MORE ON YOUR NEW SOCIALIZED MEDICINE PROGRAM…….

Just arrived for my reading entertainment, RIA’s Complete Analysis of the Tax and Benefits Provisions of the 2010 Health Care Act as Amended by the 2010 Health Care Reconciliation Act. This compelling novel of 960 arrived on April 15, how appropriate. Actually this is the abbreviated version. The actual document exceeds 2400 pages.

Much of the juicy tidbits in this blog were derived from an article by Roger Russell which appeared in Accounting Today. Accounting Today is a non-political publication geared specifically for CPA’s and other tax professionals.

The first thing that strikes you is the “phase-in” periods. While a few provisions hit relatively quickly, most of the major items are “phased-in” or do not take effect until 2014. On thing is for sure, everyone will be affected if the current bill is allowed to stand in its current format. This is an important point because at least 13 states have already filed suits challenging the constitutionality of requiring individual to carry coverage. Insurance has traditionally been a state regulated item.

Here are a few interesting areas of the new legislation

• Beginning in 2014, taxpayers who are required to carry qualifying health care coverage will face a penalty if they fail to comply. The penalty increases from $95 per qualified non-covered individual in 2014 to $695 in 2016.

• Additional federal filings will be required to track compliance. The compliance mechanism has not been defined. In all likelihood, it will be part of your federal tax return filings. This, of course, will add to the cost of tax preparation.

• You will have reduced “itemized deductions” for medical expense beginning in 2013. Currently, you are able to deduct any medical expenses in excess of 7.5% of your gross adjust income on your tax return. In 2013, this number increases to 10.0%. In effect the government is forcing you to pay for the coverage by decreasing your deductions.

• Beginning in 2013, if your adjusted income exceeds $250,000 for a joint filer, then you will be subject to surcharge on your investments of 3.8%. This group of taxpayers will also pay an increased Medicare tax of .9%.

• If you current coverage includes a flexible spending account or a HAS, your covered products will be reduced.

This legislation is worrisome for two reasons. First, in Texas, everyone can get healthcare. Healthcare can not be denied. Second, in the UK, someone that makes approximately $57,000 (US) is in the 20% tax bracket while that same income would taxed at about 10% in the US.

Congress is on a spending roll now. Wait until you see the cost of the proposed “financial institution reform program”. Let’s just hope that we can avoid the inflation of the late 70’s and 80’s.