Revised Health Bill Retains Taxes on Higher-Income Individuals

by Matthew Person on July 14, 2017

Revised Health Bill Retains Taxes on Higher-Income Individuals

Yesterday, July 13th, Senate Republications released a revised version of the Better Care Reconciliation Act of 2017. If enacted, the new version would retain several taxes originally imposed as part of the Patient Protection and Affordable Care Act(PPACA). This includes 3.8% net investment income tax, and 0.9% Medicare Surtax under Sec. 3101.

The net investment income portion (Sec. 1411) imposes a tax equal to 3.8% of the lesser of an individual’s net investment income for the tax year or the excess (if any) of the individual’s modified adjusted gross income for the tax year over a threshold amount.

The threshold amounts are:

  • $250,000 for married taxpayers filing jointly and surviving spouses
  • $125,000 for married taxpayers filing separately
  • $200,000 for other taxpayers.

The tax also applies to estates and trusts, with different threshold amounts.

The bill also contains a Medicare surtax which applies to wages received within a calendar year in excess of $200,000 ($250,000 for married couples filing jointly; $125,000 for married filing separately) (Sec. 3101(b)(2)).

Other changes in the revised bill include allowing taxpayers to receive a premium tax credit even if their insurance was defined as a catastrophic plan under PPACA. Currently, Sec. 36B(c)(3)(A) forbids a premium tax credit for taxpayers insured by such a plan. A catastrophic plan is defined in Section 1302(e) of PPACA as

“a plan that does not provide bronze, silver, gold, or platinum coverage (as PPACA Section 1302 defines those terms), that provides no benefits for any plan year until the covered individual has incurred cost-sharing expenses in an amount equal to PPACA’s annual limitation on cost-sharing expenses (but covers at least three primary care visits), and is available to individuals who are under age 30 and exempt from the individual mandate.”

It is still not clear to what extent the bill may be amended before it is brought to vote, and if the bill is passed it will still need to go back to the House of Representatives for a vote.


Previous post:

Next post: