http://money.cnn.com/2010/02/01/pf/taxes/obama_budget_tax_changes/index.htm
By Jeanne Sahadi, senior writer, February 2, 2010: 9:44 AM ET
NEW YORK (CNNMoney.com) -- President Obama, in his proposed 2011 budget, is calling on Congress to make a number of tax changes for individuals.
Some ideas are new. Many others were made last year, but not enacted by Congress. So the estimates of the revenue that may be raised by his proposals may be overly optimistic.
Across the universe of individual and corporate taxes, "what's most striking is how little new ground [the president's budget] ploughs," said Clint Stretch, managing principal of tax policy at Deloitte Tax LLC.
Here's a breakdown of some of Obama's key proposals for 2011 and beyond that would affect individuals:
High-income households
Let tax cuts expire: The 2001 and 2003 Bush tax cuts are scheduled to expire by 2011. Obama is sticking to his call to let those tax cuts expire for high-income households ($200,000 for individuals; $250,000 for families). The White House estimates close to $700 billion would be raised over 10 years.
This provision would raise the top two individual income tax rates to where they were in 2001, before passage of the Bush tax cuts. The 33% bracket would become 36%. And the 35% bracket would rise to 39.6%.
In addition, the long-term capital gains tax rate would increase to 20%, up from 15% currently.
The provision would also reinstate so-called phaseouts for high-income households, which would essentially reduce their eligibility for a host of personal exemptions.
The House may be amenable to letting the tax cuts expire in 2011 for wealthier Americans. But Stretch said it may be a tougher vote in the Senate, where there may be more of an inclination to wait until 2012 when the economy is expected to be on firmer footing.
Limit itemized deductions: The president proposes to cap at 28% the rate at which high-income households can itemize their deductions. Currently the value of a deduction is equal to the deductible amount multipled by one's top income tax rate, which can range well above 28%. So deductions will be worth less to a high-income tax filer under the president's proposal.
Capping itemized deductions is a proposal he made last year and it went nowhere. That's in part because many in Congress said it would seriously curb charitable giving, even though that is not a foregone conclusion. If the measure gains any traction this year, it's likely Congress would limit the cap to only certain types of deductions, thereby muting its revenue-raising effect.
The White House estimates that capping the rate on deductions could raise $291 billion over 10 years.
Obama maps routes to lower deficits
Keep the estate tax: The president's budget assumes the estate tax will be made permanent at a $3.5 million exemption level per person and a top rate of 45% on taxable estates. That's much more generous than current law, which calls for a $1 million exemption level and a 55% top rate starting in 2011.
But it's less generous than a proposal getting bipartisan support in the Senate. The Senate proposal would institute a $5 million exemption level per person and a top rate of 35%.
Altering the estate tax to the levels Obama has proposed would increase the deficit by $262 billion over 10 years.
Raise taxes on investment fund manager profits: Obama would like to tax the portion of profits paid to managers of hedge funds and private equity funds as ordinary income rather than as a capital gain. That would subject it to much higher tax rates than the 15% capital gains rate currently imposed. The White House estimates the measure would raise $24 billion over 10 years.
This is a carryover proposal from last year. While Congress hasn't acted on it yet, there's a fair chance they may move on it in the next year, since lawmakers will be looking for ways to pay for other costly legislation they'd like to pass.
Eliminate capital gains tax on small business stock: There are currently capital gains tax breaks in place for investors in small businesses, defined as companies with gross assets of $50 million or less. But the president is proposing to eliminate the capital gains tax altogether on stock in small businesses held for at least five years. The measure would only apply to stock acquired after Feb. 17, 2009. The cost of the president's proposal is an estimated $8.1 billion over 10 years.
Lower and middle income households
Make tax cuts permanent: The president's budget assumes all the 2001 and 2003 tax cuts will be made permanent for everyone making less than $200,000 ($250,000 for couples), which is the majority of American households.
That means, among other things, that today's rates on income tax, capital gains and dividends would remain the same.
It's an expensive proposition, however, costing federal coffers nearly $2 trillion over 10 years.
Permanently protect the middle class from the "wealth" tax: The administration assumes in the president's budget that Congress will permanently change the parameters of the Alternative Minimum Tax (AMT). That would protect tens of millions of middle-income families from having to pay the tax, which was originally intended only for the highest earners.
The cost of such a provision is close to $660 billion over 10 years.
Extend the Make Work Pay credit: The president's 2011 budget calls for a one-year extension of the stimulus-created tax credit that adds a few dollars to workers' paychecks every pay period. The extension is estimated to boost the deficit by $61.2 billion over 10 years.
Calling for just a one-year extension is a switch from Obama's call to make the credit permanent last year. The hope may still be that the credit is renewed every year -- as many tax breaks are. But by only calling for a one-year extension, the impact on the 10-year deficit appears to be less.
Permanently expand a low-income tax credit: The stimulus package temporarily expanded the Earned Income Tax Credit for very low-income families with three or more children. The expansion meant such families could claim a credit equal to 45% of their qualifying earnings, up from 40%, so that they could get a maximum credit of $5,657. President Obama wants to make that increase permanent at an estimated cost of $15.2 billion over 10 years.
Expand child-care tax credit: Under the president's budget, families making less than $85,000 would be able to claim nearly double the child and dependent care tax credit for which they currently qualify. The White House estimates the increase will raise the deficit by $12.6 billion over 10 years.
Permanently extend the American Opportunity Tax Credit: Created under stimulus legislation, the American Opportunity Tax Credit expanded for 2009 and 2010 the existing Hope Scholarship tax credit and made it partially refundable -- meaning that a tax filer could get money back even if it meant he or she would be getting back more from Uncle Sam than paid in federal income tax.
The credit is worth up to $2,500 for higher education expenses, up from $1,800 previously. The president would like to make the measure permanent, adding to the deficit by $75.4 billion over 10 years.
Tuesday, February 2, 2010
Monday, February 1, 2010
Obama unveils 2011 budget with $3.83T in spending
http://news.yahoo.com/s/ap/us_budget
By MARTIN CRUTSINGER, AP Economics Writer Martin Crutsinger, Ap Economics Writer – 37 mins ago
WASHINGTON – President Barack Obama unveiled a multitrillion-dollar spending plan Monday, pledging an intensified effort to combat high unemployment and asking Congress to quickly approve new job-creation efforts that would boost the deficit to a record-breaking $1.56 trillion.
Obama's new budget blueprint preaches the need to make tough choices to restrain run-away deficits, but not before attacking what the administration sees as the more immediate challenge of lifting the country out of a deep recession that has cost 7.2 million jobs over the past two years.
The result is a budget plan that would give the country trillion-dollar-plus deficits for three consecutive years. Obama's new budget projects a spending increase of 5.7 percent for the current budget year and forecasts that spending would rise another 3 percent in 2011 to $3.83 trillion.
"Until America is back at work, my administration will not rest and this recovery will not be finished," Obama declared in his budget message.
Addressing the fact that his budget first projects big increases in the deficit before starting to lower these imbalances, Obama told reporters, "It's very important to understand, we won't be able to bring down this deficit overnight given that the recovery is still taking hold and families across the country still need help."
Obama's budget offers tax cuts for businesses, including a $5,000 tax credit for hiring new workers this year, help for the unemployed and $25 billion more for cash-strapped state governments. All the temporary measures would boost the deficit over the next two years by $245 billion.
The deficit for this year would surge to a record-breaking $1.56 trillion, topping last year's then-unprecedented $1.41 trillion gap, a number which had dwarfed the previous record of $454.8 billion set in 2008 under former President George W. Bush.
The administration is forecasting that deficits over the next decade will add an additional $8.5 trillion to the national debt, even if Congress adopts the administration's package of proposals to trim future deficits starting in 2011. Those include a three-year freeze on spending for government programs, an effort which does not touch popular benefit programs such as Social Security and Medicare and which also exempts defense and homeland security. It also proposes a boost in taxes on the wealthiest Americans, families making more than $250,000 annually, by allowing the Bush tax cuts of 2001 and 2003 to expire.
Republicans were not impressed with Obama's deficit cutting, saying that it fell far short of the bold steps needed in light of the fiscal challenges the country is facing.
"This country is sinking into a fiscal quagmire," said Sen. Judd Gregg, the top Republican on the Senate Budget Committee. "These circumstances call for a bold, game-changing budget that will turn things around."
The administration argued that Obama inherited a deficit that was already topping $1 trillion when he took office and, given the severity of the downturn, the president had to spend billions stabilizing the financial system and jump-starting economic growth.
Obama's new budget carries forward the pledge he made in his State of the Union address: To put full attention on reviving the moribund U.S. economy, an effort to convince recession-battered voters that Democrats are in tune with the issues that affect their lives.
Obama's new budget assumes enactment of a comprehensive health care program, the issue that dominated the president's first year in office. Passage of that proposal is currently stalled with Democrats trying to figure out how to cope with the loss of a key Democratic seat that gave them the 60 votes they needed to overcome a Republican filibuster.
Obama's job proposals would push government spending in 2010 to $3.72 trillion and increase that amount to $3.83 trillion in the 2011 budget year, which begins on Oct. 1.
The deficit in 2011 would total $1.27 trillion, the third straight trillion-dollar-plus imbalance. The deficit would fall to $828 billion in 2012 but would remain at levels surpassing any previous deficits through 2020.
The deficit for this year would be 10.6 percent of the total economy, a figure unmatched since the country was emerging from World War II. The administration does not trim the deficit below 3.6 percent of GDP for any year in the next decade, failing to meet its goal of lowering the deficit to 3 percent of GDP by 2015.
White House Budget Director Peter Orszag said the administration will rely on a deficit commission which the president will create by executive order to recommend ways to further reduce the deficit plus cope with deficits projected to soar further in the next decade with the retirement of millions of baby boomers.
Much of the spending surge starting in 2008 reflects the cost of massive economic stimulus measures passed by Congress to deal with the worst economic downturn since the Great Depression. The surge in the deficits reflects not only the increased spending but also a big drop in tax revenues, reflecting the 7.2 million people who have lost jobs since the recession began and weaker corporate tax receipts.
Obama's new budget attempts to navigate between the opposing goals of pulling the country out of a deep recession and getting control of runaway deficits. The administration insists that once the recession is history, the government will turn its attention to attacking the deficits.
On the anti-recession front, Obama's new budget proposed extending the popular Making Work Pay middle-class tax breaks of $400 per individual and $800 per couple through 2011. They were due to expire after this year. The budget also proposes making $250 payments to Social Security recipients to bolster their finances in a year when they are not receiving the normal cost-of-living boost to their benefit checks because of low inflation. Obama will also seek a $25 billion increase in payments to help recession-battered states.
In a bow to worries over the soaring deficits, the administration proposed a three-year freeze on spending beginning in 2011 for many domestic government agencies. It would save $250 billion over the next decade by following the spending freeze with caps that would keep increases after 2013 from rising faster than inflation.
Military, veterans, homeland security and big benefit programs such as Social Security and Medicare would not feel the pinch. Federal support for elementary and high school education would get what the administration termed the biggest increase in history. The Pell Grant college tuition program which would see an increase of $17 billion to just under $35 billion, helping an additional 1 million students.
