 65+ taxpayers in 2013-2016 only.

Tax on Indoor Tanning Services($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons

Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D($4.5 bil/Jan 2013)

Blue Cross/Blue Shield Tax Hike($0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services

Excise Tax on Charitable Hospitals(Min$/immediate): $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS

Tax on Innovator Drug Companies($22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Health Insurers($60.1 bil/Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. The stipulation phases in gradually until 2018, and is fully-imposed on firms with $50 million in profits.

$500,000 Annual Executive Compensation Limit for Health Insurance Executives($0.6 bil/Jan 2013)

Employer Reporting of Insurance on W-2(Min$/Jan 2011): Preamble to taxing health benefits on individual tax returns.

Corporate 1099-MISC Information Reporting($17.1 bil/Jan 2012): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers

“Black liquor” tax hike(Tax hike of $23.6 billion).  This is a tax increase on a type of bio-fuel.

Codification of the “economic substance doctrine”(Tax hike of $4.5 billion).  This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed.


 

3 Links To Make You Think (Week of 6/10 – 6/17)

3 Links To Make You Think (Week of 6/10 – 6/17)

Preparing for the Supreme Court Fallout

With the Supreme Court ruling on the Affordable Health Care Act expected within the next two weeks, both sides of the isle are busy making contingency plans.  Two things of specific note here are:

  1. This decision will directly affect the next session of the Iowa Legislature.  As of this moment the General Assembly has delayed setting up the insurance exchanges that are required in the health care law.  If the law is upheld there will be mounting pressure on Iowa Republicans to begin this process quickly, and they will be forced to decide to either design the exchanges in order to have a say in how they are built, or take no action and risk having Iowa being governed by the exchange that the Federal government constructs.
  2. The decision’s details will have a great impact on our health care system as it pertains to the expansion of Medicaid.  The working theory is that, as long as the whole law is not thrown out, the expansion of Medicaid that would put at least 16 million new people on the Medicaid roles would remain in effect.  In this scenario action by Congress would be required to reverse this new reality.  This highlights the importance of Republicans winning both the Senate and the Oval Office in November, regardless of the Supreme Court ruling.

     New York Times: With Justices Set to Rule on Health Law, Two Parties Strategize

 

 

An Early Analysis of Iowa in November

Take a look at the infrastructure the Obama and Romney campaigns are building in Iowa, and some of the factors at play in a crucial swing state.

Among some of the interesting things dealt with here are how having Steve King and the judicial retention elections on the November ballot will affect the Presidential race.

Slate: The Psychological State of Iowa 

 

A Disturbing Sign of the Times

One wonders how long our Country can prosper while producing citizens capable of the following behavior–and having a social safety net that makes it possible.

Unbelievable and Despicable:  News Channel 3 (Memphis): Memphis Man Owes Child Support to 15 Women

Even More Unbelievable and Despicable:  News Channel 3 (Memphis):  Tenn. Man “Fathers” 30 Kids But Can’t Support Any 

The Tea Party Comes To Ankeny: An Interview With Stacey Rogers(Part 2 of 2)

The Tea Party Comes To Ankeny: An Interview With Stacey Rogers(Part 2 of 2)

This is second installment of a 2-part interview.  To read part one click here.

Health Insurance Exchange

The debate raging on a national level regarding Obama Care has produced 50 separate state level clashes on this unpopular legislation’s viability, practicality, and future. Currently 27 states are suing the Federal government on the grounds the law is unconstitutional, while last week a referendum in Ohio resulted in 66% of voters expressing their wishes to be excluded.

In Iowa the form this debate has taken largely centers on the state level requirement to set up a health insurance exchange to work in accordance with Obama Care. Democrats tried last session to construct this exchange but the measure failed and set the scene for an all-out slug fest in 2012.

The roll-call from this Democratic attempt, in which 12 Senate Republicans voted in favor of the exchange, was a major factor Ms. Rogers cites in spurring her decision to run for this House seat, “It was something that some of these Republicans campaigned against and then went in and voted for, and that was a real thorn in my side.”

Besides viewing it as flatly unconstitutional, she would have voted no on the exchange for two main reasons. The first is due to differing interpretations on what failure to set up the exchanges would result in. Though the Republicans who voted in favor did so on the grounds that failing to do so would trigger authorization of the Federal government to do it for us, Ms. Rogers believes that not having the exchanges would result in Iowa receiving a waiver from the Executive branch:

“We have to fight the full implementation of Obama Care every way we can. The Supreme Court could announce as early as tomorrow whether they will hear the Obama Care challenges. Why would we volunteer to set up a new state bureaucracy before the Supreme Court has ruled? We shouldn’t. Why would we set up a state exchange and volunteer to pay for that unconstitutional debacle? We shouldn’t. Obama has stated publicly that he feels he will be forced to grant waivers to states that haven’t passed the exchanges because there is no way to administer Obama Care without them. That means that by refusing to implement the health insurance exchanges, Iowans effectively have the ability to opt out of a major portion of Obama Care.”

