Posts Tagged ‘HealthCareLegislation’

DC Circuit Court of Appeals Deals ObamaCare Major Blow: Federal Exchange Tax Subsidies Axed

Tuesday, July 22nd, 2014

The Court of Appeals for the District of Columbia dealt the Obama Administration a major blow today when the court ruled 2-1 that only state health exchanges plans are eligible for tax subsidies. The IRS had promulgated a rule that health exchanges run by the federal government were eligible for the subsidies.

Here is the conclusion of the primary opinion:

We reach this conclusion, frankly, with reluctance. At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly. But, high as those stakes are, the principle of legislative supremacy that guides us is higher still. Within constitutional limits, Congress is supreme in matters of policy, and the consequence of that supremacy is that our duty when interpreting a statute is to ascertain the meaning of the words of the statute duly enacted through the formal legislative process. This limited role serves democratic interests by ensuring that policy is made by elected, politically accountable representatives, not by appointed, life-tenured judges.

The basic issue is that the Affordable Care Act (aka ObamaCare) allows a tax credit for exchanges established by a state. Are federal exchanges established by a state? The court ruled they weren’t.


UPDATE: The Fourth Circuit ruled in a similar case that the IRS rule was valid. This is almost certainly heading to the US Supreme Court with a decision probably next June.

While this decision will be appealed (to either an en banc panel of the DC Circuit Court of Appeals or the US Supreme Court), it appears sound. The law is what’s written, and neither the Administration nor the IRS can avoid such bright lines.

This is likely to cause more headaches for both taxpayers and tax professionals next year. It is almost certain this case will be appealed, and the appeals will likely not be resolved until next Spring at the earliest. Will tax credits be allowed for an Exchange in, say, Kansas, where the Exchange is run by the federal government? I have no idea. Both California and Nevada have exchanges run by the state, so subsidies in these states appear legal. However, Nevada will be moving to a federal exchange for 2015 so this could have a major impact then (2015 returns prepared in 2016).

The Tanning Tax: Alan Greenspan Gets It Right (Again)

Sunday, April 27th, 2014

Alan Greenspan, the former chairman of the Federal Reserve, has the wonderful quote:

Whatever you tax, you get less of.

It’s something our Congresscritters might take to heart…but I doubt it. Today, let’s look at the tanning tax.

This tax is one of the many ways that Congress had to pay for ObamaCare (aka the Affordable Care Act). Like almost everything else with ObamaCare, it’s not working as expected. The tax was predicted to generate $200 million annually. Instead, it’s took in $91 million in 2012 (the last year there are statistics for).

In this Politico article, Barton Bonn, Head of the American Suntanning Association, notes,

It’s effectively a price increase for our customers…Anybody knows that if you increase the price on a product or service, some people are not going to show up after the price increase, and that’s what occurred.

I’m not sure Mr. Barton is correct; I suspect some in Congress do not understand the law of supply and demand. In any case, it’s just another of the many tax flaws with ObamaCare.

Pass the Popcorn, Please, II

Wednesday, November 20th, 2013

As ObamaCare and its troubles dominate the news, lurking in the background is the IRS scandal. The Chief Counsel of the American Center for Law and Justice (ACLJ) wrote an op-ed on FoxNews that noted the lawsuit filed by the ACLJ isn’t going to be dropped. Jay Sekulow, the Chief Counsel, noted five reasons why the IRS scandal won’t go away. I’m going to focus just on his fifth point:

Fifth, the IRS targeting scandal is directly relevant to the mother of all policy disasters, ObamaCare. With the IRS set to function as ObamaCare’s enforcement arm, every story of corruption, incompetence, and malice casts doubt on the IRS’s ability faithfully and lawfully discharge its responsibilities within our health care system. [emphasis in original]

Eliana Johnson of the National Review had two tweets last night that highlight this issue. Here’s the first:

IRS source tells me that “last thing in the world anybody wants right now is IRS connected to that pile of crap at healthcare.gov”

Here’s the second:

IRS source says agency still working to link IRS sys to HHS and CMS. “Our guys can’t move until HHS and CMS get their crap together.”

