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Affordable Health Care for America Act

Back in November, the House of Representatives passed the Affordable Health Care for America Act of 2009. The legislation included a public option that would take affect in 2013. If passed it would extend coverage to 96 percent of legal residents under the age of 65. In order to pay for the legislation, the House included a slew of tax increases including a 2.5% penalty tax for Americans who did not have establish health care coverage, an 8% penalty on businesses that do not provide their employees coverage, and a 5.4% surtax on couples making over a million dollars per year.

Patient Protection and Affordable Care Act

The Senate’s health care legislation (the Patient Protection and Affordable Care Act) has been making headlines more recently as it was voted on just a few weeks ago. It aims to extend coverage to 94% of legal residents, but does so without a public option. The legislation is expected to cost over $870 billion over the next ten years, but would actually reduce the federal deficit because of the tax increases it includes.

The Senate’s bill also includes a penalty for not buying into a qualifying insurance plan, but it would begin as only a 0.5% tax in 2014. It would gradually increase until reaching 2% in 2016. There would also be a mandate on employers, as well as a 40% tax on “Cadillac” health care plans, and a 10% tax on tanning services.

The Similarities

When looking at the tax implications of each bill, it is easy to see their similarities. Both include taxes on employers who do not provide health care coverage, as well as penalties on taxpayers who do not purchase a qualifying plan. They also both include new taxes on medical device manufacturers. Additionally, both health care reform bills ensure that anyone living in the country illegally would be barred from receiving government subsidies.

The Differences

Although they have a few similar tax implications, the two bills are significantly different. The House of Representative’s bill would cost nearly $1.2 trillion, and includes more aggressive tax increases to pay for the expensive legislation. The penalty on taxpayers without coverage is higher than the Senate’s and would take effect a full year earlier. The House’s bill also includes the massive 5.4% surtax on the wealthiest Americans, which is absent from the Senate’s legislation.

The bill passed by the Senate would only cost $871 billion over 10 years, which is significantly less than the House’s. Although their bill also includes penalties on taxpayers without insurance, it would only start at 1% in 2014, and then gradually increase to 2% in 2016. Even once the penalty reaches its full amount, it will still be less than the House’s penalty. Additionally, the Senate’s bill calls for a non-deductible fee of $750, per employee, for employers that do not offer coverage; this is higher than the 8% tax proposed the House’s bill. Finally, the Senate’s bill also creates two new taxes that were not even considered by the House, including a tax on “Cadillac” health plans, and a tanning tax that has actually gained support by the medical community.