Obamacare Taxes May Remain in New Health Care Bill

At least one element of Obamacare appears may remain in the new health care bill being designed in the Senate.

The 0.9 percent Medicare surtax on upper-income earners may very well remain intact according to reports. The Washington Examiner reported that John Thune, Senate Republican Conference Chairman, said lawmakers have been discussing plans to maintain the surtax along with the mandated 3.8 percent investment tax for those same earners.

The Medicare surtax would save some $58 billion over 10 years and would combine with the investment tax to save $230 billion over that time. GOP leaders hope those savings can serve as a compromise in efforts to win over the handful of Republican in the Senate who continue to hold out against the proposed health care bill. An earlier draft of the bill would have slashed Obamacare’s taxes by $701 billion over 10 years.

Senate Majority Leader Mitch McConnell said a draft of the legislation should be released later in the week with a vote on the measure soon thereafter. It remains unclear when the Senate will vote on the bill as a whole.

Tax Breakdown

The Medicare surtax, otherwise known as the “Additional Medicare Tax,” is an added 0.9 percent tax that is applied to higher-income earners in addition to the standard 1.45 percent tax that applies to all earners.

For those who are married and filing jointly, the extra tax applies to those reporting at least $250,000 of wages, self-employment income and railroad retirement income. For people who are married but filing separately, the limit is $125,000. For all other filers, the limit is $200,000.

The Net Investment Income Tax (NIIT) is a 3.8 percent tax applied to the lesser of an individual’s net income from any investments. That includes, interest, dividends, capital gains, annuities and rental or royalty income. The income thresholds for the tax are the same as those of the Medicare surtax with the lone exception being widow(er)s with a child, who are exempt up to $250,000.

To learn more, read our article, What to Know About the Republican Health Care Bill.

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Sources

Washington Examiner: http://www.washingtonexaminer.com/senate-healthcare-bill-likely-to-keep-obamacare-taxes/article/2628310

IRS.gov: https://www.irs.gov/uac/what-is-the-additional-medicare-tax

IRS.gov: https://www.irs.gov/individuals/net-investment-income-tax

NBC News: http://www.nbcnews.com/politics/congress/here-s-how-wealthy-gain-gop-health-care-bill-n778741

Christian Worstell is a health care and policy writer for MedicareSupplement.com. He has written hundreds of articles helping people better understand their Medicare coverage options.