The second reason is funding, and more specifically the long and destructive history the states and the federal government have in jointly paying for programs, “State governments, including Iowa, so often get duped on the promise of free federal money. The issue with these exchanges is that they come in partially funded, and sure there is that promise of federal money there but the other part has to come from the state—and that means from the taxpayer. It’s not just a tax hike up front with the federal government, that we can’t control, but it is going to be a tax hike up front for the portion that our state has to pay.”

Issues Going Forward

Education Reform

Having spoken to many Republicans, and interviewing multiple candidates and elected officials, you don’t need to be a political expert to see that Governor Branstad’s outline for reforming Iowa’s educational system is in real trouble. Although constructed as a proposal big enough to build a legacy on, when you get equal blow-back from Conservatives and the teachers’ union the chances of breaking ground, let alone building anything, are slim.

Having worked her way through college teaching private pre-school and kindergarten this is an area that Ms. Rogers has a special interest in:

 “I don’t think its rocket science to figure out why people aren’t rushing to support a plan that takes the best teachers out of the classroom at a time when we are trying to find ways to better reach children. The major problem I have with it is that the good teachers are going to be teaching 50% less, and how on earth are you going to help children when you are taking their teachers away? What the plan does is it increases bureaucracy and decreases the number of good teachers we have in the classroom.”

Beyond disliking it for those reasons, she fears, and was told by a Department of Education employee in the Branstad administration, that one of the effects of the reform would be to divert good teachers from Ankeny to Des Moines. If true, this would not only threaten losing quality teachers in the classroom but possibly losing them to a school district outside of HD 37.

In place of the current system, and the Governor’s proposed reform, the changes she would push to implement would have a different focus:

 “Educational choice is one of my number one issues. I love open enrollment because it does introduce an element of choice into the public school system. I would also go further and allow more freedom for home-schoolers, more freedom for charter schools, and more freedom for private schools. If vouchers are a part of that, even better, because they are a tool that introduces a market element into the system that lowers the cost and increases the amount of learning that is going on.”

Illegal Immigration

Though failure to take control of the Iowa Senate last week severely reduced its likelihood, a widespread willingness of Iowa Republicans to address illegal immigration is beginning to form. Ms. Rogers indicated that she would favor potentially passing legislation to hamper Iowa’s influx of illegal aliens and when asked specifically about Arizona’s recent attempt had this to say, “I don’t see anything wrong with what Arizona has done, because when they joined the Union they basically said that we are going to give you (the federal government) the responsibility to protect us and that this is no longer just our state’s border but it’s now a Federal border. All the Arizona law does is re-enforce the fact that it is still a state border. If the Federal government is going to back out of their responsibility to protect it as our nation’s border I think that Arizona has every right to protect it as a state border.”

Varnum

Although the list of Republican legislative priorities is long and getting longer, it’s safe to say that passing a Constitutional Amendment barring gay marriage in Iowa has a home in the top three. In one of the most cowardly and inexcusable political maneuvers in our state’s history, Mike Gronstal (D-Council Bluffs) has managed to save rural Democrats by robbing all Iowans of the opportunity to have their voices heard.

As one would suspect, being an attorney and a Conservative, Ms. Rogers has a strong opinion on the Varnum decision. From a legal perspective the two problems she has with the Supreme Court’s ruling was that they considered some issues that were not part of the legal briefs filed and “they applied a heightened level of scrutiny to a new class, and created this class based on a behavior and not a real and immutable characteristic.” Noting that she was not surprised by the unanimous nature of the decision she added, “I think it was a political decision from beginning to end and that they had the result in mind before they ever read the briefs.”

Analysis of the Race

Three factors that are likely to come into play for her candidacy are how the district views the Tea Party, how she navigates through a crowded field, and how voters react to her relative youth. Far from shying away from any of them, she actually views all three as positives—and makes some very convincing arguments in the process.

For any Tea Party politician, whether running or governing, an issue always in play is the political peril inherent in cutting government and removing services that people have become accustomed to. While its effect will be softened by the fact that this is a Republican primary, and that applying Tea party principals at the state level as opposed to the federal level is a far different animal, it still will remain an issue. An example of this is that next session will gavel in with the Governor seeking legislative approval to cut Medicaid. This is a reality that Ms. Rogers recognizes and will seek to deal with in the following way, “You have to educate people and make them realize that some of these things are not theirs and that government can’t give them anything that they don’t first take away from somebody else. And if you wouldn’t reach into your neighbors pocket and take it then you shouldn’t be living your life in a way that you are willing to take it through the government.”