The budget reveals some of the changes the administration is seeking in an overhaul of the No Child Left Behind school accountability law. The administration wants to change how schools are judged to be succeeding or failing, looking not only at a single year's test score but at how kids and schools are progressing over time.
In Obama's new budget, there would be substantial increases for homeland security and veterans programs — exempt from Obama's partial freeze — with a 3.4 percent increase in the Pentagon's core budget to $549 billion for next year.
The administration would kill $175 billion worth of Environmental Protection Agency clean water accounts used as a pork-barrel kitty by Congress.
Obama also kills his predecessor's signature space program to return astronauts to the moon. NASA had already spent $9.1 billion on the program, which was projected to cost $100 billion by 2020. Obama's new budget said NASA will be "launching a bold new effort" with an extra $1.2 billion annually for five years, money expected to be used to encourage private companies to build, launch and operate their own spacecraft for the benefit of NASA and others. NASA would pay the private companies to carry U.S. astronauts.
The new Obama budget will also include a proposal to levy a fee on the country's biggest banks to raise an estimated $90 billion to recover losses from the government's $700 billion financial rescue fund.
___
AP writers Andrew Taylor, Stephen Ohlemacher, Seth Borenstein, Darlene Superville and Libby Quaid contributed to this report.
By MARTIN CRUTSINGER, AP Economics Writer Martin Crutsinger, Ap Economics Writer – 37 mins ago
WASHINGTON – President Barack Obama unveiled a multitrillion-dollar spending plan Monday, pledging an intensified effort to combat high unemployment and asking Congress to quickly approve new job-creation efforts that would boost the deficit to a record-breaking $1.56 trillion.
Obama's new budget blueprint preaches the need to make tough choices to restrain run-away deficits, but not before attacking what the administration sees as the more immediate challenge of lifting the country out of a deep recession that has cost 7.2 million jobs over the past two years.
The result is a budget plan that would give the country trillion-dollar-plus deficits for three consecutive years. Obama's new budget projects a spending increase of 5.7 percent for the current budget year and forecasts that spending would rise another 3 percent in 2011 to $3.83 trillion.
"Until America is back at work, my administration will not rest and this recovery will not be finished," Obama declared in his budget message.
Addressing the fact that his budget first projects big increases in the deficit before starting to lower these imbalances, Obama told reporters, "It's very important to understand, we won't be able to bring down this deficit overnight given that the recovery is still taking hold and families across the country still need help."
Obama's budget offers tax cuts for businesses, including a $5,000 tax credit for hiring new workers this year, help for the unemployed and $25 billion more for cash-strapped state governments. All the temporary measures would boost the deficit over the next two years by $245 billion.
The deficit for this year would surge to a record-breaking $1.56 trillion, topping last year's then-unprecedented $1.41 trillion gap, a number which had dwarfed the previous record of $454.8 billion set in 2008 under former President George W. Bush.
The administration is forecasting that deficits over the next decade will add an additional $8.5 trillion to the national debt, even if Congress adopts the administration's package of proposals to trim future deficits starting in 2011. Those include a three-year freeze on spending for government programs, an effort which does not touch popular benefit programs such as Social Security and Medicare and which also exempts defense and homeland security. It also proposes a boost in taxes on the wealthiest Americans, families making more than $250,000 annually, by allowing the Bush tax cuts of 2001 and 2003 to expire.
Republicans were not impressed with Obama's deficit cutting, saying that it fell far short of the bold steps needed in light of the fiscal challenges the country is facing.
"This country is sinking into a fiscal quagmire," said Sen. Judd Gregg, the top Republican on the Senate Budget Committee. "These circumstances call for a bold, game-changing budget that will turn things around."
The administration argued that Obama inherited a deficit that was already topping $1 trillion when he took office and, given the severity of the downturn, the president had to spend billions stabilizing the financial system and jump-starting economic growth.
Obama's new budget carries forward the pledge he made in his State of the Union address: To put full attention on reviving the moribund U.S. economy, an effort to convince recession-battered voters that Democrats are in tune with the issues that affect their lives.
Obama's new budget assumes enactment of a comprehensive health care program, the issue that dominated the president's first year in office. Passage of that proposal is currently stalled with Democrats trying to figure out how to cope with the loss of a key Democratic seat that gave them the 60 votes they needed to overcome a Republican filibuster.
Obama's job proposals would push government spending in 2010 to $3.72 trillion and increase that amount to $3.83 trillion in the 2011 budget year, which begins on Oct. 1.
The deficit in 2011 would total $1.27 trillion, the third straight trillion-dollar-plus imbalance. The deficit would fall to $828 billion in 2012 but would remain at levels surpassing any previous deficits through 2020.
The deficit for this year would be 10.6 percent of the total economy, a figure unmatched since the country was emerging from World War II. The administration does not trim the deficit below 3.6 percent of GDP for any year in the next decade, failing to meet its goal of lowering the deficit to 3 percent of GDP by 2015.
White House Budget Director Peter Orszag said the administration will rely on a deficit commission which the president will create by executive order to recommend ways to further reduce the deficit plus cope with deficits projected to soar further in the next decade with the retirement of millions of baby boomers.
Much of the spending surge starting in 2008 reflects the cost of massive economic stimulus measures passed by Congress to deal with the worst economic downturn since the Great Depression. The surge in the deficits reflects not only the increased spending but also a big drop in tax revenues, reflecting the 7.2 million people who have lost jobs since the recession began and weaker corporate tax receipts.
Obama's new budget attempts to navigate between the opposing goals of pulling the country out of a deep recession and getting control of runaway deficits. The administration insists that once the recession is history, the government will turn its attention to attacking the deficits.
On the anti-recession front, Obama's new budget proposed extending the popular Making Work Pay middle-class tax breaks of $400 per individual and $800 per couple through 2011. They were due to expire after this year. The budget also proposes making $250 payments to Social Security recipients to bolster their finances in a year when they are not receiving the normal cost-of-living boost to their benefit checks because of low inflation. Obama will also seek a $25 billion increase in payments to help recession-battered states.
In a bow to worries over the soaring deficits, the administration proposed a three-year freeze on spending beginning in 2011 for many domestic government agencies. It would save $250 billion over the next decade by following the spending freeze with caps that would keep increases after 2013 from rising faster than inflation.
Military, veterans, homeland security and big benefit programs such as Social Security and Medicare would not feel the pinch. Federal support for elementary and high school education would get what the administration termed the biggest increase in history. The Pell Grant college tuition program which would see an increase of $17 billion to just under $35 billion, helping an additional 1 million students.
The budget reveals some of the changes the administration is seeking in an overhaul of the No Child Left Behind school accountability law. The administration wants to change how schools are judged to be succeeding or failing, looking not only at a single year's test score but at how kids and schools are progressing over time.
In Obama's new budget, there would be substantial increases for homeland security and veterans programs — exempt from Obama's partial freeze — with a 3.4 percent increase in the Pentagon's core budget to $549 billion for next year.
The administration would kill $175 billion worth of Environmental Protection Agency clean water accounts used as a pork-barrel kitty by Congress.
Obama also kills his predecessor's signature space program to return astronauts to the moon. NASA had already spent $9.1 billion on the program, which was projected to cost $100 billion by 2020. Obama's new budget said NASA will be "launching a bold new effort" with an extra $1.2 billion annually for five years, money expected to be used to encourage private companies to build, launch and operate their own spacecraft for the benefit of NASA and others. NASA would pay the private companies to carry U.S. astronauts.
The new Obama budget will also include a proposal to levy a fee on the country's biggest banks to raise an estimated $90 billion to recover losses from the government's $700 billion financial rescue fund.
___
AP writers Andrew Taylor, Stephen Ohlemacher, Seth Borenstein, Darlene Superville and Libby Quaid contributed to this report.
IRS Electronic Payment Options
I have been advocating paying taxes electronically for quite some time now. Doing so is not only safe and accurate but eliminates any concern about the checks getting lost in the mail or stolen. This is especially true if the payment amount is large. Paying taxes electronically removes any potential late payment penalties.
It is so easy to forget sending in quarterly estimated tax payments. Setting them up to have the payments taken out of your bank account automatically on the due date makes a lot of sense.
The December 2009 issue of the Journal of Accountancy has an article on the subject and the author agrees. One caveat is that I would not advise anyone to pay taxes with their credit card unless it is the last resort.
Below is the first and last paragraphs of the article. You can click on the link to read the entire article.
http://www.aicpa.org/pubs/taxadv/dec2009/hurtt.pdf
With the e-filing of tax returns becoming more and more prevalent, practitioners and their clients should also take advantage of other electronic services that the IRS has introduced in recent years. These include the Electronic Federal Tax Payment System (EFTPS), electronic funds withdrawal, and payment by credit or debit card. This article
discusses the requirements and advantages of these electronic services.
More and more taxpayers are using electronic means to pay their taxes due to the number of available payment options. While each option has its pros and cons, depending upon the taxpayer’s or the practitioner’s needs, the options are safe and secure and give the taxpayer a streamlined way to pay taxes.
It is so easy to forget sending in quarterly estimated tax payments. Setting them up to have the payments taken out of your bank account automatically on the due date makes a lot of sense.
The December 2009 issue of the Journal of Accountancy has an article on the subject and the author agrees. One caveat is that I would not advise anyone to pay taxes with their credit card unless it is the last resort.
Below is the first and last paragraphs of the article. You can click on the link to read the entire article.
http://www.aicpa.org/pubs/taxadv/dec2009/hurtt.pdf
With the e-filing of tax returns becoming more and more prevalent, practitioners and their clients should also take advantage of other electronic services that the IRS has introduced in recent years. These include the Electronic Federal Tax Payment System (EFTPS), electronic funds withdrawal, and payment by credit or debit card. This article
discusses the requirements and advantages of these electronic services.
More and more taxpayers are using electronic means to pay their taxes due to the number of available payment options. While each option has its pros and cons, depending upon the taxpayer’s or the practitioner’s needs, the options are safe and secure and give the taxpayer a streamlined way to pay taxes.
Monday, January 25, 2010
Tax Breaks for Almost Everyone
http://finance.yahoo.com/taxes/article/108642/tax-breaks-for-almost-everyone
by Mary Beth Franklin
Monday, January 25, 2010
You'll find lots of new deductions, credits and expanded eligibility rules when you prepare your 2009 tax return.
There's no denying that 2009 was a challenging year for millions of Americans. But filling out your 2009 tax return could bring some welcome relief in the form of a big refund. There are a slew of new and expanded tax breaks for home buyers and car buyers, college students and their parents, homeowners who installed energy-efficient improvements, and the unemployed. Together, these tax savings are expected to boost average tax refunds above last year's level of about $2,800, says IRS spokeswoman Nancy Mathis. The sooner you file, the sooner you'll get your money back.
Here are highlights of what's new for 2009 tax returns.