President Obama promised that the website would be functioning by month-end. It’s apparent to almost everyone that is not going to happen. Meanwhile, individuals need to enroll by December 15th in order to have coverage by January 1st; the back-end payment system has apparently not yet been built! (The key point in the testimony begins at about 3:20):

If health care weren’t such a major issue this would be laughable. Unfortunately, it is a major issue. I have not talked with many individuals at the IRS regarding health care and the IRS’s role in ObamaCare. I notice that in today’s IRSAC report that IRSAC identified as its very first issue the IRS’s funding level. IRSAC rightly noted that, “Reducing the IRS’s budget constrains IRS effectiveness and efficiency, which results in taxpayers’ loss of respect for the agency and our voluntary tax system.”

I identified this issue earlier this month. I’ll repeat what I said then:

For the IRS to function effectively, it needs both a reasonable budget and to be apolitical. It’s vital that the Department of Justice go after individuals who turn the IRS into a political organization from an apolitical one. Yet the current Administration apparently doesn’t see the urgency in this issue. That’s a huge mistake, and one that will definitely come back to haunt them and all Americans. We need a well functioning IRS…and given what the Administration is doing (and not doing), it’s very likely the budget for the IRS will continue to shrink.

The Obama Administration needs to give more than lip service to the investigations of the IRS scandal. Does anyone really believe that the Department of Justice is doing anything in regards to this? The budget of the IRS will not be increased until the scandal is resolved. As Mr. Sekulow noted, the IRS scandal and the troubles of ObamaCare are directly linked.

The individuals I have dealt with at the IRS are normal hard-working people doing jobs. The IRS deserves better than what it’s getting from the Obama Administration. IRSAC’s recommendation is laudable, but Congress’s cutting the IRS’s budget is also reasonable until the scandal is resolved. The onus here lies on the current Administration. I suspect IRSAC will be repeating their recommendation in next year’s report.

Coming Attractions: When the IRS Writes New Law When They’re Not Allowed To

Tuesday, October 22nd, 2013

The IRS is part of the Executive Branch of government. The Executive Branch can’t write law–they can issue regulations based on laws passed by the legislative branch (Congress) and then only when Congress authorizes it. There’s an issue percolating in the courts which is likely going to cause a huge headache throughout the country: tax credits for federal health care exchanges.

Today, a federal court judge in Washington denied the Administration’s request to stop a lawsuit challenging the IRS’s interpretation of the ability to give tax credit subsidies on federal health care exchanges. US District Judge Paul Friedman denied a preliminary injunction but did order the case tried on an expedited basis; he said that he expects to issue a ruling by February. Earlier this year a judge in Oklahoma also denied an Administration dismissal request in a similar case. There are two other cases filed on this matter.

Jonathan Adler of the Volokh Conspiracy notes the issue succinctly:

The IRS rule contravenes the plain text of the PPACA, as the statute only authorizes tax credits (and subsidies) for the purchase of insurance in an exchange “established by a state” under Section 1311 of the law…Supporters of the IRS rule claim that Congress could not have intended that Americans in dozens of states would be unable to obtain tax credits to help them purchase insurance. They’re right. Congress intended for every state to create its own exchange, as PPACA supporters said time and again, but states refused. Now that their assumption has been proven wrong, this does not provide an excuse to rewrite the plain statutory text.

This matters because in tax when a statute says “x,” it’s “x.” A good example of this is some of the ludicrous ways the Alternative Minimum Tax impacts individuals. Judges have stated in their rulings that these make no sense but because it’s written into the statute, there’s no choice on this matter: Until Congress changes the law, they’re stuck. I expect the same thing to happen here. Of course, Congress could change the law but the chance of that happening is equivalent to the chance of snow in Las Vegas in July.

Assuming that this suit is successful, it will strike at the heart of the mandates in the law. Assuming this ruling comes in February, there will be even more of a mess with the law. The ObamaCare rollout has hardly been something one could call “smooth.” Proponents have been hopeful that the light they’re seeing is the end of the tunnel. To me, it looks like an oncoming train.

44 Days

Sunday, October 20th, 2013

44 days isn’t much time. It’s about a month and a half. Yet in the bizarre world of the Affordable Care Act (aka ObamaCare), it’s a big deal. Over the coming weeks I’m going to be looking at various provisions in light of the current law and the current difficulties–perhaps impossiblities–of individuals to actually sign up and obtain a policy. Consumer Reports is suggesting that perhaps a solution to signing up is to wait a while–at least a month; hopefully by then the software glitches will be gone.

Anyway, back to the point of this post, 44 days. Nancy Pelosi famously said, “But we have to pass the bill [ObamaCare] so that you can find out what is in it.” Well, there are some interesting deadlines in ObamaCare:

December 15th: Date you need to be enrolled by for coverage to take effect on January 1, 2014 [1];
February 15, 2014: Date you must have coverage by in order to be exempt from the Individual Mandate Tax; and
March 31, 2014: Final date to enroll for calendar year 2014.

The Obama Administration was unaware that someone who enrolls on February 16, 2014 will be subject to the individual mandate penalty tax until it was pointed out to them. The penalty for 2014 is $95 or 1% of Adjusted Gross Income, whichever is greater. I suspect for much of my client base the 1% of AGI will be greater, perhaps far greater than $95. Consider an amateur gambler who has $100,000 of gambling wins and $100,000 of gambling losses and who makes $100,000 of salary. He’s looking at a $2,000 penalty. Still, given the cost of health insurance under ObamaCare that might be a more financially prudent choice.

But do be aware that the true deadline is February 15th, not March 31st. It’s yet another quirk in the law.


[1] It is unclear if dates that fall on weekends–December 15th falls on a Sunday–cause the deadline to be extended a day. As best as I can tell, the answer to that is no…but I did not read the 3,000 page legislation.

It’s Only $67 Million that We Can’t Find…

Sunday, September 29th, 2013

Have you ever lost something? Of course you have–we all have had experiences where we can’t find that paper we need. Of course, just after we get the second copy of the paper we find the original (Murphy’s Law at work). I’m sure most of us have misplaced some money or your wallet. However, I doubt that most of us have misplaced $67 million.

Earlier this week TIGTA, the Treasury Inspector General for Tax Administration, issued an audit on the Affordable Care Act. The report, dated September 18th, was sent out on the 25th and is titled, “Affordable Care Act: Tracking of Health Insurance Reform Implementation Fund Costs Could be Improved.”

I put the report aside until this morning, and was stunned when I read this paragraph:

Some Affordable Care Act Implementation Costs Were Inaccurate or Not Tracked and Supporting Documentation Was Not Always Maintained

Our review found that the tracking of costs related to the ACA implementation could be improved. Specifically, we found that costs charged to HIRIF funding relating to direct labor were sometimes inaccurate and not always substantiated by reliable supporting documentation. We also found that the IRS did not track all costs associated with implementation of the ACA, including costs not applied to the HIRIF. Specifically, the IRS did not account for or attempt to quantify approximately $67 million of indirect ACA costs incurred for FYs 2010 through 2012. Indirect costs include, for example, providing employees with workspace and information technology support.

There’s more, too. “The IRS did not track all costs associated with the implementation of the ACA.” Those indirect costs were not tracked. The IRS, which is not flush with funds, had the ability to get funding for indirect ACA costs by using funds from a $1 billion Health Insurance Reform Implementation Fund (HIRIF). However, IRS management did not believe that indirect costs should be recovered from HIRIF…so the IRS (and we, the taxpayers) are out those funds.

On the bright side, the IRS agreed with TIGTA’s recommendations in the report and will be tracking these costs in the future. Unfortunately, the HIRIF is likely gone for future years.

This is yet another black eye for the IRS.

The Affordable Care Act and Gamblers: A Bad Bet

Saturday, September 21st, 2013

The Affordable Care Act (aka ObamaCare) is a complex law. For those who gamble, both professionally and as amateurs, there will be a multitude of impacts. The law includes twenty new taxes. Let’s take a look at how these will impact gamblers.

