Why I oppose Obamacare, part 1

I am absolutely against the health care "reform" bills going through Congress right now. We're looking at a massive expansion of government power and taxation that will put the private insurance companies out of business and leave all of us with nowhere to go except rationed public care. This is a terrible plan that's being forced on us, and about as far from genuine reform as one can get.

So, reasons to be against Obamacare, one at a time:

1. The Cost
With our federal deficit already at record levels, this bill would spend even more money that we don't have. According to this and other articles, "the legislation is estimated to cost $1.2 trillion in the first 10 years".

Where will the money to pay for this come from, particularly when we're in a recession? Does anyone seriously believe it won't add to the deficit, as Nancy Pelosi and President Obama have claimed? I don't. Find me a federal program that didn't end up costing many, many times more than the authors of the bill originally claimed. You can't do it.

The money will come from two sources: cuts to Medicare, and higher taxes and fees. The taxes will supposedly be levied only on "the rich", but the country can only go to that particular well so often. The truth of the matter is, the cost will be passed on to us in the middle class, as it always is. We'll be paying for this trillion dollar government program.

2. Taxes

Just for starters, how about a 69% increase in capital gains taxes?

House Democrats are funding their new entitlement with a 5.4% surtax on incomes above $500,000 for individuals and above $1 million for joint filers. The surcharge is intended to snag the greatest number of taxpayers to raise some $460.5 billion, and so the House has written it to apply to modified adjusted gross income. That means it includes both capital gains and dividends.

That surtax takes effect on January 1, 2011, or the day the Bush tax rates of 2001 and 2003 expire. Today’s capital gains tax rate of 15% would bounce back to 20% because of the Bush repeal and then to 25.4% with the surtax. That’s a 69% increase, overnight. The last time investors were hit with anything comparable was 1986, when the capital gains rate jumped to 28% from 20%, a 40% increase, as part of the Reagan tax reform that lowered incometax rates.

There's more. Much more.

Employer Mandate Excise Tax (Page 275): If an employer does not pay 72.5 percent of a single employee’s health premium (65 percent of a family employee), the employer must pay an excise tax equal to 8 percent of average wages. Small employers (measured by payroll size) have smaller payroll tax rates of 0 percent (<$500,000), 2 percent ($500,000-$585,000), 4 percent ($585,000-$670,000), and 6 percent ($670,000-$750,000).

Individual Mandate Surtax (Page 296): If an individual fails to obtain qualifying coverage, he must pay an income surtax equal to the lesser of 2.5 percent of modified adjusted gross income (MAGI) or the average premium. MAGI adds back in the foreign earned income exclusion and municipal bond interest.

Medicine Cabinet Tax (Page 324): Non-prescription medications would no longer be able to be purchased from health savings accounts (HSAs), flexible spending accounts (FSAs), or health reimbursement arrangements (HRAs). Insulin excepted.

Cap on FSAs (Page 325): FSAs would face an annual cap of $2500 (currently uncapped).

Increased Additional Tax on Non-Qualified HSA Distributions (Page 326): Non-qualified distributions from HSAs would face an additional tax of 20 percent (current law is 10 percent). This disadvantages HSAs relative to other tax-free accounts (e.g. IRAs, 401(k)s, 529 plans, etc.)

Denial of Tax Deduction for Employer Health Plans Coordinating with Medicare Part D (Page 327): This would further erode private sector participation in delivery of Medicare services.

Surtax on Individuals and Small Businesses (Page 336): Imposes an income surtax of 5.4 percent on MAGI over $500,000 ($1 million married filing jointly). MAGI adds back in the itemized deduction for margin loan interest. This would raise the top marginal tax rate in 2011 from 39.6 percent under current law to 45 percent—a new effective top rate.

Excise Tax on Medical Devices (Page 339): Imposes a new excise tax on medical device manufacturers equal to 2.5 percent of the wholesale price. It excludes retail sales and unspecified medical devices sold to the general public.

Corporate 1099-MISC Information Reporting (Page 344): Requires that 1099-MISC forms be issued to corporations as well as persons for trade or business payments. Current law limits to just persons for small business compliance complexity reasons. Also expands reporting to exchanges of property.

Delay in Worldwide Allocation of Interest (Page 345): Delays for nine years the worldwide allocation of interest, a corporate tax relief provision from the American Jobs Creation Act

Limitation on Tax Treaty Benefits for Certain Payments (Page 346): Increases taxes on U.S. employers with overseas operations looking to avoid double taxation of earnings.

Codification of the “Economic Substance Doctrine” (Page 349): Empowers the IRS to disallow a perfectly legal tax deduction or other tax relief merely because the IRS deems that the motive of the taxpayer was not primarily business-related.

Application of “More Likely Than Not” Rule (Page 357): Publicly-traded partnerships and corporations with annual gross receipts in excess of $100 million have raised standards on penalties. If there is a tax underpayment by these taxpayers, they must be able to prove that the estimated tax paid would have more likely than not been sufficient to cover final tax liability.

Even if you're a big government, soak the rich kind of person, can you possibly justify this level of new taxation and penalties in the midst of a recession? Can we afford to have business hit this hard when they're already struggling?

Oh, and just today, Senate Majority leader Harry Reid(D) announced a possible Medicare payroll tax increase. One more cost for businesses.

Part 2 to follow soon.