Skip to main content

NEW YORK (MainStreet) — It seems incredible now that anyone really believed the healthcare Houdinis. The promises of implementing universal health insurance without increasing taxes, made by candidates during the 2008 presidential campaign, were pretty incredible even by the standards of political hyperbole.

But a willing media rarely challenged the validity of these claims. A large part of the electorate proved to be very gullible when they were promised that healthcare would be provided for all - without having Americans paying extra taxes or fees. It was a bait and switch campaign, an unethical business practice those very same candidates vociferously condemn. But it was used very effectively to pass the Patient Protection and Affordable Care Act (ACA).

"There are eighteen total new taxes and penalties," said Curtis Dubay, a senior tax policy analyst for the Heritage Foundation, a Washington D.C. think tank. "Most are not income sensitive."

Just in case you may have forgotten, here are just some examples of how the candidates said they would pay for a universal health insurance - some, including President Barack Obama, emphasized no new taxes:

"I believe the way you do it is by having no new bureaucracies," said Gov. Bill Richardson (D-NM). "I don't propose a new tax or any new bureaucracy."

"Well, first of all, I'm for a national health-care plan," said Rep. Dennis Kucinich (D-OH). "It would cost the same amount we're spending now, except that all the money goes into the system."

Sen. Chris Dodd (D-CT) said, "Well, you pay for it by having everyone contribute based on their ability to pay."

Obama, for his part, said that he could increase benefits, expand coverage and reduce costs. Obama said during the Democratic Party candidates debate on September 13, 2007 that he would provide universal healthcare to everyone without exception by subsidizing those who cannot afford it.

Obama said he would pay "for those subsidies by imposing a set of cost-saving measures that will actually improve quality at the same time that they lower costs."

Obama and nearly every other proponent of universal health insurance never once mentioned that additional taxes or a tax increase would be necessary. There was no mention of penalties or fees needed to pay for subsidies of the uninsured.

As we already have learned, the money to pay for the health insurance subsidies for those who must purchase health insurance and who earn as much as 400% of poverty level will come from eighteen taxes.

Scroll to Continue

TheStreet Recommends

Taxes of course, was what many of the opponents of universal health insurance said would happen from the beginning.

There is also the expense of determining who would be eligible for the subsidies was a cost never mentioned. But the Congressional Budget Office (CBO) expects that "the cost to the Internal Revenue Service of implementing the eligibility determination, documentation, and verification processes for premium and cost sharing subsidies would probably be between $5 billion and $10 billion over ten years."

Among the taxes for the subsidies themselves are increased capital gains, dividends and interest income; additional Medicare taxes on households earning more than $250,000 a year; taxes on health insurance premiums; taxes on medical devices; additional taxes on certain group health insurance plans deemed to generous by the government; and taxes on certain types of services (at least for now) like tanning salons.

There are also the penalties for those who choose not to buy insurance and for those companies not offering insurance.

The Department of Health and Human Services website lists, in addition to the taxes and fees already mentioned, some other taxes and fees. They include:

  • An increase in additional tax on distributions from Health Savings Accounts (HSA's) and Archer Medical Savings Account (MSA's) not used for qualified medical expenses. This is not limited to those making more than $250,000
  • A limitation on health flexible spending arrangements under cafeteria plans.
  • An imposition of annual fees on branded prescription pharmaceutical manufacturers and importers.
  • The elimination of deduction for expenses allocable to Medicare Part D subsidy.
  • A modification of itemized deduction for medical expenses. The floor was raised to be claimed is for everyone. This is not limited to the undeserving rich who make more than $250,000 per year.
  • An additional hospital insurance tax on "high-income taxpayers." The Medicare A tax is raised from 2.9 to 3.8 for those making more than $250,000
  • An excise tax on "elective cosmetic medical procedures."

These are not just taxes on the undeserving wealthy making more than $250,000 per year either.

"The tax on premiums is passed through by the insurers, the taxes on the HSA's and Archer MSA's are also not relative to income," said Dubay.

How much of this was mentioned in the news? How many pundits talked about these on the cable TV news shows? Certainly Obamacare's opponents were talking about it but they were often dismissed as being overly critical and merely political.

But the cost of the new taxes is significant.

"It is estimated by the Joint Committee on Taxation that $700 billion over ten years will be taken out of the private sector in new taxes by the government to pay for the ACA subsidies," Dubay said. "The Congressional Budget Office estimated that there will be about a $1 trillion. This is due to the secondary effects such as exposing more income to payroll taxes."

--Written by Michael P. Tremoglie for MainStreet