Education Credit
More parents and students can use a federal education credit to offset part of the cost of college under the new American Opportunity Credit. The maximum $2,500 credit is available to eligible taxpayers who paid at least $4,000 in qualified college tuition, fees and required course materials, including books, in 2009. The full credit is available to individuals with incomes up to $80,000, phasing out above that level and disappearing completely at $90,000. (For married couples filing jointly, the full credit is available to those with incomes up to $160,000 and disappears above $180,000.) Those income limits are higher than under the existing Hope and Lifetime Learning credits.
If you claim the credit and owe no tax, you may receive a refund of 40% of the credit, up to a maximum of $1,000 for each eligible student. Other education credits are not refundable. The American Opportunity Credit can be applied only to expenses paid during the first four years of college. Graduate students are not eligible for this new credit, but they still qualify for the Lifetime Learning credit, of up to $2,000 per household, or a tuition-and-fees deduction of up to $4,000. (A credit, which reduces your tax bill dollar for dollar, is more valuable than a deduction, which merely reduces the amount of income that is taxed.)
Parents of some college freshmen and sophomores should bypass the new American Opportunity Credit and opt instead for the supercharged Hope Credit available to students in Midwestern seven states affected by 2008's flooding disaster (Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska, and Wisconsin). The top credit on 2009 returns for qualified students is $3,600.
Home-Energy Credits
If you weatherized your home or bought alternative-energy equipment in 2009, you may qualify for either of two expanded home-energy credits, regardless of your income.
You may claim a credit worth 30% of the cost of eligible home improvements on your principal residence, up to a maximum $1,500. The cost of certain high-efficiency heating and air-conditioning systems, water heaters and stoves used for home heating qualify for the credit, along with labor costs for installing them. The cost of energy-efficient windows, doors, skylights and insulation also count, but installation costs do not. You would have to spend at least $5,000 to qualify for the full $1,500 credit.
A second tax credit is designed to spur investment in alternative-energy equipment, such as solar electric systems, solar water heaters, geothermal heat pumps and wind turbines, in new and existing homes. The credit is worth 30% of the cost, including installation, with no cap on the amount of the credit.
Home Buyer's Credit
If you bought your first home in 2009, you may be able to claim a tax credit worth 10% of the cost of the house, up to a maximum $8,000, subject to income eligibility rules. You are considered a first-time home buyer if you, or you and your spouse, didn't own a principal residence for at least three years before purchasing a house in 2009.
Different income eligibility limits apply depending on when you bought the house. If you purchased it before November 7, 2009, you are eligible for the full first-time home buyer's tax credit if you are single and your income didn't top $75,000 or if you are married and your joint income didn't exceed $150,000. The credit phases out for individuals with incomes up to $95,000 and married couples with joint incomes up to $170,000, disappearing above those income levels.
Income Eligibility Limits
Limits are higher for those who bought homes on or after November 7, 2009. And a new 10% credit, with a maximum of $6,500, is available to longtime homeowners who bought a new principal residence on or after that date. The full home-buyer credits are available to individuals with incomes up to $125,000 and married couples with joint incomes up to $225,000. The credit is phased out for individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 and disappears for those with incomes above those levels.
Taxpayers claiming either credit on their 2009 returns must use the new Form 5405, "First-Time Homebuyer Credit". If you claim the credit, you cannot file your 2009 tax return online; you must print it out and mail it to the IRS. See more details in our FAQ on the home-buyer credits.
New-Vehicle Purchases
If you bought a new car, light truck, motorcycle or motor home on or after February 16, 2009, through the end of the year, you may be able to deduct the state or local sales tax or excise tax you paid on the vehicle on your 2009 tax return. The deduction is limited to the tax you paid on up to $49,500 of the purchase price of the vehicle, but there is no limit on the number of qualifying vehicles.
To qualify for the full deduction, your income can't top $125,000 if you are single or $250,000 if you are married filing jointly. A partial deduction is available for individuals with incomes between $125,000 and $135,000 (and between $250,000 and $260,000 for joint filers). The deduction is available whether or not you itemize your deductions. If you claim the standard deduction, file the new Schedule L ("Standard Deduction for Certain Filers"). If you itemize your deductions, you can claim the deduction for the sales tax on your vehicle purchase on either line 5 or line 7 of Schedule A.
Jobless Benefits
Unemployed workers are allowed to exclude the first $2,400 of unemployment benefits received in 2009.
Copyrighted, Kiplinger Washington Editors, Inc.
by Mary Beth Franklin
Monday, January 25, 2010
You'll find lots of new deductions, credits and expanded eligibility rules when you prepare your 2009 tax return.
There's no denying that 2009 was a challenging year for millions of Americans. But filling out your 2009 tax return could bring some welcome relief in the form of a big refund. There are a slew of new and expanded tax breaks for home buyers and car buyers, college students and their parents, homeowners who installed energy-efficient improvements, and the unemployed. Together, these tax savings are expected to boost average tax refunds above last year's level of about $2,800, says IRS spokeswoman Nancy Mathis. The sooner you file, the sooner you'll get your money back.
Here are highlights of what's new for 2009 tax returns.
Education Credit
More parents and students can use a federal education credit to offset part of the cost of college under the new American Opportunity Credit. The maximum $2,500 credit is available to eligible taxpayers who paid at least $4,000 in qualified college tuition, fees and required course materials, including books, in 2009. The full credit is available to individuals with incomes up to $80,000, phasing out above that level and disappearing completely at $90,000. (For married couples filing jointly, the full credit is available to those with incomes up to $160,000 and disappears above $180,000.) Those income limits are higher than under the existing Hope and Lifetime Learning credits.
If you claim the credit and owe no tax, you may receive a refund of 40% of the credit, up to a maximum of $1,000 for each eligible student. Other education credits are not refundable. The American Opportunity Credit can be applied only to expenses paid during the first four years of college. Graduate students are not eligible for this new credit, but they still qualify for the Lifetime Learning credit, of up to $2,000 per household, or a tuition-and-fees deduction of up to $4,000. (A credit, which reduces your tax bill dollar for dollar, is more valuable than a deduction, which merely reduces the amount of income that is taxed.)
Parents of some college freshmen and sophomores should bypass the new American Opportunity Credit and opt instead for the supercharged Hope Credit available to students in Midwestern seven states affected by 2008's flooding disaster (Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska, and Wisconsin). The top credit on 2009 returns for qualified students is $3,600.
Home-Energy Credits
If you weatherized your home or bought alternative-energy equipment in 2009, you may qualify for either of two expanded home-energy credits, regardless of your income.
You may claim a credit worth 30% of the cost of eligible home improvements on your principal residence, up to a maximum $1,500. The cost of certain high-efficiency heating and air-conditioning systems, water heaters and stoves used for home heating qualify for the credit, along with labor costs for installing them. The cost of energy-efficient windows, doors, skylights and insulation also count, but installation costs do not. You would have to spend at least $5,000 to qualify for the full $1,500 credit.
A second tax credit is designed to spur investment in alternative-energy equipment, such as solar electric systems, solar water heaters, geothermal heat pumps and wind turbines, in new and existing homes. The credit is worth 30% of the cost, including installation, with no cap on the amount of the credit.
Home Buyer's Credit
If you bought your first home in 2009, you may be able to claim a tax credit worth 10% of the cost of the house, up to a maximum $8,000, subject to income eligibility rules. You are considered a first-time home buyer if you, or you and your spouse, didn't own a principal residence for at least three years before purchasing a house in 2009.
Different income eligibility limits apply depending on when you bought the house. If you purchased it before November 7, 2009, you are eligible for the full first-time home buyer's tax credit if you are single and your income didn't top $75,000 or if you are married and your joint income didn't exceed $150,000. The credit phases out for individuals with incomes up to $95,000 and married couples with joint incomes up to $170,000, disappearing above those income levels.
Income Eligibility Limits
Limits are higher for those who bought homes on or after November 7, 2009. And a new 10% credit, with a maximum of $6,500, is available to longtime homeowners who bought a new principal residence on or after that date. The full home-buyer credits are available to individuals with incomes up to $125,000 and married couples with joint incomes up to $225,000. The credit is phased out for individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 and disappears for those with incomes above those levels.
Taxpayers claiming either credit on their 2009 returns must use the new Form 5405, "First-Time Homebuyer Credit". If you claim the credit, you cannot file your 2009 tax return online; you must print it out and mail it to the IRS. See more details in our FAQ on the home-buyer credits.
New-Vehicle Purchases
If you bought a new car, light truck, motorcycle or motor home on or after February 16, 2009, through the end of the year, you may be able to deduct the state or local sales tax or excise tax you paid on the vehicle on your 2009 tax return. The deduction is limited to the tax you paid on up to $49,500 of the purchase price of the vehicle, but there is no limit on the number of qualifying vehicles.
To qualify for the full deduction, your income can't top $125,000 if you are single or $250,000 if you are married filing jointly. A partial deduction is available for individuals with incomes between $125,000 and $135,000 (and between $250,000 and $260,000 for joint filers). The deduction is available whether or not you itemize your deductions. If you claim the standard deduction, file the new Schedule L ("Standard Deduction for Certain Filers"). If you itemize your deductions, you can claim the deduction for the sales tax on your vehicle purchase on either line 5 or line 7 of Schedule A.
Jobless Benefits
Unemployed workers are allowed to exclude the first $2,400 of unemployment benefits received in 2009.
Copyrighted, Kiplinger Washington Editors, Inc.
Thursday, January 7, 2010
White House put on the defensive on health care
http://www.sacbee.com/838/story/2439696.html
By ERICA WERNER
Associated Press Writer
Published: Tuesday, Jan. 5, 2010 - 1:26 pm
Last Modified: Wednesday, Jan. 6, 2010 - 1:20 pm
WASHINGTON -- The White House was put on the defensive Wednesday after President Barack Obama pushed congressional leaders to fast-track health care legislation behind closed doors despite his campaign promises of an open process.
"The president wants to get a bill to his desk as quickly as possible," Press Secretary Robert Gibbs said as reporters questioned him repeatedly about Obama's decision to go along with House and Senate leaders in bypassing the usual negotiations between the two chambers in the interest of speed.
The decision was made in an Oval Office meeting Tuesday evening with House Speaker Nancy Pelosi and House Majority Leader Steny Hoyer. Senate Majority Leader Harry Reid and his No. 2, Sen. Dick Durbin, D-Ill., joined in by phone.
They agreed that rather than setting up a formal conference committee to resolve differences between health bills passed last year by the House and Senate, the House will work off the Senate's version, amend it and send it back to the Senate for final passage, according to a House leadership aide, speaking on condition of anonymity in order to discuss the private meeting.
Obama himself will take a hands-on role, and is convening another meeting with congressional leaders at the White House on Wednesday. Pelosi and four Democratic committee leaders are expected to attend.
Gibbs told reporters Wednesday to "ask the leaders in Congress" about the fast-track approach, even though Obama was involved in making the decision and the closed nature of the proceedings is at odds with a promise he made while campaigning for president. In a January 2008 debate, Obama said that his approach to health care talks would involve "bringing all parties together, and broadcasting those negotiations on C-SPAN so that the American people can see what the choices are."
Republicans have jumped on the contradiction to accuse Obama and Democrats of operating in secret, an assertion Democrats dispute. "There has never been a more open process for any legislation in anyone who serves here's experience," Pelosi declared at a news conference Tuesday.
Asked about Obama's campaign trail promise, Pelosi remarked, without elaboration, "There are a number of things he was for on the campaign trail."
Pelosi spokesman Brendan Daly said Wednesday it was not a slap at the president. "It was a quip," Daly said.
The fast-track process isn't unheard of in Congress but it is unusual. Democrats passed their health care bills by razor-thin margins and with barely any Republican support last year. The quick approach to reconcile the bills will exclude GOP lawmakers and reduce the party's ability to delay or force politically troubling votes in both houses.
Ahead of Wednesday's White House meeting Pelosi summoned her top lieutenants and committee chairmen to search for concessions and trade-offs they can reach with the Senate in order to deliver a bill to Obama in time for the State of the Union speech sometime early next month.
House Democrats are reluctant to abandon elements of their legislation favored by liberals but rejected by Senate moderates, but face doing just that. Reid has no votes to spare in his 60-member caucus so the legislation must be largely tailored along the lines favored by the Senate.
That means no new government insurance plan, which the House wanted but the Senate omitted, and changes to the House's preferred payment scheme. The House wants to raise income taxes on individuals making more than $500,000 and couples over $1 million. The Senate would slap a new tax on high-cost insurance plans. Although the Obama administration supports the Senate's insurance tax as a cost-saver, labor unions, which contribute heavily to Democratic candidates, oppose it.
House Rules Committee Chairman Louise Slaughter, D-N.Y., said that leaders spent Wednesday morning comparing the House and Senate bills, and "concluded as we always do that our bill is so much better."
Nonetheless Slaughter, like others, sounded ready to deal. On the different taxation approaches, "There's a lot of talk about whether there'd be sort of a hybrid between ours and the Senate," she said.
The House may end up accepting the insurance tax if it hits fewer people than the Senate's design now calls for. There also could be common ground on a Senate proposal to raise Medicare payroll taxes.
In place of a new government insurance plan House Democrats plan to insist on stronger affordability measures for the middle and lower classes, and they also favor revoking insurers' antitrust exemption. Obama agreed at Tuesday evening's meeting to help strengthen affordability measures beyond what's in the Senate bill, the aide said.
The bills passed by the House and Senate both would require nearly all Americans to get coverage and would provide subsidies for many who can't afford the cost, but they differ on hundreds of details. Among them are whom to tax, how many people to cover, how to restrict taxpayer funding for abortion and whether illegal immigrants should be allowed to buy coverage in the new markets with their own money.
Also Wednesday California Gov. Arnold Schwarzenegger, who in October praised Obama's efforts toward reforming health care, delivered a stinging indictment of the legislation.
"Health care reform, which started as noble and needed legislation, has become a trough of bribes, deals and loopholes," Schwarzenegger said in his State of the State address in Sacramento, Calif. "You've heard of the bridge to nowhere. This is health care to nowhere."
Schwarzenegger urged California lawmakers to vote against the bill unless they can negotiate a special deal to get more Medicaid money, as did key centrist Sen. Ben Nelson, D-Neb.
By ERICA WERNER
Associated Press Writer
Published: Tuesday, Jan. 5, 2010 - 1:26 pm
Last Modified: Wednesday, Jan. 6, 2010 - 1:20 pm
WASHINGTON -- The White House was put on the defensive Wednesday after President Barack Obama pushed congressional leaders to fast-track health care legislation behind closed doors despite his campaign promises of an open process.
"The president wants to get a bill to his desk as quickly as possible," Press Secretary Robert Gibbs said as reporters questioned him repeatedly about Obama's decision to go along with House and Senate leaders in bypassing the usual negotiations between the two chambers in the interest of speed.
The decision was made in an Oval Office meeting Tuesday evening with House Speaker Nancy Pelosi and House Majority Leader Steny Hoyer. Senate Majority Leader Harry Reid and his No. 2, Sen. Dick Durbin, D-Ill., joined in by phone.
They agreed that rather than setting up a formal conference committee to resolve differences between health bills passed last year by the House and Senate, the House will work off the Senate's version, amend it and send it back to the Senate for final passage, according to a House leadership aide, speaking on condition of anonymity in order to discuss the private meeting.
Obama himself will take a hands-on role, and is convening another meeting with congressional leaders at the White House on Wednesday. Pelosi and four Democratic committee leaders are expected to attend.
Gibbs told reporters Wednesday to "ask the leaders in Congress" about the fast-track approach, even though Obama was involved in making the decision and the closed nature of the proceedings is at odds with a promise he made while campaigning for president. In a January 2008 debate, Obama said that his approach to health care talks would involve "bringing all parties together, and broadcasting those negotiations on C-SPAN so that the American people can see what the choices are."
Republicans have jumped on the contradiction to accuse Obama and Democrats of operating in secret, an assertion Democrats dispute. "There has never been a more open process for any legislation in anyone who serves here's experience," Pelosi declared at a news conference Tuesday.
Asked about Obama's campaign trail promise, Pelosi remarked, without elaboration, "There are a number of things he was for on the campaign trail."
Pelosi spokesman Brendan Daly said Wednesday it was not a slap at the president. "It was a quip," Daly said.
The fast-track process isn't unheard of in Congress but it is unusual. Democrats passed their health care bills by razor-thin margins and with barely any Republican support last year. The quick approach to reconcile the bills will exclude GOP lawmakers and reduce the party's ability to delay or force politically troubling votes in both houses.
Ahead of Wednesday's White House meeting Pelosi summoned her top lieutenants and committee chairmen to search for concessions and trade-offs they can reach with the Senate in order to deliver a bill to Obama in time for the State of the Union speech sometime early next month.
House Democrats are reluctant to abandon elements of their legislation favored by liberals but rejected by Senate moderates, but face doing just that. Reid has no votes to spare in his 60-member caucus so the legislation must be largely tailored along the lines favored by the Senate.
That means no new government insurance plan, which the House wanted but the Senate omitted, and changes to the House's preferred payment scheme. The House wants to raise income taxes on individuals making more than $500,000 and couples over $1 million. The Senate would slap a new tax on high-cost insurance plans. Although the Obama administration supports the Senate's insurance tax as a cost-saver, labor unions, which contribute heavily to Democratic candidates, oppose it.
House Rules Committee Chairman Louise Slaughter, D-N.Y., said that leaders spent Wednesday morning comparing the House and Senate bills, and "concluded as we always do that our bill is so much better."
Nonetheless Slaughter, like others, sounded ready to deal. On the different taxation approaches, "There's a lot of talk about whether there'd be sort of a hybrid between ours and the Senate," she said.
The House may end up accepting the insurance tax if it hits fewer people than the Senate's design now calls for. There also could be common ground on a Senate proposal to raise Medicare payroll taxes.
In place of a new government insurance plan House Democrats plan to insist on stronger affordability measures for the middle and lower classes, and they also favor revoking insurers' antitrust exemption. Obama agreed at Tuesday evening's meeting to help strengthen affordability measures beyond what's in the Senate bill, the aide said.
The bills passed by the House and Senate both would require nearly all Americans to get coverage and would provide subsidies for many who can't afford the cost, but they differ on hundreds of details. Among them are whom to tax, how many people to cover, how to restrict taxpayer funding for abortion and whether illegal immigrants should be allowed to buy coverage in the new markets with their own money.
Also Wednesday California Gov. Arnold Schwarzenegger, who in October praised Obama's efforts toward reforming health care, delivered a stinging indictment of the legislation.
"Health care reform, which started as noble and needed legislation, has become a trough of bribes, deals and loopholes," Schwarzenegger said in his State of the State address in Sacramento, Calif. "You've heard of the bridge to nowhere. This is health care to nowhere."
Schwarzenegger urged California lawmakers to vote against the bill unless they can negotiate a special deal to get more Medicaid money, as did key centrist Sen. Ben Nelson, D-Neb.
Sunday, January 3, 2010
Health bills could expand IRS role
http://www.usatoday.com/news/washington/2010-01-03-IRS-health-care-role_N.htm
By Phil Galewitz and Christopher Weaver, Kaiser Health News
Internal Revenue Service agents already try to catch tax cheats and moonshiners. Under the proposed health care legislation, they would get another assignment: checking to see whether Americans have health insurance.
The legislation would require most Americans to have health insurance and to prove it on their federal tax returns. Those who don't would pay a penalty to the IRS.
That's one of several key duties the IRS would assume under the bills that have been approved by the House of Representatives and Senate and will be merged by negotiators from both chambers.
The agency also would distribute as much as $140 billion a year in new government subsidies to help small employers and as many as 19 million lower-income people buy coverage.
In addition, the IRS would collect hundreds of billions of dollars in new fees on employers, drug companies and device makers, according to the non-partisan Congressional Budget Office (CBO).
Some critics of the health bill question whether the IRS, which has struggled in recent years with budget problems, staffing shortages and outdated computer systems, will be up to the job of enforcing the mandate and efficiently handling the subsidies.
"It's hard to see how the IRS could take on the huge responsibility it would be given under pending health care legislation without some real glitches, or worse," said Sen. Chuck Grassley of Iowa, the top Republican on the Senate Finance Committee. He voted against the bill, as did every other Republican senator.
The CBO estimated the IRS would need $5 billion to $10 billion in the first decade to cover the costs of its expanded role. The IRS' annual budget is currently $11.5 billion.
Neither the House nor Senate bill includes funding for the IRS, but money could be added by House and Senate negotiators.
The IRS already has trouble meeting its primary duty: collecting taxes. By the IRS's own estimates, it failed to collect about $290 billion in taxes in 2005, the latest year for which data are available.
Pete Sepp, spokesman for the National Taxpayers Union, an IRS watchdog group, says the IRS might be the "logical" agency to enforce the mandate, "but that doesn't mean things will go smoothly."
'Social engineering'
Howard Gleckman of the Urban Institute, an economics and social policy think tank, sees the IRS' proposed new role as a part of a historical pattern. "We are always asking the IRS to do all kinds of social engineering," he said, such as tax credits for new homeowners and renewable-energy companies.
In one of the biggest examples of using the tax code to achieve a social goal, Congress shifted much of its effort to help the poor in the 1990s from direct spending to the Earned Income Tax Credit, an IRS-run program that pays rebates to low-income working people to offset taxes.
In 2005, more than 22 million people claimed the credit, resulting in more than $40 billion in payments, a Treasury Department inspector general found last year. The audit found $11.4 billion in improper payments in 2005 — about 28 cents of every dollar paid out.
Grassley has called the program "rife with fraud and abuse." John Dalrymple, a former IRS deputy commissioner, said the tax-credit program — despite its flaws — demonstrates that the IRS has the experience to handle the new subsidy program.
Under the health care legislation, the IRS would determine who qualifies for the insurance subsidies. Those subsidies would apply to people with incomes up to four times the federal poverty level, which is $43,320 for an individual and $88,200 for a family of four. The government would pay insurance companies to help individuals buy policies on the new exchanges. The exchanges, a central feature in both bills, would be a sort of marketplace where small businesses and individuals who don't get employer-sponsored coverage could shop for health plans.
To meet the mandate, Americans would have to provide proof of insurance coverage with their annual tax returns. The mandate would begin in 2013 under the House bill; 2014 in the Senate bill.
The penalty in the Senate bill for not having coverage would start in 2014 at $95 or 0.5% of an individual's income, whichever is greater. It would rise to $750 or 2% of annual income in 2016, up to the cost of the cheapest health plans. The House bill penalty would be up to 2.5% of an individual's income up to the cost of the average health plan.
Massachusetts as a model
In 2007, Massachusetts became the first state to enact a health insurance mandate and lowered the percentage of uninsured residents from 7% to 4%.
State residents are required to report their health insurance status on a special form they attach to state income tax returns. Insurers provide statements to policyholders confirming coverage and report that data to the state Department of Revenue.
The state tax agency did not get extra staff or money for enforcement and has not had serious difficulties gathering the information, spokesman Robert Bliss said. In 2008, more than 96% of tax filers provided proof of coverage. Only 1.3% of filers, or about 45,000 residents, were assessed a no-coverage penalty of up to $1,068.
The "vast majority" of Massachusetts residents who pay the penalty are self-reported, Bliss said.
Bliss said the fact that the department had 18 months to get ready for the state's insurance mandate was "enormously important" in making sure it was ready to handle the assignment. That bodes well for the IRS, which would have three to four years to get ready under the bills.
Despite concerns over whether IRS will be up to the job in the health bills, Gerard Anderson, health policy professor at Johns Hopkins University, said: "The IRS seems like the only logical enforcement mechanism."
Galewitz and Weaver report for Kaiser Health News, an editorially independent news service and a program of the Kaiser Family Foundation, a non-partisan health care policy research organization. Neither KFF nor KHN is affiliated with Kaiser Permanente.
By Phil Galewitz and Christopher Weaver, Kaiser Health News
Internal Revenue Service agents already try to catch tax cheats and moonshiners. Under the proposed health care legislation, they would get another assignment: checking to see whether Americans have health insurance.
The legislation would require most Americans to have health insurance and to prove it on their federal tax returns. Those who don't would pay a penalty to the IRS.
That's one of several key duties the IRS would assume under the bills that have been approved by the House of Representatives and Senate and will be merged by negotiators from both chambers.
The agency also would distribute as much as $140 billion a year in new government subsidies to help small employers and as many as 19 million lower-income people buy coverage.
In addition, the IRS would collect hundreds of billions of dollars in new fees on employers, drug companies and device makers, according to the non-partisan Congressional Budget Office (CBO).
Some critics of the health bill question whether the IRS, which has struggled in recent years with budget problems, staffing shortages and outdated computer systems, will be up to the job of enforcing the mandate and efficiently handling the subsidies.
"It's hard to see how the IRS could take on the huge responsibility it would be given under pending health care legislation without some real glitches, or worse," said Sen. Chuck Grassley of Iowa, the top Republican on the Senate Finance Committee. He voted against the bill, as did every other Republican senator.
The CBO estimated the IRS would need $5 billion to $10 billion in the first decade to cover the costs of its expanded role. The IRS' annual budget is currently $11.5 billion.
Neither the House nor Senate bill includes funding for the IRS, but money could be added by House and Senate negotiators.
The IRS already has trouble meeting its primary duty: collecting taxes. By the IRS's own estimates, it failed to collect about $290 billion in taxes in 2005, the latest year for which data are available.
Pete Sepp, spokesman for the National Taxpayers Union, an IRS watchdog group, says the IRS might be the "logical" agency to enforce the mandate, "but that doesn't mean things will go smoothly."
'Social engineering'
Howard Gleckman of the Urban Institute, an economics and social policy think tank, sees the IRS' proposed new role as a part of a historical pattern. "We are always asking the IRS to do all kinds of social engineering," he said, such as tax credits for new homeowners and renewable-energy companies.
In one of the biggest examples of using the tax code to achieve a social goal, Congress shifted much of its effort to help the poor in the 1990s from direct spending to the Earned Income Tax Credit, an IRS-run program that pays rebates to low-income working people to offset taxes.
In 2005, more than 22 million people claimed the credit, resulting in more than $40 billion in payments, a Treasury Department inspector general found last year. The audit found $11.4 billion in improper payments in 2005 — about 28 cents of every dollar paid out.
Grassley has called the program "rife with fraud and abuse." John Dalrymple, a former IRS deputy commissioner, said the tax-credit program — despite its flaws — demonstrates that the IRS has the experience to handle the new subsidy program.
Under the health care legislation, the IRS would determine who qualifies for the insurance subsidies. Those subsidies would apply to people with incomes up to four times the federal poverty level, which is $43,320 for an individual and $88,200 for a family of four. The government would pay insurance companies to help individuals buy policies on the new exchanges. The exchanges, a central feature in both bills, would be a sort of marketplace where small businesses and individuals who don't get employer-sponsored coverage could shop for health plans.
To meet the mandate, Americans would have to provide proof of insurance coverage with their annual tax returns. The mandate would begin in 2013 under the House bill; 2014 in the Senate bill.
The penalty in the Senate bill for not having coverage would start in 2014 at $95 or 0.5% of an individual's income, whichever is greater. It would rise to $750 or 2% of annual income in 2016, up to the cost of the cheapest health plans. The House bill penalty would be up to 2.5% of an individual's income up to the cost of the average health plan.
Massachusetts as a model
In 2007, Massachusetts became the first state to enact a health insurance mandate and lowered the percentage of uninsured residents from 7% to 4%.
State residents are required to report their health insurance status on a special form they attach to state income tax returns. Insurers provide statements to policyholders confirming coverage and report that data to the state Department of Revenue.
The state tax agency did not get extra staff or money for enforcement and has not had serious difficulties gathering the information, spokesman Robert Bliss said. In 2008, more than 96% of tax filers provided proof of coverage. Only 1.3% of filers, or about 45,000 residents, were assessed a no-coverage penalty of up to $1,068.
The "vast majority" of Massachusetts residents who pay the penalty are self-reported, Bliss said.
Bliss said the fact that the department had 18 months to get ready for the state's insurance mandate was "enormously important" in making sure it was ready to handle the assignment. That bodes well for the IRS, which would have three to four years to get ready under the bills.
Despite concerns over whether IRS will be up to the job in the health bills, Gerard Anderson, health policy professor at Johns Hopkins University, said: "The IRS seems like the only logical enforcement mechanism."
Galewitz and Weaver report for Kaiser Health News, an editorially independent news service and a program of the Kaiser Family Foundation, a non-partisan health care policy research organization. Neither KFF nor KHN is affiliated with Kaiser Permanente.
Tuesday, December 29, 2009
Where do you rank in terms of income?
http://finance.yahoo.com/career-work/article/108460/how-your-income-stacks-up
By Kiplinger
Where do you rank as a taxpayer? You may not feel rich earning $35,000 a year, but you're in the top half of taxpayers. Make $70,000, and you earn more than 75 percent of fellow taxpayers.
Even as the Great Recession ends, we know the economic wounds it inflicted will take years to heal. The national unemployment rate has breached 10 percent, and unemployment is higher than 12 percent in California and above 15 percent in Michigan. A new study from the Department of Agriculture found that nearly 50 million Americans struggled at some point in 2008 to get enough to eat.
More than 40 million Americans are officially living in poverty. And you might be surprised at how little income it takes to not be considered poor by the federal government. For 2008, the poverty threshold for a single person under age 65 was an income of $11,201, or less than $1,000 a month. For a family of four, the threshold was $21,834. For a family of six, $28,769.
With that perspective, you may wonder just how your income stacks up against that of your fellow citizens. New statistics from the IRS provide an answer. The numbers here come from an analysis of 2007 tax returns, the most recent ones that have been studied.
The data show that an income of $32,879 or more puts you in the top half of taxpayers. Earning a bit more than twice that much -- $66,532 -- earns you a spot among the top 25 percent of all earners. You crack the elite top 10 percent if you earn more than $113,018.
And $410,096 buys top bragging rights: Earn that much or more and you're among the top 1 percent of all American earners.
Kiplinger has developed an online calculator to quickly show you -- based on your personal adjusted gross income -- into which income category you fall and, as a bonus, what percentage of the nation's tax burden is borne collectively by you and your fellow citizens who are in that income category. The following table shows the income categories and the percentage of income earned and tax burden paid by each category.
Monday, December 28, 2009
Accounting in health care, is it double counting?
http://www.nytimes.com/2009/12/29/health/policy/29health.html
By ROBERT PEAR
Published: December 28, 2009
WASHINGTON — At the heart of the fight over health care legislation is a paradox that befuddles lawmakers of both parties.
Separate bills passed by the Senate and the House would squeeze nearly a half-trillion dollars from projected spending on Medicare over the next 10 years. These savings would help offset the cost of providing coverage to people who are uninsured.
At the same time, federal accountants say the money would shore up the Medicare trust fund, so the program could continue paying hospitals to treat older Americans in the future.
In other words, Medicare savings mean both more money available to spend now and the appearance of more money to spend later on Medicare.
How is this possible?
The Congressional Budget Office tried to answer the question last week. In effect, it said, the same money cannot be used for both purposes without double-counting.
“To describe the full amount of hospital insurance trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings, and thus overstate the improvement in the government’s fiscal position,” the budget office said.
But the clarification came too late to affect the outcome of debate over the legislation, passed Thursday in the Senate by a party-line vote of 60 to 39.
For weeks, Republicans had been saying that Democrats would plunder Medicare, raid it, use it as a “piggy bank” to pay for coverage of the uninsured under a new entitlement program.
Such fusillades frightened some older voters and prompted defensive maneuvers by Democrats, who said their bill would “save lives, save money and save Medicare,” while providing additional benefits to older Americans.
Senator Michael Bennet, Democrat of Colorado, offered an amendment that said nothing in the bill would result in a reduction of “guaranteed benefits” under Medicare. The amendment was approved, 100 to 0, on Dec. 3.
Richard S. Foster, the chief Medicare actuary, agrees with the Congressional Budget Office. He traces the confusion to different accounting rules used for the federal budget and for the Medicare trust fund.
The Senate bill would reduce the growth of Medicare spending and increase the Medicare payroll tax on high-income people. The combination of less spending and more revenue would lower the deficit, based on budget accounting rules, and extend the life of the Medicare trust fund.
However, Mr. Foster said, the same money “cannot be simultaneously used” to cover the uninsured and to extend the Medicare trust fund, “despite the appearance of this result from the respective accounting conventions.”
Senator Jon Kyl of Arizona, the No. 2 Republican in the Senate, summarized the situation with a pithy metaphor. “You can’t sell the same pony twice,” he said.
After issuing its clarification, the budget office reaffirmed its earlier estimate that the Senate bill would reduce the deficit by $132 billion in the next 10 years, compared with the deficits expected under current law.
The issue involves not only technical accounting matters, but also a huge political issue: the impact of a health care overhaul on Medicare and its beneficiaries, whose numbers are about to explode — to 60 million in 2019, from 46 million now.
