Small Businesses Will Take a Hit With Tax Increases
The Joint Committee on Taxation (JCT) is reporting what the small business community has been saying all along — proposed tax increases on the “wealthy” amount to big tax increases on small business owners. In a November 3, 2009 memo, the JCT estimates that one-third of the $460.5 billion estimated to be raised from H.R. 3962, the “Affordable Health Care for America Act,” through a proposed 5.4 percent surtax is business income. According to the Small Business & Entrepreneurship Council (SBE Council), America’s economic recovery is highly dependent on small-business job creation and investment. Seizing more of their hard-earned capital flies in the face of White House efforts, for example, to provide small businesses with access to credit and capital, according to the advocacy group.
“No wonder small business owners are gripped by uncertainty. With mixed messages coming from Washington, they don’t know whether to add to their payrolls, hoard cash, cut jobs or stay-the-course,” said SBE Council President & CEO Karen Kerrigan.
Kerrigan added: “More than $150 billion of the proposed surtax alone falls on the backs of small business owners, according to the JCT. When will those who support these tax hikes wake up to the fact that they are sucking oxygen out of the very businesses that need this capital for survival and growth. Businesses can’t save or create jobs without money. All of the tax increases proposed in the House health bill will deprive the private sector of the capital it needs to hold onto their workers, create more job opportunities, invest, innovate and grow.”
Senate Health Bill Raises Taxes on Families of Special Needs Children
There are 18 separate tax hikes in the Reid-Obama healthcare bill. One of them caps the amount that can be deferred in Flexible Spending Accounts (FSAs) at $2500 per year (a similar provision was included in the Pelosi-Obama health bill and written about by Congressman Cathy McMorris-Rogers, R-Was., for National Review Online). There is currently no limit to how much can be saved, though all monies must be used by the end of the year. Employers may put a cap in place for their employees, but this would put a cap in federal tax law for the first time. According to the Employee Benefit Research Institute (EBRI), 30 million American families use an FSA.
-For most people, the $2500 cap won’t be noticed. FSAs tend to be used for things like small deductibles, co-payments, eyeglasses, over-the-counter medicines, and laser eye surgery. The amount deferred in the typical FSA is probably much less than $2500 today
-There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year.
-Under tax rules, FSA dollars can be used to pay for this type of special needs education.
According to IRS Publication 502, Medical Expenses:
-You can include in medical expenses fees you pay on a doctor’s recommendation for a child’s tutoring by a teacher who is specially trained and qualified to work with children who have learning disabilities caused by mental or physical impairments, including nervous system disorders.
-You can include in medical expenses the cost (tuition, meals, and lodging) of attending a school that furnishes special education to help a child to overcome learning disabilities. A doctor must recommend that the child attend the school. Overcoming the learning disabilities must be a principal reason for attending the school, and any ordinary education received must be incidental to the special education provided. Special education include teaching Braille to a visually impaired person; teaching lip reading to a hearing-impaired person, or giving remedial language training to correct a condition caused by a birth defect.
AAFPRS Opposes the Proposed Tax on Medical Procedures
The United States Senate is about to consider health system reform legislation which contains a 5% tax on cosmetic surgery deemed unnecessary for medical purposes. The American Academy of Facial Plastic and Reconstructive Surgery (AAFPRS) announces it strongly opposes the inclusion of this tax as it is discriminatory and has already failed in other states.
If passed into law, the tax will go into effect on January 1, 2010, in hopes of generating $5.8 billion over the next 10 years to help fund the $849 billion health care plan. The law defines cosmetic surgery as “any procedure which is directed at improving the patient’s appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease.”
The proposal further stipulates that if a patient declines to pay the increase when initially billed for their surgery, the physician is entirely liable for all charges.
Various experts declare this tax would be discriminatory against women, noting that 86 percent of patients are working middle class woman. Plastic surgery is no longer considered a luxury for the wealthy, as 60% of respondents reported a household income of $30,000-$90,000 a year. Breaking down this data further, 40% of the 60% reported an income of $30,000-$60,000.
“The bill claims to not tax reconstructive surgery, however, in many cases there is thin line that separates ‘cosmetic’ from ‘reconstructive’,” states Daniel E. Rousso, M.D., president of the AAFPRS.
Several states have already tried to impose taxes on cosmetic surgery, including New Jersey which currently has a 6% tax on cosmetic surgery. Since New Jersey adopted the tax on elective medical procedures in 2004, the Department of Taxation has experienced a 59% shortfall based on projected revenue estimates. In fact, New Jersey Assemblyman Joseph Cryan, the sponsor of the 2004 bill, is leading efforts to repeal the tax. Eight other states have considered cosmetic taxes and have rejected them.