View Full Version : Obama Tax Cost reality vs the theory

06-08-2009, 07:48 AM
Last night some friends were over and we got to talking about the Obama Health issues and where all that is going. The debate was as usual pretty lively with the Obot in the group spouting one figure after another and much hand wringing over the plight of the people.

One of the others there is pretty analytical and unemotional and he brought up a illustration that may or may not be real but it sure sounds plausible. He challenged the group to not look at the issue as some pie in the sky political issue to debat but to be real world and apply the proposal to a individual person. What is the cost to Mr and Mrs working person out of their vacation/household/car payment/food budget?

Here it is boiled down...

If they move forward with plans to tax you on your health care benefits that are employer provided, what does that mean to you in real dollars out of your pocket?

His sister is a single mom and he said the cost for her coverage for her son and herself through her job is $6200. Her employer statement claims they pay an additional $12,000 as stated in an annual benefits statement her company sends out.

Under the Obama plan, she would still pay the $6200 as she should. BUT she would also pay income tax on either the $12,000 or on the total of roughly $18000.

Our assumption process breaks down because we didn't know if the $6200 she pays now is pre tax or post tax. But if it is pre-tax then the new income tax load would apply to the $18000. At a 30% tax bracket, the out of pocket load would be $5400. So the result on this individual is nearly a 2x cost increase for the care she gets.

Now taking that a step further, what is the impact on those who are retired with benefits? Will they have to pay this as well? We assumed that being retired means older and older means higher premium costs. But the income level as a retiree is fixed. The hit on disposable income for a fixed income retiree is daunting.