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    3 Obamacare Taxes Delayed in Deal to Fund Federal Government
    The Vault

    3 Obamacare Taxes Delayed in Deal to Fund Federal Government

    January 2018

    3 Obamacare taxes delayed in deal to fund federal government.


    When the House and Senate struck a deal this week to end the (brief) shutdown of the federal government and fund it through February 8, 2018, three Obamacare taxes were put on hold: the medical device tax, the “Cadillac tax”, and the health insurance tax. Here’s what you need to know.

    Division D of the new stopgap funding bill outlines the details of the Obamacare tax delays:

    Medical Device Tax

    The Medical Device Tax is a 2.3% excise tax levied on the sale of medical devices such as pacemakers, stents, catheters, and artificial joints at the manufacturer or importer level. A two-year delay of the tax expired on December 31, 2017, and the continuing resolution reestablishes that delay through December 31, 2019. The Medical Device Tax remains wildly unpopular among medical technology innovators who claim it stifles innovation passes costs onto consumers.

    The Congressional Budget Office estimated that a total of $3.27 billion would have been collected from device makers this year and in 2019 if the tax were in effect.

    Cadillac Tax

    The Cadillac tax is a 40% excise tax levied on health insurance plans if their value is above a certain threshold and is designed to tax high-end employer-sponsored health plans (valued at more than $27,500 for families and $10,200 for individuals). It was included in the Affordable Care Act as a tool to control healthcare spending and generate revenue to fund other ACA programs, but it has remained wildly unpopular from the beginning -- especially among employers who would not be able to deduct the surcharge as a business expense.

    The Cadillac tax has never actually been implemented because of delays made by previous legislation. The continuing resolution extends the current delay until January 1, 2022.

    Health Insurance Tax

    The Health Insurance Tax is an annual fee on certain for-profit health insurers based on their market share and the value of their business. Previous legislation suspended the tax for 2017, but it will be in effect for calendar year 2018 and is estimated to generate $14.8 billion. The continuing resolution suspends the health insurance tax for calendar year 2019.

    The Joint Committee on Taxation has estimated that the net loss in revenue from delaying and suspending these three health-related taxes would be $31.25 billion over the ten-year period from 2018 to 2027.

    In addition to suspending the three Obamacare taxes as part of its deal to end the shutdown, Congress authorized, for six more years, funding of the Children's Health Insurance Program, a jointly run federal/state program that provides health coverage to about 9 million children. Congress failed to reauthorize spending on CHIP in September 2017, and several states were on the verge of running out of funds for the program before the shutdown deal was reached. CHIP remains a popular program for both parties.


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