First, the good news (about the only good news in this post): Gambling income is not impacted by the new Unearned Income Medicare Contribution Tax (UIMCT).

That’s about it for good news. The UIMCT will impact gamblers–especially amateur gamblers–indirectly. Suppose you’re an amateur gambler and have $300,000 of winning sessions and $300,000 of losing sessions. While the gambling income itself will not be subject to the UIMCT, the winning sessions will cause such an individual to pay this tax on any unearned income (besides gambling) that he has (e.g. investment income).

The new law requires the purchase of health insurance or you have to pay a penalty. That penalty in 2013 is $95 or 1% of Modified Adjusted Gross Income (MAGI), whichever is greater. Consider an amateur gambler who makes $40,000 in his day job but has $50,000 of winning sessions and $40,000 of losing sessions. His MAGI might be $80,000; 1% of that is $800.

But it gets worse. There are subsidies (tax credits) available to lower income individuals. But those subsidies are based on MAGI, and the gambler’s MAGI is artificially high; no subsidies would be in his future. (Of course, the current ObamaCare software cannot ‘reliably determine’ enrolles’ eligibility for the subsidies….)

Now let’s consider a successful professional gambler who is making, say, $150,000. He’s young (say 23) and doesn’t have health insurance. Given that the penalty would be $1,500 a year, he should consider obtaining insurance. This could be through his parents’ coverage (individuals under age 26 must be offered coverage through their parents’ plan), or through one of the Exchanges that should be available later this year. Indeed, anyone who is making good money should strongly consider doing this. If someone is making $1.5 million, the decision is easy: the $15,000 penalty would be very significant.

There’s one more category of individuals for which there are almost no answers today: expatriates. Consider a professional gambler who lives abroad in, say, Hungary. He’s a US citizen. He’s not eligible for a US-based plan (he’s not in the US). His Hungarian health insurance plan is fine for him, but does it comply with US law?

For now, this is likely not a problem for some. The Departments of Labor, Health and Human Services, and Treasury realized this and issued “transitional relief” that exempts group health insurance coverage through 2015; it appears that most current plans will suffice. However, it’s not so clear for self-employed expatriates: Do they need coverage? Will coverage an individual has in their country of residence suffice? I don’t know the answer, and I doubt many do today.

If this sounds like a mess, good: It is.


So far, I’ve covered just two of the 20 new taxes in ObamaCare. However, most of the other new taxes are on businesses in the health care industry and won’t directly impact individuals. There is one other issue I do want to cover: the IRS’s ability to collect the individual insurance mandate penalty.

Believe it or not, there is no method that the IRS has to force people to pay the tax directly. The IRS can send you notices, but it appears you can ignore these! However, the IRS can offset tax refunds to pay the penalty. There’s also the obvious question (which doesn’t have an answer): Say you file a tax return and owe $5,095 ($5,000 in tax and $95 for the health insurance penalty). You pay $5,000. Can the IRS apply the money first to the health insurance penalty so you owe $95 in unpaid tax? Or must they apply the payment first to the tax? The courts will likely have to decide that one.

As I’ve written several times, “It’s unpopular, unworkable, and insane.” It remains horribly unpopular with the public. A Democratic Senator believes that the implementation of the new law will be a train wreck (and nothing I’ve seen makes me disagree with him). There’s almost no chance of the law being repealed while President Obama is in office, so we’ll have to deal with the train wreck for at least three more years.

Does the New Unearned Income Medicare Contribution Tax Impact Amateur Gamblers?

Sunday, September 23rd, 2012

Over two years ago the Patient Protection Act–aka Obamacare–passed Congress. At the time, no one knew what was in the law. Famously, then Speaker of the House Nancy Pelosi (D-CA) said that, “We have to pass the law to know what’s in the law.” Really?

Well, back in March 2010 I thought that the law would impact amateur gamblers. I based this on the title of the provision and how Congress wrote and the IRS interpreted the Kiddie Tax. The Kiddie Tax is also a tax on unearned income. The exact title of the law is the Unearned Income Medicare Contribution Tax. Since the Kiddie Tax is theoretically a tax on investment income but it applies to amateur gamblers, I felt that the IRS would interpret this law similarly.

