Wednesday, June 30, 2010

Your W-2 and Obamacare

NOTICE: I received this update correcting the assumption that everyone will be taxed on health care. Here is what it says on Snopes.
Origins:   This is another case of a legislative issue which has a kernel of truth to it, but which has been misinterpreted, affects only a small percentage of the population, and has misleadingly been blown out of proportion through someone's mistaken assumption that it applies to everyone.

The portion (Title IX, Sec. 9001) of the Patient Protection and Affordable Care Act (H.R. 3590) referenced above is entitled "Excise Tax on High Cost Employer-Sponsored Coverage." This is the section of the recently passed health care reform legislation that addresses taxing so-called high-level "Cadillac" health care plans that some employees receive through their employers.

In general, beginning in 2018 (not 2011), H.R. 3590 imposes a 40% excise tax on the value of employer-sponsored medical insurance that exceeds a given threshold (initially $27,500 annually). Although "the aggregate cost of applicable employer sponsored group  health coverage" will be reported on employees' W-2 forms, the excise tax would be paid by the insurance company, not the employee, and is initially expected to affect fewer than 10% of families covered by health insurance:

Many employers pay most of the premium for health coverage. Workers pick up the rest but pay no taxes on the employer's often-substantial contribution. That's why many unions have bargained hard for generous health coverage over the years, even if that meant forgoing a bigger pay raise.

The new agreement would take away the tax advantage for a small portion of the health benefit by imposing a 40 percent tax on the amount by which the premiums for employer-sponsored health coverage exceed specified thresholds. That would be $27,500 a year for a family, starting in 2018. The tax on a $29,500 plan would be $800, or 40 percent of $2,000. The insurance company would pay the tax but would almost certainly pass it along to the employer and its employees. 

NOTE: So when you get the email below as I did, check it out first to fully understand what it means.

I received an email this morning that explains what Obamacare means to those who have health care through an employer who pays part or all of the cost. A lot of people, (like our public employees) are going to have a real problem with this. Those people who keep telling us we all need to pay our fair share are going to scream when they find out that they are no longer going to get a free ride.

When you are self-employed, everything you earn is claimed on a 1099. You pay the full amount of tax claimed on that 1099. If you want insurance, you pay for the full amount of the premium. And you pay 100% of amy money you manage to save toward retirement.

It looks to me like Obama is EQUALIZING the palying field here. If our government employees and other union workers want employers to offer these great benefits, well, their just going to have to pay their fair share like the rest of us.

Now maybe these government workers will understand what WE have been screaming about. If they want the cost of insurance and health care to come DOWN, then put competition back by making insurances companies deal directly with us. Get the employer and union out of the business of contracting what you should be contracting for yourself. After all, your going to pay for it one way or another anyway now.

Starting in 2011-next year-the W-2 tax form sent by your employer will be
increased to show the value of whatever health insurance you are provided.

It doesn't matter if you're retired; your gross income WILL go up by the
amount of insurance your employer paid for. So you'll be required to pay
taxes on a larger sum of money that you actually received; take the tax form
you just finished and see what $15,000.00 or $20,000.00 additional gross
income does to your tax debt. That's what you'll pay next year. For many
it puts you into a much higher bracket. This is how the government is going
to buy insurance for fifteen (15) percent that don't have insurance and it's
only part of the tax increases, but it's not really a "tax increase" as
such, it a redefinition of your taxable income.

Not believing this I researched the CRS Summary and here's what found:

Title IX Revenue Provisions-Subtitle A: Revenue Offset
"(Sec. 9002) Requires employers to include in the W-2 form of each employee
the aggregate cost of applicable employer-sponsored group health coverage
that is excludable from the employee's gross income (excluding the value of
contributions to flexible spending arrangements)."

Joan Pryde, is the Senior Tax Editor for the Kiplinger Letters. Go to
and read about the thirteen (13) tax changes
for 2010 that could affect you.

The Cost of Unions - Veronique de Rugy - The Corner on National Review Online

Here is interesting some data:
Unionized public sector workers have much higher average wages and benefits than nonunionized public sector workers.

Bureau of Labor Statistics data in Table 2 show that union members have a 31-percent advantage in wages and a 68-percent advantage in benefits.

This line bears repeating: 'Union members have a 31-percent advantage in wages and a 68-percent advantage in benefits.' FULL STORY

1 comment:

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