On a purely technical level, the federal budget deficit — $1.4 trillion in the last year — is the difference between federal receipts and federal spending in a given year. It measures cash flows into and out of the Treasury. If Congress cuts Medicare spending, it reduces the deficit, assuming everything else stays the same.
By contrast, Medicare’s hospital insurance trust fund serves, in the words of the Congressional Budget Office, “primarily as an accounting mechanism.” Payroll taxes paid by workers and employers are credited to the trust fund. Medicare draws on this account to pay hospitals, nursing homes and certain other health care providers.
Under federal law, the Medicare hospital trust fund exists “on the books of the Treasury.” It may have a positive balance — enough money to pay expected claims for a decade or more — even though the government as a whole runs a deficit every year and borrows immense sums to pay its bills.
In one sense, money that “goes into” the Medicare trust fund cannot be used for other purposes. But it is part of a unified federal budget, which includes spending for dozens of other federal programs. So if Congress reduces Medicare payments to hospitals or private Medicare Advantage plans — and if everything else stays the same — the federal budget deficit will be lower and the balance in the Medicare trust fund higher than they otherwise would be.
The Congressional Budget Office says the Senate bill would cover 31 million uninsured people — about 10 percent of the population — while the House bill would cover 36 million. The budget office has not estimated the effects on total national health spending, but Mr. Foster, the Medicare actuary, has done so.
Mr. Foster estimates that the Senate bill would increase national health spending by a total of $234 billion, or 0.7 percent, in the decade from 2010 through 2019, while the House bill would increase it by $289 billion, or 0.8 percent.
If the savings in the Senate bill are achieved, Mr. Foster said, they would add nine years to the life of Medicare’s hospital trust fund, so it would be exhausted in 2026, rather than 2017.
But, Mr. Foster said, some of the estimated savings “may be unrealistic” because they assume increases in productivity that can probably not be attained by hospitals, nursing homes and home health agencies.
By ROBERT PEAR
Published: December 28, 2009
WASHINGTON — At the heart of the fight over health care legislation is a paradox that befuddles lawmakers of both parties.
Separate bills passed by the Senate and the House would squeeze nearly a half-trillion dollars from projected spending on Medicare over the next 10 years. These savings would help offset the cost of providing coverage to people who are uninsured.
At the same time, federal accountants say the money would shore up the Medicare trust fund, so the program could continue paying hospitals to treat older Americans in the future.
In other words, Medicare savings mean both more money available to spend now and the appearance of more money to spend later on Medicare.
How is this possible?
The Congressional Budget Office tried to answer the question last week. In effect, it said, the same money cannot be used for both purposes without double-counting.
“To describe the full amount of hospital insurance trust fund savings as both improving the government’s ability to pay future Medicare benefits and financing new spending outside of Medicare would essentially double-count a large share of those savings, and thus overstate the improvement in the government’s fiscal position,” the budget office said.
But the clarification came too late to affect the outcome of debate over the legislation, passed Thursday in the Senate by a party-line vote of 60 to 39.
For weeks, Republicans had been saying that Democrats would plunder Medicare, raid it, use it as a “piggy bank” to pay for coverage of the uninsured under a new entitlement program.
Such fusillades frightened some older voters and prompted defensive maneuvers by Democrats, who said their bill would “save lives, save money and save Medicare,” while providing additional benefits to older Americans.
Senator Michael Bennet, Democrat of Colorado, offered an amendment that said nothing in the bill would result in a reduction of “guaranteed benefits” under Medicare. The amendment was approved, 100 to 0, on Dec. 3.
Richard S. Foster, the chief Medicare actuary, agrees with the Congressional Budget Office. He traces the confusion to different accounting rules used for the federal budget and for the Medicare trust fund.
The Senate bill would reduce the growth of Medicare spending and increase the Medicare payroll tax on high-income people. The combination of less spending and more revenue would lower the deficit, based on budget accounting rules, and extend the life of the Medicare trust fund.
However, Mr. Foster said, the same money “cannot be simultaneously used” to cover the uninsured and to extend the Medicare trust fund, “despite the appearance of this result from the respective accounting conventions.”
Senator Jon Kyl of Arizona, the No. 2 Republican in the Senate, summarized the situation with a pithy metaphor. “You can’t sell the same pony twice,” he said.
After issuing its clarification, the budget office reaffirmed its earlier estimate that the Senate bill would reduce the deficit by $132 billion in the next 10 years, compared with the deficits expected under current law.
The issue involves not only technical accounting matters, but also a huge political issue: the impact of a health care overhaul on Medicare and its beneficiaries, whose numbers are about to explode — to 60 million in 2019, from 46 million now.
On a purely technical level, the federal budget deficit — $1.4 trillion in the last year — is the difference between federal receipts and federal spending in a given year. It measures cash flows into and out of the Treasury. If Congress cuts Medicare spending, it reduces the deficit, assuming everything else stays the same.
By contrast, Medicare’s hospital insurance trust fund serves, in the words of the Congressional Budget Office, “primarily as an accounting mechanism.” Payroll taxes paid by workers and employers are credited to the trust fund. Medicare draws on this account to pay hospitals, nursing homes and certain other health care providers.
Under federal law, the Medicare hospital trust fund exists “on the books of the Treasury.” It may have a positive balance — enough money to pay expected claims for a decade or more — even though the government as a whole runs a deficit every year and borrows immense sums to pay its bills.
In one sense, money that “goes into” the Medicare trust fund cannot be used for other purposes. But it is part of a unified federal budget, which includes spending for dozens of other federal programs. So if Congress reduces Medicare payments to hospitals or private Medicare Advantage plans — and if everything else stays the same — the federal budget deficit will be lower and the balance in the Medicare trust fund higher than they otherwise would be.
The Congressional Budget Office says the Senate bill would cover 31 million uninsured people — about 10 percent of the population — while the House bill would cover 36 million. The budget office has not estimated the effects on total national health spending, but Mr. Foster, the Medicare actuary, has done so.
Mr. Foster estimates that the Senate bill would increase national health spending by a total of $234 billion, or 0.7 percent, in the decade from 2010 through 2019, while the House bill would increase it by $289 billion, or 0.8 percent.
If the savings in the Senate bill are achieved, Mr. Foster said, they would add nine years to the life of Medicare’s hospital trust fund, so it would be exhausted in 2026, rather than 2017.
But, Mr. Foster said, some of the estimated savings “may be unrealistic” because they assume increases in productivity that can probably not be attained by hospitals, nursing homes and home health agencies.
Sunday, December 27, 2009
20 States cry foul on Senate health bill
Here are a few excerpts from the NY Times article below on the unfairness on Medicaid reimbursement among different states:
In Arizona, ... the state, where voters approved an expansion of Medicaid in 2000, projects that in the first seven years of an overhaul, its share of Medicaid would be $17 billion under the Senate bill. Had Arizona not expanded coverage, the state’s share would have been $1.4 billion, the state estimates
... in general, the states without expanded coverage would be paid back 95 percent of their costs, while those that have already expanded coverage would be reimbursed between 80 percent and 95 percent. Medicaid reimbursement rates are based on per capita income; wealthier states have smaller shares of their costs paid back.
States that have expanded already would not get any new matching funds for those people. The Senate bill provides additional money only for those who are “newly eligible.”
... it would pay just 50 percent of the cost for most of those newly enrolled in California, because California already makes eligible working parents earning up to 106 percent of the poverty level and its Medicaid assistance is set at 50 percent. California would get a more generous reimbursement, about 83 percent, only for parents earning from 106 percent to 133 percent of the federal poverty level.
http://www.nytimes.com/2009/12/27/health/policy/27states.html
By KATE ZERNIKE
Published: December 26, 2009
States that have already broadly expanded health care coverage are pushing back against the Senate overhaul bill, arguing that it unfairly penalizes them in favor of states that have done little or nothing to extend benefits to the uninsured.
With tax revenues down and budgets breaking, the states — including Arizona, California, New Jersey, New York and Wisconsin — say they cannot afford to essentially subsidize other states’ expansion of health care.
The bill passed by the Senate on Thursday would move toward universal health insurance coverage in large part by expanding Medicaid, a program whose costs have traditionally been shared by the states and the federal government.
But the roughly 20 states that have already expanded coverage in some form will pay a greater proportion of their new Medicaid costs under the bill than those states, largely in the South, that until now have covered relatively few of their poorest residents.
Medicaid covers about 60 million Americans, mostly low-income families and pregnant women, though some states have expanded eligibility to include childless adults under 65. It accounts for about one-fifth of state budgets, on average.
States that have expanded coverage have generally broadened eligibility to include parents with relatively higher income levels and a greater number of childless adults. Even governors in some states without expanded coverage are suggesting that their budgets cannot afford a widened program without additional federal assistance.
“There is always an issue with Medicaid that different states are in different places,” said Diane Rowland, the executive director of the Commission on Medicaid and the Uninsured at the Kaiser Family Foundation. “Do you reward the leader states as well as the laggard states, the good states versus the bad? How do you equalize the assistance? That’s at the heart of this.”
The states with expanded coverage would get more relief from the cost-sharing provisions of the health care bill passed by the House in November.
In memorandums explaining the legislation, the drafters of the Senate bill argued that states without expanded coverage would need more help from the federal government to defray the costs of broadening their programs. But governors in the states that have done more to broaden coverage are now lobbying their Congressional delegations to eliminate the discrepancies as the two chambers reconcile the bills.
“We are, in a sense, being punished for our own charity,” Gov. David A. Paterson of New York said last week.
Wendy Saunders, New York’s deputy secretary for health, Medicaid and oversight, estimated that it would cost about $30 billion over 10 years to adjust the financing formula so that the Senate bill matches the more generous provisions of the House bill.
“Because it’s not a huge cost in the context of what is happening, we’re optimistic that it can be worked out,” Ms. Saunders said.
Massachusetts and Vermont, the states providing the broadest coverage, have already received some relief for the anticipated Medicaid costs in the negotiations that led to the passage of the Senate bill.
To secure the crucial 60th vote from Senator Ben Nelson, Democrat of Nebraska, Senate leaders permanently exempted his state from paying to expand Medicaid. But other states, many of them strong supporters of an overhaul, have been left in the lurch.
Existing Medicaid coverage varies widely. Arkansas, for example, extends Medicaid to working parents who earn up to 17 percent of the federal poverty level, and Alabama offers coverage for those making up to 24 percent of that level. Minnesota covers working parents making up to 215 percent of the federal poverty level, and New York, up to 150 percent. New York also covers childless adults up to 65 making up to 100 percent of the federal poverty level.
In Arizona, where state revenues are down 31 percent, the governor called an emergency cabinet meeting last week as the Senate bill was advancing and ordered the state to stop accepting applicants to its children’s health insurance program. The state, where voters approved an expansion of Medicaid in 2000, projects that in the first seven years of an overhaul, its share of Medicaid would be $17 billion under the Senate bill. Had Arizona not expanded coverage, the state’s share would have been $1.4 billion, the state estimates.
