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Health Reform Bill

Posted by Predovich & Company

On October 30, House leaders unveiled the “Affordable Health Care for America Act.” It's a massive 1,900-page health reform bill that revises and combines the tri-committee (Ways and Means, Energy and Commerce, and Education and Labor) bills issued earlier this year. The timetable for the House of Representatives to take up the measure is uncertain at this point. And should the House pass the measure it would have to be reconciled with any bill that passes Senate as the two bills would likely have different approaches on many non-tax and tax provisions.

“Shared responsibility” and tax provisions in the House bill:

  • Employers would have to either provide health insurance to their employees or make a contribution to help fund affordable health insurance. Employers not offering qualified coverage would pay a payroll tax equal to 8% of their payroll to help cover expenses of employees who seek coverage through the exchange. Small businesses (annual payrolls below $500,000) would be exempt from coverage requirements, including the 8% payroll contribution for failure to provide health benefits to their workers. The 8% contribution requirement would be phased in for small businesses with an annual payroll between $500,000 and $750,000.

  • Individuals would be required to obtain health insurance coverage or pay an additional tax equal to the lower of 2.5% of their adjusted income above the filing threshold or the average premium on the insurance exchange.

  • The penalty on distributions from health savings accounts that are not used to pay for health related expenditures would be increased from 10% to 20%.

  • The deduction for expenses allocable to Medicare Part D subsidy would be eliminated.
The bill would create a 5.4% tax on modified adjusted gross income in excess of $1 million in the case of a joint return ($500,000 in the case of other returns). It's estimated that the tax, if enacted, would affect only 0.3% of all households and only 1.2% of sole proprietors, partners, and S Corp shareholders operating a business.

Source: RIA Checkpoint Tax Watch 10/30/09

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