Key Tax Provisions of House Democrats' Draft Health Care Bill
The Facts
On June 19, 2009, Democrats from three key House committees released a draft health reform bill that sheds light on plans to use the Internal Revenue Code to incentivize individuals to obtain, and employers to provide, adequate health care. The bill, however, leaves out details on the major sources of revenue needed to finance the health care expansion. Key tax provisions in the bill to date include:
- Imposing 2 percent tax on the income of individuals without “acceptable coverage,” with tax limited to national average premium
- Providing limited exceptions to 2 percent tax on individuals (e.g., nonresident aliens, religious conscience)
- Requiring providers of acceptable coverage to provide annual information reports to the IRS describing the names and types of coverage of each covered individual and other information that the IRS requires
- Imposing excise tax on employers that elect to help satisfy the health coverage participation requirement but that later fail to meet the requirement
- Imposing excise tax equal to 8 percent of wages paid on employers that elect not to help satisfy the health coverage participation requirement
- Providing 50 percent tax credit for employee health coverage expenses of small businesses providing employee coverage, with phaseouts for average employee compensation (greater than $20,000) and employee headcount (more than 10)
- Authorizing IRS disclosure of taxpayer information to determine whether individuals are eligible for affordability credits
What’s at Stake
With a promise by President Obama and key members of Congress to fully fund health care reform, which is anticipated to cost $1 to 2 trillion or more over 10 years, progress will require filling in the details on the revenue-raising provisions. Approximately half of the money needed to pay for health care reform is expected to come from changes in the tax law.
Steps to Consider
- Stay tuned for revenue-raising tax proposals, which may include significant amendments to the international tax rules
- Continue to monitor any additional guidance on required information reporting by employers to show they meet the health coverage participation requirements