“You’ll have taxpayers in Arizona raising taxes on themselves not only to support their program, but to cover all the other states expanding,” said Thomas J. Betlach, the Medicaid director in Arizona. “I work for an insolvent entity; we can’t afford the program we have.”
The House bill would take effect in 2013 and expand Medicaid to cover Americans earning up to 150 percent of the federal poverty level, currently about $29,300 for a family of four and $14,400 for an individual. The Senate bill would begin in 2014 and extend Medicaid to Americans making up to 133 percent of the federal poverty level.
Under the Senate bill, the federal government would pay the entire cost of expanding Medicaid to those not already eligible under state coverage for the first two years of the program. The following three years, states that do not now have expanded coverage would be reimbursed at a higher rate than those states that do — in general, the states without expanded coverage would be paid back 95 percent of their costs, while those that have already expanded coverage would be reimbursed between 80 percent and 95 percent. Medicaid reimbursement rates are based on per capita income; wealthier states have smaller shares of their costs paid back.
The biggest hit to states that have already expanded will be in covering the people who are eligible now but have not signed up for coverage under the state’s current program. They are expected to enroll because the new legislation will require almost all Americans to have insurance.
States that have expanded already would not get any new matching funds for those people. The Senate bill provides additional money only for those who are “newly eligible.”
For example, the federal government would pick up the entire cost for the first two years and 95 percent of the cost for the next three years for newly covered working parents in Alabama, which now covers only those making up to 24 percent of the federal poverty level.
But it would pay just 50 percent of the cost for most of those newly enrolled in California, because California already makes eligible working parents earning up to 106 percent of the poverty level and its Medicaid assistance is set at 50 percent. California would get a more generous reimbursement, about 83 percent, only for parents earning from 106 percent to 133 percent of the federal poverty level.
“We support the policy, but we need to make sure the financial reality aligns with the policy,” said Toby Douglas, the Medicaid director in California.
New York expects nearly one million people who are currently eligible for Medicaid under a state expansion to sign up under the federal legislation.
Because the state has expanded coverage, the federal government would pay just 50 percent of the cost for all but about 100,000 of those people, Ms. Saunders said. The Senate bill would cost the state $1 billion a year, while the House bill would provide an additional $4 billion a year.
The House bill largely eliminates the problem of signing up people who are now eligible under state programs by counting anyone who signs up as “newly eligible.”
The recession has swelled Medicaid rolls already.
“We’d be having a very different discussion if the economy was humming and everyone was back to work,” said Carol Steckel, Alabama’s Medicaid director and the chairwoman of the National Association of State Medicaid Directors. “But I still think you’d see the different philosophies about who is responsible for the costs. There has to be a balance.”
... in general, the states without expanded coverage would be paid back 95 percent of their costs, while those that have already expanded coverage would be reimbursed between 80 percent and 95 percent. Medicaid reimbursement rates are based on per capita income; wealthier states have smaller shares of their costs paid back.
States that have expanded already would not get any new matching funds for those people. The Senate bill provides additional money only for those who are “newly eligible.”
... it would pay just 50 percent of the cost for most of those newly enrolled in California, because California already makes eligible working parents earning up to 106 percent of the poverty level and its Medicaid assistance is set at 50 percent. California would get a more generous reimbursement, about 83 percent, only for parents earning from 106 percent to 133 percent of the federal poverty level.
http://www.nytimes.com/2009/12/27/health/policy/27states.html
By KATE ZERNIKE
Published: December 26, 2009
States that have already broadly expanded health care coverage are pushing back against the Senate overhaul bill, arguing that it unfairly penalizes them in favor of states that have done little or nothing to extend benefits to the uninsured.
With tax revenues down and budgets breaking, the states — including Arizona, California, New Jersey, New York and Wisconsin — say they cannot afford to essentially subsidize other states’ expansion of health care.
The bill passed by the Senate on Thursday would move toward universal health insurance coverage in large part by expanding Medicaid, a program whose costs have traditionally been shared by the states and the federal government.
But the roughly 20 states that have already expanded coverage in some form will pay a greater proportion of their new Medicaid costs under the bill than those states, largely in the South, that until now have covered relatively few of their poorest residents.
Medicaid covers about 60 million Americans, mostly low-income families and pregnant women, though some states have expanded eligibility to include childless adults under 65. It accounts for about one-fifth of state budgets, on average.
States that have expanded coverage have generally broadened eligibility to include parents with relatively higher income levels and a greater number of childless adults. Even governors in some states without expanded coverage are suggesting that their budgets cannot afford a widened program without additional federal assistance.
“There is always an issue with Medicaid that different states are in different places,” said Diane Rowland, the executive director of the Commission on Medicaid and the Uninsured at the Kaiser Family Foundation. “Do you reward the leader states as well as the laggard states, the good states versus the bad? How do you equalize the assistance? That’s at the heart of this.”
The states with expanded coverage would get more relief from the cost-sharing provisions of the health care bill passed by the House in November.
In memorandums explaining the legislation, the drafters of the Senate bill argued that states without expanded coverage would need more help from the federal government to defray the costs of broadening their programs. But governors in the states that have done more to broaden coverage are now lobbying their Congressional delegations to eliminate the discrepancies as the two chambers reconcile the bills.
“We are, in a sense, being punished for our own charity,” Gov. David A. Paterson of New York said last week.
Wendy Saunders, New York’s deputy secretary for health, Medicaid and oversight, estimated that it would cost about $30 billion over 10 years to adjust the financing formula so that the Senate bill matches the more generous provisions of the House bill.
“Because it’s not a huge cost in the context of what is happening, we’re optimistic that it can be worked out,” Ms. Saunders said.
Massachusetts and Vermont, the states providing the broadest coverage, have already received some relief for the anticipated Medicaid costs in the negotiations that led to the passage of the Senate bill.
To secure the crucial 60th vote from Senator Ben Nelson, Democrat of Nebraska, Senate leaders permanently exempted his state from paying to expand Medicaid. But other states, many of them strong supporters of an overhaul, have been left in the lurch.
Existing Medicaid coverage varies widely. Arkansas, for example, extends Medicaid to working parents who earn up to 17 percent of the federal poverty level, and Alabama offers coverage for those making up to 24 percent of that level. Minnesota covers working parents making up to 215 percent of the federal poverty level, and New York, up to 150 percent. New York also covers childless adults up to 65 making up to 100 percent of the federal poverty level.
In Arizona, where state revenues are down 31 percent, the governor called an emergency cabinet meeting last week as the Senate bill was advancing and ordered the state to stop accepting applicants to its children’s health insurance program. The state, where voters approved an expansion of Medicaid in 2000, projects that in the first seven years of an overhaul, its share of Medicaid would be $17 billion under the Senate bill. Had Arizona not expanded coverage, the state’s share would have been $1.4 billion, the state estimates.
“You’ll have taxpayers in Arizona raising taxes on themselves not only to support their program, but to cover all the other states expanding,” said Thomas J. Betlach, the Medicaid director in Arizona. “I work for an insolvent entity; we can’t afford the program we have.”
The House bill would take effect in 2013 and expand Medicaid to cover Americans earning up to 150 percent of the federal poverty level, currently about $29,300 for a family of four and $14,400 for an individual. The Senate bill would begin in 2014 and extend Medicaid to Americans making up to 133 percent of the federal poverty level.
Under the Senate bill, the federal government would pay the entire cost of expanding Medicaid to those not already eligible under state coverage for the first two years of the program. The following three years, states that do not now have expanded coverage would be reimbursed at a higher rate than those states that do — in general, the states without expanded coverage would be paid back 95 percent of their costs, while those that have already expanded coverage would be reimbursed between 80 percent and 95 percent. Medicaid reimbursement rates are based on per capita income; wealthier states have smaller shares of their costs paid back.
The biggest hit to states that have already expanded will be in covering the people who are eligible now but have not signed up for coverage under the state’s current program. They are expected to enroll because the new legislation will require almost all Americans to have insurance.
States that have expanded already would not get any new matching funds for those people. The Senate bill provides additional money only for those who are “newly eligible.”
For example, the federal government would pick up the entire cost for the first two years and 95 percent of the cost for the next three years for newly covered working parents in Alabama, which now covers only those making up to 24 percent of the federal poverty level.
But it would pay just 50 percent of the cost for most of those newly enrolled in California, because California already makes eligible working parents earning up to 106 percent of the poverty level and its Medicaid assistance is set at 50 percent. California would get a more generous reimbursement, about 83 percent, only for parents earning from 106 percent to 133 percent of the federal poverty level.
“We support the policy, but we need to make sure the financial reality aligns with the policy,” said Toby Douglas, the Medicaid director in California.
New York expects nearly one million people who are currently eligible for Medicaid under a state expansion to sign up under the federal legislation.
Because the state has expanded coverage, the federal government would pay just 50 percent of the cost for all but about 100,000 of those people, Ms. Saunders said. The Senate bill would cost the state $1 billion a year, while the House bill would provide an additional $4 billion a year.
The House bill largely eliminates the problem of signing up people who are now eligible under state programs by counting anyone who signs up as “newly eligible.”
The recession has swelled Medicaid rolls already.
“We’d be having a very different discussion if the economy was humming and everyone was back to work,” said Carol Steckel, Alabama’s Medicaid director and the chairwoman of the National Association of State Medicaid Directors. “But I still think you’d see the different philosophies about who is responsible for the costs. There has to be a balance.”
Friday, December 25, 2009
When the Health Care Changes Could Take Effect
http://online.wsj.com/article/SB126161805062603707.html
By JANET ADAMY
WASHINGTON -- For consumers, the most confusing part of the health-care bill may be when -- and if -- they will see its benefits.
Under the Senate bill scheduled for a vote Thursday, a slate of provisions designed to be immediately visible to consumers would kick in six months after the bill takes effect.
But those changes wouldn't affect people who stay in employer health plans. For people who buy insurance on their own, the provisions would only have an effect when they buy a new policy. And one of the health bill's most widely debated features -- a mandate that most Americans obtain health insurance or pay a fine -- won't take effect until 2014.
Starting next year, insurance companies would no longer be able to place lifetime caps on coverage, and they would begin to lose their ability to set annual limits on benefits. Insurers would have to pay the entire cost of preventive services such as mammograms, colonoscopies, flu vaccines and assistance to people trying to quit smoking.
But these changes apply only to new insurance plans purchased after the bill takes effect. Employer plans, under which more than 160 million Americans are covered, will be grandfathered in and won't have to adopt such changes.
Insurance companies say they may not be able to put some of the new provisions in place by next year. America's Health Insurance Plans, the main industry lobby, said it could take up to a year to put new plans on the market because they need regulatory approval.
"The timeline to implement new benefits isn't feasible," said Robert Zirkelbach, a spokesman for the group. A Senate Democratic aide said the bill's crafters factored in the time needed to make the changes and considered them reasonable, since they apply largely to new policies.
Other provisions begin to kick in six months after President Barack Obama signs the bill, which could happen next month at the earliest. These include the one where Medicare beneficiaries would get a 50% discount on brand-name prescriptions that fall within a coverage gap known as the doughnut hole.
