Why Obamacare's Tax Increase Isn't the Biggest Ever

Overall, Obama’s health care law will increase federal revenues as a portion of GDP. The non-partisan Congressional Budget Office estimates that the law will reduce federal deficits by a relatively small amount, $210 billion, by 2021. Photograph by Luke Sharrett/AFP/Getty Images

Ever since Chief Justice John Roberts decided that Obamacare was indeed a tax, Republicans have been railing that the law amounts to a stupendously large tax increase.

It started with Rush Limbaugh. Shortly after the ruling, Limbaugh declared Obama’s 2010 Affordable Care Act to be “the largest tax increase in the history of the world.” Other GOP politicians such as Louisiana Pennsylvania Republican Jeff Landry followed Limbaugh’s lead, though they at least had enough sense to limit their superlatives to U.S. history.

Notably, Mitt Romney wasn’t one of the ones making noise. Attempting to save himself from the accusation that he raised taxes during his tenure as Massachusetts governor, Romney has been sticking to the argument that the Supreme Court wrongly decided the case and that the Affordable Care Act—along with his own state health-care mandate—was really a penalty, not a tax. (UPDATE: On July 4, Romney changed his position, saying the Supreme Court’s “final word is that Obamacare is a tax. So it’s a tax.”)

Will the Affordable Care Act actually raise your tax bill? Well, that depends on who you are.

Overall, Obama’s health-care law will increase federal revenues as a portion of gross domestic product. The nonpartisan Congressional Budget Office estimates that the law will reduce federal deficits by a relatively small amount—$210 billion, by 2021.

Here’s a nice chart from Ezra Klein which breaks down how the tax increases in Obamacare stack up against tax hikes passed by previous administrations. You can see that Obama’s tax increase will bring in less revenue as a portion of GDP than the tax increases put in place by presidents George H.W. Bush, Bill Clinton, or Ronald Reagan.

Lots of different tax hikes are tucked into the Affordable Care Act. If you’re a tanning salon, a medical device maker, a pharmaceutical company, a small business owner who doesn’t want to provide health insurance coverage to your employees, or an individual who refuses coverage, you’re going to have to cough up more money to the IRS in the form of penalties, fees, and yes, taxes. Individuals earning $200,000 or above and couples earning at least $250,000 will pay a 0.9% Medicare surtax and a 3.8% surtax on investment income. Some of these taxes—such as the 2.3 percent excise tax on the sale of medical devices—could be passed along to consumers.

If you’re just about anyone else, the health-care law is likely to be a net plus. People who earn up to 133 percent of the poverty line will become eligible for Medicaid. Families earning up to 400 percent of the poverty line—about $100,000—also get lots of subsidies for insurance on state-run exchanges whose goal is to bring down the cost of care.

Republicans such as House Speaker John Boehner (R.-Ohio) have been particularly keen on bringing up small business, arguing that Obamacare amounts to a tax hike for them. If you’re a business with up to 25 employees, you’re also going to get a big tax credit to help with your employees’ health-care bill. After 2014, that credit will cover up to 50 percent of employer contributions.

Taken together, claims that Obamacare amounts to the largest tax hike in the entire history of humanity—or even the last 20 years—don’t add up.

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