However, that does not appear to be the case. Section 1402 of the law notes that it is on 3.8% of the lesser of:

‘‘(A) net investment income for such taxable year, or
‘‘(B) the excess (if any) of—
‘‘(i) the modified adjusted gross income for such taxable year, over
‘‘(ii) the threshold amount.

So what is Net Investment Income? Section 1411(c) has the definition:

‘‘(c) NET INVESTMENT INCOME.—For purposes of this chapter—
‘‘(1) IN GENERAL.—The term ‘net investment income’ means the excess (if any) of—
‘‘(A) the sum of—
‘‘(i) gross income from interest, dividends, annuities, royalties, and rents, other than such income which is derived in the ordinary course of a trade
or business not described in paragraph (2)….

Based on how the law is written it will not apply to “Other Income” such as gambling income, sweepstakes, and contests.

Thus, my initial fear back in 2010 of how the law would be interpreted should be wrong.

I should note that the IRS has yet to issue most of the regulations on Obamacare, so they could interpret this provision differently. However, I think that would be very unlikely. Additionally, it is very possible that some tax software will make errors in this calculation. The Kiddie Tax, a tax on unearned income, uses a different basis than this tax. A lazy software writer might not notice the difference so this is definitely something I’ll be checking when we get to 2013 returns. (This new tax goes into effect with 2013 tax returns filed in 2014.)

It’s a Tax: What ObamaCare Means for You

Sunday, July 1st, 2012

Unless you were shipwrecked on a deserted island you know that the Supreme Court ruled that the Affordable Care Act, aka ObamaCare, is a legal “tax.” Back in February 2010 I wrote about the taxes in ObamaCare. Let’s run down the entire list (now that we know what’s in the bill) and see how this impacts you. The italicized text is from February 2010 (the proposal). Numbers refer to [individuals]/[families].

1. Individual Mandate Tax. For those who don’t purchase health insurance, this income tax surcharge continues to exist in this plan. I couldn’t determine the exact rate. This begins on January 1, 2014. The penalty is $95 (at first) but increases to the greater of $695 or 2.5% of modified adjusted gross income (MAGI) in 2016. (Families pay three times the individual number for the minimum tax.) The tax is indexed to the Consumer Price Index (CPI) for future years.

Something to realize is that most of the taxes in the measure are based on MAGI. This means your income before itemized deductions. For individuals who are, say, amateur gamblers who have $100,000 of wins and $100,000 or losses, you will pay taxes based on your winnings but not your losses. This is not a good thing (unless you like paying lots of taxes).

2. Employer Mandate Tax. On businesses with 50+ employees that do not offer health care, and at least one employee qualifies for a tax credit, $750/employee. This will cause many small businesses to stop growing once they reach 49 employees. Those figures come from the prior version.

In the final version of the law, the Employer Mandate Tax is $2,000/employee with it going into effect on January 1, 2014. There is also a $3,000/employee penalty if the government finds they provide workers with “unaffordable” health insurance. There ‘s an obvious solution to small employers: Don’t hire employee #50. And for those who have 51 or 52 employees, let those “excess” employees go. And that’s exactly what is guaranteed to happen.

This tax is guaranteed to hurt the economy in numerous ways. It will cause employers to cut employees. It will cost employees health insurance; if the $3,000/employee penalty applies to health insurance that’s unaffordable and you have just 30 employees, the solution is simple–don’t offer health insurance. The title of my previous post was, “It’s unpopular, unworkable, and insane, so naturally they’re in a hurry to pass it.” It remains an insane plan.

3. Excise Tax on Health Insurance Plans. Beginning in 2018, 40% tax (the percentage may be wrong) on plans costing $10,200/$27,500. Is indexed to CPI. This is in the law at the percentages and dollar amounts noted; it goes into effect in 2018.

