National Health Care Reform Price Tag

Proposed Tax Law Changes: "America's Affordable Health Choices Act of 2009" H.R. 3200

On July 14, the House Democratic leadership released the text of H.R. 3200, the ''America's Affordable Health Choices Act of 2009,” which is slated to be taken up by the House Ways & Means Committee on July 16. Title IV of the Act would make numerous tax changes to pay for the projected $1 trillion price tag of comprehensive national health care reform.

Title IV of the bill includes the following changes to the Internal Revenue Code:

1. High income individuals married filing a joint return or surviving spouses would face a surtax equal to: 1% of modified adjusted gross income (AGI) over $350,000 but not over $500,000; 1.5% of modified AGI over $500,000 but not over $1 million; and 5.4% of modified AGI over $1 million. The dollar amounts for separate filers would be half of the joint filer amounts; for other filers the amounts would be 80% of the joint filer amounts. The surtax for modified AGI over $350,000 but not over $1 million would rise for post-2012 tax years unless federal health reform savings hit a predetermined target level.



2. A tax on individuals who don't have acceptable health benefit plan coverage (as defined by the bill). In general, the tax would equal 2.5% of modified AGI in excess of the taxpayer's exemption amount, but not more than the “national average premium” for that year. A number of exceptions would apply (e.g., for dependents, objectors on religious grounds).



3. Health insurers would be required to file information returns for the individuals they cover.



4. Employers that fail to satisfy the bill's health coverage participation requirements would face a tax of $100 per day per each non-covered employee.



5. Employers electing not to provide health benefits for employees would pay an excise tax equal to 8% of wages (the excise tax would be less for small employers).



6. Small businesses would get an employee health coverage tax credit.



7. For Multi-National Corporations related to International tax proposals: The application of the worldwide allocation of interest would be delayed (until the first tax year beginning after 2019) and as a anti-tax-avoidance measure, there would be new limitations on treaty benefits for certain deductible payments.



8. The economic substance doctrine would be codified. An accuracy related penalty would apply for underpayments due to transactions lacking economic substance, and a stiff penalty would apply for nondisclosure of “noneconomic substance transactions.”