House Panel Considers Tax Impact Of Health Reform Law

A House tax panel heard testimony from expert witnesses on March 5 about the impact of tax increases included in the Patient Protection and Affordable Care Act (ACA). The hearing allowed House Ways and Means Oversight Subcommittee Chairman Charles W. Boustany, Jr. (R-La), to restate his arguments that the ACA is stunting economic growth, harming job creation, and failing to rein in health care costs. He said the $1 trillion in tax increases included in the ACA “could hardly come at a worse time, as our economy continues to struggle through the slowest recovery on record.”

Boustany said the medical device tax, combined with the new insurance tax, and employer mandate, will hold back job creation. He criticized forthcoming IRS rules that will be used to determine whether a company qualifies as a large employer. Owners will be required to work out a complicated algorithm aggregating the hours of all part-time workers and adding in the number of full-time workers, he said. “With the new law, Washington is effectively telling many main street businesses to cut their work-force and stop growing,” Boustany charged. “Hardly the incentives we need to be giving employers in our current economic climate.”

Former Congressional Budget Office (CBO) Director Douglas Holtz-Eakin, said the tax policy in the ACA inefficiently distorts economic decision-making, with the majority of the revenues coming from middle-income taxpayers. Holtz-Eakin, who now serves as president of the American Action Forum, a Washington, D.C.-based think tank, particularly criticized the health insurance premium tax, medical device tax, Medicare taxes, the Cadillac insurance tax, and the employer and individual insurance penalty. “As a whole, the taxes are strongly in violation of the preference for taxes that are as broadly based as possible, treat similar activities similarly and have minimal impact on decisions to save, allocate investment, market products and spend incomes,” he said.

According to Paul N. Van De Water, a senior fellow at the Center on Budget and Policy Priorities, a Washington, D.C.-based think tank, the tax increases in the ACA are not harmful to the economy. He cited CBO studies that show that, even if health care reform imposes some costs on employers, economic principles strongly suggest that it would have little impact on hiring decisions. He criticized efforts to undercut the ACA’s critical objective of expanding health insurance coverage and slowing the growth of health care costs without adding to the budget deficit.

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