4. Health Insurance would be reported on W-2s. Another mandate that increases costs for business. It’s unclear whether this mandate survived. However, the White House release states that loopholes will be closed which implies this remains. It survived and is in the law.

5. “Medicine Cabinet Tax.” Limitation on HSAs, FSAs, and MSAs to purchase non-prescription medication except insulin. This is in the law and is already in effect (as of 2011).

6. HSA Withdrawal Tax Increased. The tax would increase to 20% from 10%. It’s in the law and went into effect in 2011.

7. FSAs capped at a maximum of $2500. They are now uncapped. This goes into effect in 2013 (it is indexed to CPI after 2013). This will especially hurt parents of special needs children who have utilized FSA dollars for special needs education. That kind of education can easily run over $10,000 per year.

8. 1099 Reporting for corporations. Requires businesses to send 1099-MISCs to corporations. This is another cost for businesses. This will begin in 2011 and will definitely increase my income. This is definitely in the proposal, but it’s unclear if this starts in 2011. While this was in the law, Congress repealed this section of the law after outcries from almost every business in the country.

8. Tax on Charitable Hospitals. This excise tax of $50,000 per hospital impacts hospitals that don’t meet new Department of Health and Human Services regulations. It’s unclear whether this is in the proposal. This went into law in 2010 and impacts hopspitals that do not meet “community health assessment needs,” “financial assistance,” and “billing and collection rules” set by the Department of Health and Human Services (HHS).

9. Tax on Drug Companies. There’s definitely a tax on drug companies, but the size and timing of the tax is unclear. This went into effect in 2010 as a $2.3 billion annual tax based on the share of sales made in a year.

10. Tax on Medical Device Manufacturers. This tax is in the bill, but the size and timing of the tax is not clear. This goes into effect in 2013, and is a 2.3% excise tax. How many medical device manufacturers will now establish overseas subsidiaries not subject to US taxation? I’d expect many to do so. Given that there are 360,000 people employed in the US in this industry, there will be layoffs in this industry caused by this tax.

11. Tax on Health Insurers. This tax is definitely in the bill, but the size and timing of the tax is unclear. This tax goes into effect in 2014, and phases in gradually until 2018. The tax immediately hits firms with $50 million in profits (or more) and is based on premiums collected.

12. Elimination of tax deduction for employer provided retirement prescription drug coverage. It is unclear whether this tax is in the measure. It’s in the law and goes into effect in 2013.

13. Increase of percentage of AGI required to deduct medical expenses from 7.5% to 10%. Few can deduct medical expenses today; fewer will be able to deduct them tomorrow. This goes into effect in 2013. However, for those 65 or older the AGI percentage will remain at 7.5% through 2016 (seniors will join everyone else at 10% in 2017).

14. Compensation Limitation for Health Insurance Executives. If you work in that industry, you will be limited to a salary of $500,000. There’s no mention of this in the measure. However, given the Obama Administration’s stance on various pay-related measures, it’s likely included. It goes into effect in 2013.

15. Medicare Payroll Tax Hikes. Once your income exceeds $200,000/$250,000 (MFJ), you will pay an additional 0.9% tax. Note that the employer will only collect (and be responsible for this tax) if you earn $200,000/$250,000 or more. This also impacts the self-employed. And the law is written so that the self-employed cannot deduct half of the new tax as a deduction to income tax. It appears this provision is dead. However, it’s been replaced with something worse (see below). Unfortunately, this tax is in the final version of the law and takes effect in 2013.

16. New Hospital Insurance Tax. “The Act will include an additional 0.9 percentage point Hospital Insurance tax for households with incomes exceeding $200,000 for singles and $250,000 for married couples filing jointly.” I remember then-candidate Obama stating that if you made under $250,000, he wouldn’t increase your taxes. Yeah, right. This tax is not in the final version of the law.

