Mitt Romney might not be able to decide if the mandate is a tax or penalty, but for the most part Republicans are resorting to false claims about taxes in the Affordable Care Act to continue to scare and mislead voters. The tax penalty in the mandate only affects two percent of the population, and overall the ACA is certainly not the largest tax increase in history as conservatives claim. It is far less than the Reagan tax increase of 1982, and few will actually wind up paying more in taxes.
Overall, Obama’s health-care law will increase federal revenues as a portion of gross domestic product. The nonpartisan Congressional Budget Office estimates that the law will reduce federal deficits by a relatively small amount—$210 billion, by 2021.
Here’s a nice chart from Ezra Klein which breaks down how the tax increases in Obamacare stack up against tax hikes passed by previous administrations. You can see that Obama’s tax increase will bring in less revenue as a portion of GDP than the tax increases put in place by presidents George H.W. Bush, Bill Clinton, or Ronald Reagan.
Lots of different tax hikes are tucked into the Affordable Care Act. If you’re a tanning salon, a medical device maker, a pharmaceutical company, a small business owner who doesn’t want to provide health insurance coverage to your employees, or an individual who refuses coverage, you’re going to have to cough up more money to the IRS in the form of penalties, fees, and yes, taxes. Individuals earning $200,000 or above and couples earning at least $250,000 will pay a 0.9% Medicare surtax and a 3.8% surtax on investment income. Some of these taxes—such as the 2.3 percent excise tax on the sale of medical devices—could be passed along to consumers.
If you’re just about anyone else, the health-care law is likely to be a net plus. People who earn up to 133 percent of the poverty line will become eligible for Medicaid. Families earning up to 400 percent of the poverty line—about $100,000—also get lots of subsidies for insurance on state-run exchanges whose goal is to bring down the cost of care.
Republicans such as House Speaker John Boehner (R.-Ohio) have been particularly keen on bringing up small business, arguing that Obamacare amounts to a tax hike for them. If you’re a business with up to 25 employees, you’re also going to get a big tax credit to help with your employees’ health-care bill. After 2014, that credit will cover up to 50 percent of employer contributions.
Taken together, claims that Obamacare amounts to the largest tax hike in the entire history of humanity—or even the last 20 years—don’t add up.
The Affordable Care Act is especially beneficial in promoting small business. A small percentage of small business owners make enough to be subject to the higher taxes while many will receive tax breaks to provide coverage for employees. This will help small businesses compete for employees, being able to offer coverage comparable to larger companies, along with helping business owners. Having health insurance become portable will also allow more people to leave larger companies to either work for small businesses or start businesses of their own.