This document discusses the history and impact of taxes related to health reform in the United States. It outlines key events such as the introduction of Social Security in 1933 and the passage of Medicare in 1965. It also describes taxes implemented or modified under the Affordable Care Act, including the 3.8% tax on investment income above certain thresholds and the 0.9% additional Medicare tax. The document provides examples of how these new taxes may impact individuals with different income levels and sources.

1. Health Reform: The Tax Effect

2. FDR’s New Deal – Social
Security introduced; FICA
Tax
Social Security and Medicare
History of FICA (Federal Insurance Contributions Tax) as Imposed on Wages
No federally mandated
benefits
Lyndon Johnson and Congress
- Medicare passed
1920’s………………………………….1933………………………………………………….1965………………………………………………………………….2013 (Health Care Reform)
Affordable Care Act – 3.8% on investment income;
.9% additional Medicare

3. Decoupling of Medicare Tax
from Social Security Tax
No limit on Medicare tax paid @ 1.45%
Now, based on AGI limit, additional .9% for total of 2.35%
AGI limits - $200k single, $250k married filing jointly (MFJ)

4. It’s Complicated, but...
Rate is 3.8% on
Lesser of Net Investment Income or amount by
which AGI exceeds $250k MFJ, $200k single
So,
Possible top rate is:
39.6%
3.8%
43.4%
Add MD 9.0%
52.4%
Net Investment Income Tax (NIIT Tax)

5. Interest
Dividends
Rents
Royalties
Capital Gains
Passive Activities
What is Net Investment
Income?
Salaries
Self Employment Income
Non-Passive Business Income
Social Security
Tax-exempt Interest
Qualified Pension Income
IRA Distributions
Annuity Income
What is not Net Investment
Income?

6. Summary
Report-
Case 1
2012
Adjusted Gross Income $173,250
Personal Exemptions (7,600)
Total Itemized (17,421)
Taxable Income 148,229
Regular Tax:
Schedule of Table Tax 29,283
Alternative Capital Gains Tax 26,617
Appropriate Regular Tax 26,617
Net Alternative Minimum Tax 0
High Income HI, Medicare & Other Tax 0
Total Federal Taxes 26,617
Resident State Tax 9,821
Total Taxes $36,438
Marginal Nominal Federal Rate 25
Marginal Federal Rate with Phaseouts 25
Marginal Resident State Rate 8
2013
$173,250
(7,800)
(17,421)
148,029
28,914
26,365
26,365
0
0
26,365
9,821
$36,186
25
25
8
* INT & DIV $100,000
SS Benefits 38,250
Net Cap Gains 35,000
AGI $173,250

7. Summary
Report-
Case 2
2012
Adjusted Gross Income $373,250
Personal Exemptions (7,600)
Total Itemized (34,725)
Taxable Income 330,925
Regular Tax:
Schedule of Table Tax 86,112
Alternative Capital Gains Tax 81,612
Appropriate Regular Tax 81,612
Net Alternative Minimum Tax 9,341
High Income HI, Medicare & Other Tax 0
Total Federal Taxes 90,953
Resident State Tax 27,125
Total Taxes $118,078
Marginal Nominal Federal Rate 28
Marginal Federal Rate with Phaseouts 35
Marginal Resident State Rate 9
2013
$373,250
(3,120)
(32,570)
337,560
87,708
83,208
83,208
6,808
4,684
94,700
27,168
$121,868
28
35
9
*$200,000 additional INT & DIV.

8. Summary
Report-
Case 3
2012
Adjusted Gross Income $623,250
Personal Exemptions (7,600)
Total Itemized (57,100)
Taxable Income 558,550
Regular Tax:
Schedule of Table Tax 164,632
Alternative Capital Gains Tax 159,632
Appropriate Regular Tax 159,632
Net Alternative Minimum Tax 7,820
High Income HI, Medicare & Other Tax 0
Total Federal Taxes 167,452
Resident State Tax 49,500
Total Taxes $216,952
Marginal Nominal Federal Rate 28
Marginal Federal Rate with Phaseouts 28
Marginal Resident State Rate 9
2013
$623,250
0
(47,517)
_575,733
175,636
170,736
170,736
0
_ 10,646
181,382
49,615
$230,997
40
41
9
*$250,000 wages added

9. Small Business Tax Credit
 No more than 25 full-time equivalent employees
 Average annual wages for the employees cannot
exceed $50,000 in 2014, (will be adjusted for
inflation)
 Must purchase coverage through the SHOP
Marketplace (Small Business Health Options)
 Credit = to approx. 50% of employer contributions
to health care premium
 Available to certain eligible employees
 Must cover at least 50% of the cost of employee-only
coverage for each employee

10. Medical Device Excise Tax
Only for manufacturers and importers of “medical devices”
Confusion in definition of taxable “medical device”
Must be “intended for humans”
Retail exemption i.e. eyeglasses, contact, hearing aids, etc.
Rate 2.3%

11. Annual Fee on Health Insurance Providers
In 2014, the fee is $5.25 per member per month ($63 per year)
Includes not only the employee, but dependents – ALL COVERED LIVES
In 2015, the fee is $3.67 per member per month ($44 per year)
Insurers will raise premiums to pass on to customers
•Assessed on insurance carriers, HMO’s, etc.
•Fee is NOT tax deductible
•First year is 2014
•Fee is permanent

12. PCORI Fee – Patient-Centered Outcomes
Research Institute Fee
Period – 2012 to 2019
Amount $1 to $2 per member per year
Insurers have/will add to premium

13. THANK YOU!
Contact Info:
Steven Gershman, CPA, PFS, CFE
Shareholder
443.539.3201
sgershman@katzabosch.com
www.katzabosch.com