With both the House and Senate having passed tax reform bills, Congress is poised to deliver that “big beautiful Christmas present” that President Donald Trump has been seeking to sign into law. Ensuring families get to keep more of what they earned is not quite a present so much as it is the right thing to do. But if that “gift” is to keep on giving after December 31, lawmakers still need to address a looming tax increase that could leave millions with painful financial hangovers in the New Year and beyond.
Come January 1, 2018, the Health Insurance Tax (appropriately abbreviated HIT) will wallop households across the nation unless Congress acts to prevent its implementation.
The HIT, a provision hidden in the Affordable Care Act of 2010, imposes a fee on each health insurance policy companies sell, fees that are then passed on to the consumer. The “excise” tax is not tax deductible, which raises its effective rate by 54 percent. That means, between the actual excise (about $14 billion) and the premium hike needed to cover non-deductibility, the HIT would make health care $22 billion more expensive next year – not $22 billion better, just a lot more money from American businesses and consumers for the same coverage.
The costs for this new tax will be heaped on the backs of consumers. Recognizing these negative impacts of the HIT, and that charges for health care plans were already becoming difficult for many to afford, Congress approved a one-year moratorium of the tax for 2017.
But with the HIT now set to take effect, 157 million Americans will see a spike in payments to the tune of $2,400 per person in the individual market and or nearly $7,000 for a family in the larger group plans over the next 10 years. The increase in health care costs will put the brakes on growth just when the economy is coming back … and, just when tax reform is supposed to provide a further boost to family incomes.
Small businesses are the most at risk from the HIT concealed in Obamacare. Over 28 million small businesses will pay $523 more per family coverage policy in 2018. The National Federation of Independent Business found the tax could cost up to 286,000 jobs and result in $33 billion in lost sales by 2023. With employment finally increasing, this is a setback our country cannot allow.
Meanwhile, seniors, many of whom are on fixed incomes, will see their Medicare Advantage premiums skyrocket by more than $500 per couple next year. These hard-working Americans planned carefully for retirement, and now the HIT is pulling their financial stability out from under their feet. Medicaid programs, funded by federal and state taxpayers, will suffer too.
The coming crisis is recognized by both Republicans and Democrats. The Senate and House of Representatives have introduced legislation to prevent this tax from hitting consumers. Thus, there are several measures Congress can and should act on before this tax wreaks havoc just a few short weeks from now. S. 1859, “Healthcare Tax Relief Act” introduced by Sen. Cory Gardner (R-CO) would delay the tax by one year, and Sen. Heidi Heitkamp’s (D-ND) bill, the “Small Business and Family Health Tax Relief Act of 2017” (S. 1978), would postpone the tax increase by two years. Meanwhile, Reps. Kyrsten Sinema (D-AZ) and Kristi Noem (R-SD)’s bill, the “Jobs and Premium Protection Act” (H.R. 246), would repeal the HIT outright.
Sen. John Barrasso (R-WY) offered an amendment to his chamber’s tax reform bill to repeal the HIT. Unfortunately, his colleagues failed to capitalize on the smart policy proposal. Now, lawmakers must look to end-of year legislation to pass a HIT delay.
The massive government overreach that was pushed through under the guise of improved health care was filled with clandestine provisions that would not be implemented until its champion, President Barack Obama, was safely out of office. These hidden punches keep socking consumers — yet another haymaker is in store for job creators and workers in 2020, when the 40 percent high-cost insurance plan tax (a.k.a. the “Cadillac Tax”) will take effect.
The costs for Obamacare keep assailing consumers in new and creative ways, from availability of providers and plans to higher premiums and deductibles. This constant barrage of fresh challenges from the previous President’s health care experiment still threatens to send Americans reeling – all the more reason for Congress to stop the 2018 “hit” from the HIT now.
Pete Sepp is President of National Taxpayers Union (ntu.org), a nonpartisan citizen group founded in 1969 to work for lower taxes, less wasteful government spending, and economic opportunity for all Americans.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.