Warning: Hidden Obamacare Taxes Will Cost You More Than You Think

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The bill for Obamacare is on its way, and guess what? It's addressed to you.

You see, all those great benefits included in the Affordable Care Act don't come cheap, which is why the new healthcare law includes a barrage of new "Obamacare taxes."

And don't believe for a second the new Obamacare taxes will hit only the "rich" or those making over $250,000.

Some do, but you'd be surprised at how many of these new taxes also hit the middle class.

Worse still, many of these new measures are disguised as taxes on businesses. The bulk of these "stealth taxes" will be transferred to consumers via higher prices for drugs and health insurance.

"The legislation imposes more than $569 billion in new or increased taxes, the vast majority of which will fall on businesses," writes Michael Tanner in a 2011 Cato Institute report on the impact of the healthcare law. "Many of those taxes, especially those on hospitals, insurers, and medical device manufacturers, will ultimately be passed on through higher health costs."

Even still, few realize just how many new taxes lurk within the law's 2,500-plus pages because most of the talk about the Affordable Care Act focused on the constitutionality of the individual mandate.

Of course, according to Supreme Court Chief Justice John Roberts, even that turned out to be a tax.

Obamacare Taxes You'll Pay Directly

In addition to the hidden Obamacare taxes, which we'll get to shortly, the law reaches directly into your pocket in several ways:

  • Investment Income Surtax: If your gross income is more than $200,000 ($250,000) for joint filers, you'll pay a 3.8% surtax on your "investment income." That includes dividends, interest, rent, capital gains, annuities, and house sales. While middle class Americans normally would not get hit by this, the sale of a home could trigger this tax in a given year.
  • Medicare Payroll Tax Hike: This Obamacare tax also is aimed at the top income group. For them it raises the Medicare payroll tax deduction from 2.9% to 3.8%.
  • Itemized Deduction Limit: Now we're getting to the Obamacare taxes that will affect everyone. Starting in 2013, the itemized deduction limit for medical expenses will rise from 7.5% to 10% of adjusted gross income. That means you'll need to spend more than 10% of your AGI on medical expenses before you can deduct any of it.
  • Flexible Spending Account Cap: Many Americans take advantage of flexible spending accounts (FSAs), which let you set aside pre-tax money each year to pay your medical expenses. There's no limit now, but in 2013 such accounts will be capped at $2,500.
  • Penalty on HSA Withdrawals: The penalty for taking money out of a Healthcare Savings Account for a non-medical reason doubles from 10% to 20%.
  • "Medicine Cabinet" Tax: Starting in 2011, using an HSA, FSA or health reimbursement account (HRA) to pay for over-the-counter medicines is no longer allowed.
  • Tanning Tax: If you use indoor tanning services, you started paying an extra 10% tax on them in 2010.
  • Individual Mandate "Tax": This is the notorious tax/penalty you'll pay for refusing to buy health insurance as of 2014. The amount you pay depends on your income. The penalty is set to rise by fixed amounts through 2016; thereafter it is indexed to inflation.

The Hidden Obamacare Taxes

Because the government knows people don't like to pay taxes, the architects of Obamacare shifted most of the costs to businesses. While companies may "eat" some of the extra cost, most of the money will eventually come out of the pockets of average Americans.

These more stealth Obamacare taxes include:

  • Medical Device Tax: As of 2013, a 2.3% sales surtax will be added to the cost of all medical devices costing more than $100. According to the Cato Institute, this tax covers "everything from CT scanners to surgical scissors….almost everything used by doctors, hospitals or clinics would be taxed." Such costs could add hundreds of dollars to a family's annual insurance premiums.
  • Pharmaceutical Companies Tax: Starting last year, Obamacare specifies that a fixed amount of tax be extracted from the sale of prescription drugs. The amount rises from $2.5 billion in 2011 to $4.2 billion in 2018. Big drug companies must pay a portion of this tax based on their aggregate revenue from their brand-name drugs. You'll feel this tax every time you visit the pharmacy.
  • Insurer Tax: Obamacare taxes health insurers as well, but based on their market share. This tax is similar to the one on prescription drugs, but the revenue targets are much higher: $8 billion in 2011, rising to $14.3 billion by 2018. Insurers will likely recover this tax by charging customers higher premiums.
  • Cadillac Tax: Effective in 2018, the healthcare law places a 40% tax on the dollar amount of a healthcare plan that exceeds set limits. It will mainly affect comprehensive healthcare plans, which typically cost more. Employers are responsible for paying the tax, but most will simply pass it on to workers. This Obamacare tax could creep up on you: The trigger values are indexed to inflation, as opposed to higher-than-inflation increases in medical costs. That means each year more and more health plans will be subject to the tax. Consulting firm Towers Watson concluded in 2010 that 60% of large employers' health plans would be affected by 2018.
  • States Subsidies for Medicaid: Another provision of Obamacare requires states to extend their Medicaid programs to cover all citizens with incomes below 133% of the poverty level. At first the federal government will pay 100% of the cost of this expansion, but by 2017 the states will have to start pitching in. Since some state programs are closer to compliance with the new federal standard than others, the impact of this burden on taxpayers will vary from state to state. But any state facing billions in new Medicaid costs would soon be forced to raise taxes. One caveat: The Supreme Court ruling in June said the federal government could not impose a penalty on states for opting out of this requirement. So some Republican-controlled states may escape this hidden Obamacare tax.

Whether you realize you're paying for it or not, there seems to be no escape from Obamacare taxes. As Americans will soon learn, there's no free lunch.

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Join the conversation. Click here to jump to comments…

  1. steve | August 6, 2012

    David Zeiler, you are nothing more than the radical right wing mouthpiece for the ultra conservative cato screw the little guy institute. I will look for your name by any article before reading here in these financial papers and if I see it will know that it is just garbage imfo. What a 1 sided article. Obviously if your financial imfo is as bad as your political imfo, then you should go back and join your other osterich sisters with their heads in the sand and let the serious people work on our country's major pronlems

    • Russ | August 6, 2012

      Your response shared little but your political leanings. The low effectiveness of your rant is further weakened by the numerous typos in the text. If you have something important to say, good enough, but back it up with facts, not feelings. Most of the readers here are highly intelligent and will concede a point if a convincing argument is made. Sorry, none were present in your response.

    • Roger | March 2, 2013

      I have a PDF of the Affordable Health Care act. I looked all of these things up. They are all in there. You can download a copy and check for yourself if you are interested in the truth rather than just interested in arguing with nothing to back you up.
      Here is the URL where you can find it. As you can see it is a government website. No bias. Just the facts. You will find everything in this article is true. I challenge you to seek the truth rather than just argue your opinion.
      http://www.healthcare.gov/law/full/

  2. Rachel | August 6, 2012

    Steve:
    What part of the truth you don't understand? Your blind loyalty to a failed president makes YOU the ostrich! When/if you will open your eyes, you will be hit the same blow as the rest of us, and it will be too late.
    Your man is set to make all of us poor beggars! This has been the case throughout history! Look what has happened to every socialist country…. Societies that hate the rich end up becoming all poor… "Equal" or "fair share" of poverty!
    The "middle class" that he purports to serve, has already been wiped out. We are jobless, and now homeless! Millions have become parasites on the society, begging for government handouts! For how long will you defend this catastrophe?

  3. Ryan | August 6, 2012

    Steve,
    What facts in the article do you dispute? What other side or 'imfo' do you have to present since you claim to care about the 'little guy'?

    Or is your post just an emotional response to your liberal beliefs being challenged?

    Also, try "ostrich" instead of "osterich'. :)

  4. frank mc | August 6, 2012

    Steve: Refute it or don't call people names.

  5. NumbersDontLie | August 6, 2012

    Hmmmm, Steve. Am I to conclude that you fall into the "free healthcare" group? Nothing is free. Somebody is paying. Who might that somebody be? Hmmmm….

    If you cannot figure out who the shill is at the table, it's you! The costs for more healthcare will fall to the broadest and deepest base. That's you and me, Buddy! You might call it a tax on "business," but who is "business?" It's me and you! Well, it's me anyhow….you might be one of those folks who pay no federal income taxes. All costs (taxes included) are priced into the price of a good or service. More healthcare = more costs. So, ultimately, you are paying whether you admit it or not.

    Free advice: take off your political blinders, you will make better investment decisions.

  6. Steve | August 6, 2012

    The first "Steve" is giving this "Steve" a bad name.

  7. JB | August 6, 2012

    Steve: your attack against the write failed to bring forth any credible argument. I have found out that when someone cannot win an argument with facts they often resort to name calling. Debate with facts. So far the score is 1 to 0..and you are the 0.
    JB

  8. Charles | August 6, 2012

    Hey folks, this back and forth on "Obama Care" is going to go on until (1), the cows come home, or (2), we actually have time to experience for ourselves how much pain (or lack thereof) we will actually experience. I say, let's give this some time to see whether it works and how well, especially since health care costs were already rising exponentially before this legislation, and since, to my knowledge, no one had apparently made any significant attempt to address the problem during the previous 8 years before Obama took office.

    Charles

  9. Mike McAuliffe, MD | August 7, 2012

    Socialism is a majority of parasites electing whores who will hand them other peoples money. "I exist therefore you owe me" is the excuse for Social Security, Welfare, Food Stamps, Medicare, Medicaid, and now Obamacare. Two thirds of our budget is handouts. Last year I paid 27% of my income to the Federal Government while half of the people who work in this country paid nothing. The parasites paid nothing. My total taxes were 42%. Now I have to pay for every fat, lazy, cigarette smoking, beer guzzling fool who won't take care of their health.

  10. Bob | August 14, 2012

    Holgic the maker medical devices are moving all production from Indiana to Costa Rica. Thanks for the unemployment. It is already starting.

  11. cooty | August 29, 2012

    Obama doesn't care about people getting healthcare, they were never denied it to begin with. he only cared about garnering votes. The insurance companies will make billions as they always have.

    • Roger | March 2, 2013

      This legislation will bankrupt the insurance companies. They now have to cover people with preexisting conditions. That means that people can pay the tax for not buying insurance until they get sick, then they can buy the insurance because they can't be turned down. This means the insurance companies will be having to pay expensive medical bills for people who never paid in. Even as rich as they are they cannot sustain that for long. From there on out it will be the government providing all health insurance. People like Obama will be deciding what gets covered and what doesn't.

      • Rich81420 | March 24, 2013

        Everyone pays now!!! That's the point!!! If everyone pays doesn't that
        Fix the problem of everyone getting free health care. Seems like commen sence.

  12. BigB | October 28, 2013

    Our money goes more and more to this countries health issues. Republicans had years to do something about the money first insurance, and pharmaceutical industries and did nothing. At the least the Pres has done something. Do I like it, no. Did I like the original idea before republicans and their lobby buddies got involved, much more so yes. This article is scare tactics. You see all these states that want so secede. Let them. Next natural disaster good luck. Morons.

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