Possible Tax Increases to Pay for Health Care Reform


As reported in the Giftlaw eNewsletter, the potential tax increases to pay for healthcare reform may include the following:

1. Employer Health Care Exclusion
– The exclusion could be capped or phased-out for higher-income employees. For higher-income persons, part of their medical premium will be taxable, even though paid by the employer.
2. Income Tax Deduction — The 7.5% floor for medical expenses could be raised to a substantially higher level and reduce the value of the deduction.
3. HSAs and FSAs — The health savings account (HSA) or flexible spending arrangement (FSA) could have reduced contribution limits. FSA fund distributions could be limited to qualified itemized medical deductions.
4. Medicare — All state and local employees may be required to participate.
5. Alcohol Tax – An increased and uniform national tax may apply to alcohol.
6. Soft Drink Tax – A new tax may be levied on sugar-enhanced beverages.
7. Top Brackets Increase — The current top 35% and 33% brackets may rise to 39.6 % and 36%.
8. Itemized Deduction Limits — Higher income individuals may have a 3% floor on deductions and would also lose their personal exemptions.
9. Capital Gains Tax Increase — The 15% capital gains tax rate may be increased to 20%.
10. Estate Tax — Retained with $3.5 million exemption and 45% rate.
11. Estate Tax Discounts — Valuation discounts reduced or eliminated.
12. Grantor Retained Annuity Trusts — GRATs limited to ten years or longer.
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