The fact that there will be many other contenders vying for the seat does not intimidate her in the slightest and is something she sees as a net positive for the district, “I’m not afraid to run in a primary against five or six other people, and really I’m excited for the district because they will have an opportunity to vote for someone who is as Conservative as this district is and that shares their principles. Even being a lot younger than the other candidates, I still probably have a longer track record of political activism and fighting for these principles.”

As she mentioned, at 25 she will be both the youngest person in this race and one of the younger candidates in recent memory to run for the Iowa House. While I could be wrong, my sense is that this won’t play a big role in the race. I say this, first, because it would have to be brought up by another candidate and it’s unlikely that this contest will devolve into that type of an unseemly affair. Second, as she notes, she has the background and the experience to offset and eliminate it as a viable factor, “I think that youth and inexperience can go together, but I’ve been in this long enough that inexperience isn’t a word that applies to me. The two things that are really important are your motivation and your principals, and I have both in spades.”

After spending a few hours with her, this is a claim that is hard to doubt. She has a keen sense of tactical politics and one could easily see her going toe-to-toe with both the fellow Republicans in this primary and opposing Democrats should she be selected.

The results of the recent Ankeny City Council election, in which the most Conservative candidates running all won, indicates that voters will certainly give her a chance to win them over. She will likely make the most of it—and in doing so make this race very, very interesting.

Photo courtesy of Dave Davidson, whose work can be found at prezography.com

Republicans Lead In Polls, ObamaCare Progresses, And Other Dangerous Things

Republicans Lead In Polls, ObamaCare Progresses, And Other Dangerous Things

Running with scissors, bungy-jumping, lion-training don’t hold a candle to these two items…

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Republicans appear to be doing well, very well, scary well. So what’s to be done about it? Republicans need to work harder, get more engaged, get more yard signs up, knock on more doors!

Why, you may ask, would I think that?

Because early poll successes:

  1. Are deceiving. In Politics, scientific polling lacks integrity because there are so many factors and inconsistencies, including the fact that they reflect a point in time, which is not election day
  2. Are open to interpretation. The complexities and meaning behind poll answers can be interpreted multiple ways… sometimes the answers mean something different than what we think.
  3. Can lead to complacency. Accepting that your candidate is going to win hands down can lead to voter apathy and before you know it, everyone that said they were going to vote decides to stay home election day or just forgets to vote.

It’s great to feel good about these polls… I’m very enthused about our prospects here in Iowa. But polling can cause us to take our eye off the ball… we need to stay focused on the message, on getting it delivered to the people that need to hear it most, and make sure we get everyone out to vote come election day.

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Did you think that maybe ObamaCare wouldn’t impact you directly for a while? Think again.

New rules from the IRS issued earlier this month, based on the Affordable Care Act now require that those who pay for over-the-counter (OTC) medications (such as Claritan, Robitussin, etc.) FSAs or HRAs, beginning January 1, 2011, to get a prescription for these medications to get the reimbursements. Flexible Spending Account (FSAs) Health Reimbursement Accounts (HRAs) setup for medical expenses not normally covered by insurance, using untaxed dollars. On top of this, patients will have to submit the prescription information along with the receipt to their account program adminstration instead of using the more convenient (and appropriate) debit cards most of these accounts now provide.

It may seem like a small thing, but doctors don’t typically hand out prescriptions of any kind without a visit, which will cost the patient and/or their insurance provider. Add to that the new paperwork burden, and you’ve impacted many Americans enough that they will (rightfully so) choose to abandon the use of the untaxed (or pretaxed) dollars and instead reduce their FSA/HRA use (or eliminate it) and just pay for these medications with taxed dollars.

Yes this is for real, and yes I think it’s stupid. This is the result of just a small piece of the gargantuan legislation passed by a Congress bent on making us miserable. I’m convinced of that now. Give them 2 more years and they will find a way to ensure that the Government will simply pay for these medications (with an appropriate prescription) instead of just going back to a system that worked fine, therefore making us even more dependent on the government.

And the best part is, you can still use these accounts like you always did for any other medical supplies that don’t require a prescription. You will have to get a prescription to get a, frankly small, tax advantage.

Government savings, none… I can pretty much guarantee that the new taxes recovered will barely pay for the paper used to print this stupid bill. More likely we will see substantive costs go up, either in government or for insurance companies, to support this idiotic requirement.

Sometimes it just seems dangerous to get up in the morning.


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