16. New Unearned Income Tax. “[The Act] would add a 2.9 percent tax for households with incomes exceeding $200,000 for singles and $250,000 for married couples filing jointly to unearned income including interest, dividends, annuities, royalties and rents (excluding income from active participation in S corporations).” This is yet another measure which will stifle the economy in the United States. For my amateur gambling clients, this is particularly bad—it means your taxes will go up based on your gambling winnings, not your gambling net income. This goes into effect in 2013. While it’s called a “Surtax on Investment Income,” it will include dividends, capital gains, interest (the things you think about), passive income (partnerships, S-Corps, and trusts), royalties, rents, and Other Income (including gambling income). It does not include active business income, distributions from retirement plans, and sales of ownership interests in pass-through entities. It also does not apply to non-resident aliens.

17. Blue Cross Tax. There is a tax deduction available today for Blue Cross and Blue Shield companies; this tax deduction will vanish if they don’t spend 85% (or more) of premiums on clinical services. There’s no mention of this in the proposal. However, it was in both the House and Senate Democratic proposals and I expect it’s in this one, too. This went into effect in 2010.

18. Tax on Indoor Tanning. A new 10% excise tax on indoor tanning salons. This one made the cut. This went into effect in 2010.

19. Paper Production and Cellulosic Biofuels. “[Close] the loophole that allows certain byproducts of paper production to be eligible for the cellulosic biofuels producer credit.” This new tax provision is in the measure. This went into effect in 2010.

20. Strengthen Economic Substance Rules. “[Help] prevent tax shelters by clarifying the definition of when activities have true “economic substance” beyond evading taxes.” While the details aren’t listed, it’s clear that this provision will strengthen the economic substance rules. This will increase costs for complex transactions, and will likely depress economic activity. This went into effect in 2010.


President Obama and his surrogates have stated that the ACA (ObamaCare) is not a tax. White House Press Secretary Jay Carney stated the following:

“It’s a penalty, because you have a choice. You don’t have a choice to pay your taxes, right?” Carney said.

Carney was initially reluctant to assign a label to the fine when pressed repeatedly by reporters Friday. “Call it what you want,” he said…“You can call it what you want,” he said. “If you read the opinion, it is not a broad-based tax. It affects one percent, by CBO estimates, of the population. It is not something that you assess like an income tax.” It was unclear which Congressional Budget Office estimate Carney was referring to. Despite being pressed on the issue, though, the spokesman would not relent.

Bluntly, this is B.S. There are twenty tax increases in ObamaCare. You can parse words any way you like, but many of these measures are labeled as “taxes” and “surtaxes”. If you can read what I wrote above about the twenty tax increases in ObamaCare and still state that it’s not a tax, well, I suggest you apply for a job at the White House. The Supreme Court said it’s a tax. It contains twenty tax increases. President Obama’s argument that it’s not a tax is clearly wrong.

For the rest of us, this gives a clear choice in the election this November. Mitt Romney has pledged that his first job if he takes office will be the repeal of ObamaCare. President Obama and his administration have pledged the full implementation of ObamaCare (and the rescinding of the Bush Tax Cuts). You can’t get a much clearer choice than that.

ObamaCare Unconstitutional; Impact on Taxes?

Tuesday, February 1st, 2011

As most of you know, a second federal court judge has ruled the Health Care Law that passed last year is unconstitutional. Judge Rodger Vinson didn’t just rule that the mandate that health insurance must be bought is stricken; rather, he struck down the entire law. While the Obama Administration is publicly stating the law will continue to be enforced (and, in theory, either Judge Vinson or the 11th Circuit Court of Appeals could issue a stay to Judge Vinson’s ruling), as of now the law is void.

What next for the tanning tax? Or the numerous other tax provisions in the legislation that impact individuals? How about the business tax provisions?

I’m not an attorney, but the Volokh Conspiracy has some good posts up on this, though they aren’t really looking at the tax consequences (but do look at the constitutional issues in depth). As I was writing this, I noticed that Joe Kristan was asking the same questions.

My best guess is that the 11th Circuit will stay the decision until they review it. And it sure looks like this case is bound for the Supreme Court (perhaps in 2012 or 2013).

So if you’re a tanning salon should you stop collecting the 10% excise tax on tanning? I’ll probably have an answer in a couple of weeks but that answer could easily change between now and 2013.