Some of the bill's provisions could cost consumers money, but most of those will kick in after 2010. By 2011, all consumers would face caps on flexible spending accounts -- which allow people to use tax-free money for health expenses like prescriptions and doctors visits -- of $2,500 a year. Currently, some employers impose their own limits. The bill would also put new restrictions on withdrawals from health savings accounts.
In 2013, people with an insurance plan worth more than $8,500 for an individual and $23,000 for a family will face a new tax of 40% on the amount of the benefit that exceeds those levels. Insurance firms are expected to reduce the benefits in their plans in order to keep them under that level and avoid the tax.
The biggest changes for consumers wouldn't come until 2014. That is when the government will start to hand out tax credits to low- and middle-income Americans to offset the cost of buying insurance and expand the Medicaid federal-state program to provide insurance to a greater swath of the poor.
The most powerful insurance-market changes don't take effect until 2014. Insurance companies insist on getting all the healthy people in the system before they take all adults regardless of pre-existing conditions. Starting that year, insurers would no longer be able to charge older people more than three times as much for insurance. That is also the year states would set up new insurance exchanges where people without employer plans and small businesses would shop for coverage. In addition to plans from private insurers, the exchanges would offer plans administered by the same entity that handles insurance for government workers.
In 2014, consumers will face a $95 fee if they don't carry insurance and are deemed able to afford it. That penalty increases to $495 a year in 2015 and $750 a year by 2016. The Senate bolstered the fine last week so that consumers could have to pay up to 2% of their income, up to the value of the cost of a basic insurance plan, if that level is higher than the $750 fine.
There's a chance that some of the main provisions could end up taking effect a year earlier, in 2013, because that's when they start in the health bill passed by the House. But the Senate bill is expected to form the backbone of any final legislation, and starting them earlier could end up increasing the cost of the bill, something lawmakers want to avoid.
Write to Janet Adamy at janet.adamy@wsj.com
__________
Here is an article from the NY Times, "Health Care Changes Wouldn’t Have Big Effect for Many":
http://www.nytimes.com/2009/12/25/health/policy/25employer.html
The other proposed changes for employer-provided coverage seem aimed mainly at workers whose benefits are either very generous or exceedingly skimpy.
On the generous end, about a fifth of employers now offer health plans that could be affected by a new 40 percent excise tax in the Senate bill on so-called Cadillac policies, according to an estimate by Mercer, a benefits consulting firm. That tax, to be imposed on annual premiums that exceeded $23,000 for family coverage, would go into effect in 2013. For example, if an insurer, or a self-insured employer, offers a plan costing $25,000, it must pay a 40 percent tax on the $2,000 that is above the threshold, or $800.
If the excise tax survives the House-Senate negotiations, it is hard to predict how employers will respond. But almost two-thirds of the employers Mercer recently surveyed said they were likely to reduce employee benefits rather than pay the tax.
“They’re going to work hard to find a way to keep the cost of their plans below the threshold,” said Beth Umland, Mercer’s director of health and benefits research.
She predicts that many of those companies will rely on what she described as “the tried-and-true method” — passing along more of the costs to employees, in the form of higher deductibles and co-payments, in order to reduce overall premiums.
The public policy goal of the tax, in theory, is to have everyone spend less on medical care, even if it means using it less.
“We know people will use less care under such plans,” said Paul Ginsburg, president of the Center for Studying Health System Change, a nonpartisan group.
What is not so clear, Mr. Ginsburg said, is whether people will make — or be able to make — rational choices between treatments that are not particularly effective and treatments that may help them from becoming sicker later.
Congress also seems intent on establishing some minimum insurance standards so people with coverage could not end up with large piles of unpaid medical bills anyway. Both the House and Senate bills contain measures meant to eliminate lifetime maximum limits on coverage, for example.
But that might end up affecting relatively few people. Many plans limit how much they will pay out over a lifetime, but the ceilings are generally so high that the vast majority of people never hit them, according to a new study that used existing coverage for workers in California to compare the House and Senate proposals.
_____
Still unclear is whether any of the new standards — the lifetime caps, the out-of-pocket maximums, the minimum coverage standards — would apply to employer-based policies.
Because most big companies already offer plans that would meet the minimum standards being set, their workers would probably be unaffected by the new rules in any case.
But it is a different story for small businesses. Much of the legislation is aimed at making it easier for them to provide affordable coverage by trying to make changes to the insurance market.
People working for small businesses — an estimated 40 percent of the private labor force — could see their coverage affected. And if their employer decided to use one of the new insurance exchanges, workers might have a much broader choice of plans than they do now.
The premiums a small-business employee are charged could also change, especially if that company’s work force is particularly young and healthy. Those people could wind up paying more, Mr. Ginsburg said, because the legislation tries to spread the risk of covering employees with expensive medical conditions by setting new rules over how insurers can determine premiums.
The real unknown, of course, is whether any final legislation will accelerate the rise in premiums or slow it. At least one impartial analysis, by the nonpartisan Congressional Budget Office, concluded that the legislation was not going to have much of an effect on the cost of premiums either way.
By JANET ADAMY
WASHINGTON -- For consumers, the most confusing part of the health-care bill may be when -- and if -- they will see its benefits.
Under the Senate bill scheduled for a vote Thursday, a slate of provisions designed to be immediately visible to consumers would kick in six months after the bill takes effect.
But those changes wouldn't affect people who stay in employer health plans. For people who buy insurance on their own, the provisions would only have an effect when they buy a new policy. And one of the health bill's most widely debated features -- a mandate that most Americans obtain health insurance or pay a fine -- won't take effect until 2014.
Starting next year, insurance companies would no longer be able to place lifetime caps on coverage, and they would begin to lose their ability to set annual limits on benefits. Insurers would have to pay the entire cost of preventive services such as mammograms, colonoscopies, flu vaccines and assistance to people trying to quit smoking.
But these changes apply only to new insurance plans purchased after the bill takes effect. Employer plans, under which more than 160 million Americans are covered, will be grandfathered in and won't have to adopt such changes.
Insurance companies say they may not be able to put some of the new provisions in place by next year. America's Health Insurance Plans, the main industry lobby, said it could take up to a year to put new plans on the market because they need regulatory approval.
"The timeline to implement new benefits isn't feasible," said Robert Zirkelbach, a spokesman for the group. A Senate Democratic aide said the bill's crafters factored in the time needed to make the changes and considered them reasonable, since they apply largely to new policies.
Other provisions begin to kick in six months after President Barack Obama signs the bill, which could happen next month at the earliest. These include the one where Medicare beneficiaries would get a 50% discount on brand-name prescriptions that fall within a coverage gap known as the doughnut hole.
Some of the bill's provisions could cost consumers money, but most of those will kick in after 2010. By 2011, all consumers would face caps on flexible spending accounts -- which allow people to use tax-free money for health expenses like prescriptions and doctors visits -- of $2,500 a year. Currently, some employers impose their own limits. The bill would also put new restrictions on withdrawals from health savings accounts.
In 2013, people with an insurance plan worth more than $8,500 for an individual and $23,000 for a family will face a new tax of 40% on the amount of the benefit that exceeds those levels. Insurance firms are expected to reduce the benefits in their plans in order to keep them under that level and avoid the tax.
The biggest changes for consumers wouldn't come until 2014. That is when the government will start to hand out tax credits to low- and middle-income Americans to offset the cost of buying insurance and expand the Medicaid federal-state program to provide insurance to a greater swath of the poor.
The most powerful insurance-market changes don't take effect until 2014. Insurance companies insist on getting all the healthy people in the system before they take all adults regardless of pre-existing conditions. Starting that year, insurers would no longer be able to charge older people more than three times as much for insurance. That is also the year states would set up new insurance exchanges where people without employer plans and small businesses would shop for coverage. In addition to plans from private insurers, the exchanges would offer plans administered by the same entity that handles insurance for government workers.
In 2014, consumers will face a $95 fee if they don't carry insurance and are deemed able to afford it. That penalty increases to $495 a year in 2015 and $750 a year by 2016. The Senate bolstered the fine last week so that consumers could have to pay up to 2% of their income, up to the value of the cost of a basic insurance plan, if that level is higher than the $750 fine.
There's a chance that some of the main provisions could end up taking effect a year earlier, in 2013, because that's when they start in the health bill passed by the House. But the Senate bill is expected to form the backbone of any final legislation, and starting them earlier could end up increasing the cost of the bill, something lawmakers want to avoid.
Write to Janet Adamy at janet.adamy@wsj.com
__________
Here is an article from the NY Times, "Health Care Changes Wouldn’t Have Big Effect for Many":
http://www.nytimes.com/2009/12/25/health/policy/25employer.html
The other proposed changes for employer-provided coverage seem aimed mainly at workers whose benefits are either very generous or exceedingly skimpy.
On the generous end, about a fifth of employers now offer health plans that could be affected by a new 40 percent excise tax in the Senate bill on so-called Cadillac policies, according to an estimate by Mercer, a benefits consulting firm. That tax, to be imposed on annual premiums that exceeded $23,000 for family coverage, would go into effect in 2013. For example, if an insurer, or a self-insured employer, offers a plan costing $25,000, it must pay a 40 percent tax on the $2,000 that is above the threshold, or $800.
If the excise tax survives the House-Senate negotiations, it is hard to predict how employers will respond. But almost two-thirds of the employers Mercer recently surveyed said they were likely to reduce employee benefits rather than pay the tax.
“They’re going to work hard to find a way to keep the cost of their plans below the threshold,” said Beth Umland, Mercer’s director of health and benefits research.
She predicts that many of those companies will rely on what she described as “the tried-and-true method” — passing along more of the costs to employees, in the form of higher deductibles and co-payments, in order to reduce overall premiums.
The public policy goal of the tax, in theory, is to have everyone spend less on medical care, even if it means using it less.
“We know people will use less care under such plans,” said Paul Ginsburg, president of the Center for Studying Health System Change, a nonpartisan group.
What is not so clear, Mr. Ginsburg said, is whether people will make — or be able to make — rational choices between treatments that are not particularly effective and treatments that may help them from becoming sicker later.
Congress also seems intent on establishing some minimum insurance standards so people with coverage could not end up with large piles of unpaid medical bills anyway. Both the House and Senate bills contain measures meant to eliminate lifetime maximum limits on coverage, for example.
But that might end up affecting relatively few people. Many plans limit how much they will pay out over a lifetime, but the ceilings are generally so high that the vast majority of people never hit them, according to a new study that used existing coverage for workers in California to compare the House and Senate proposals.
_____
Still unclear is whether any of the new standards — the lifetime caps, the out-of-pocket maximums, the minimum coverage standards — would apply to employer-based policies.
Because most big companies already offer plans that would meet the minimum standards being set, their workers would probably be unaffected by the new rules in any case.
But it is a different story for small businesses. Much of the legislation is aimed at making it easier for them to provide affordable coverage by trying to make changes to the insurance market.
People working for small businesses — an estimated 40 percent of the private labor force — could see their coverage affected. And if their employer decided to use one of the new insurance exchanges, workers might have a much broader choice of plans than they do now.
The premiums a small-business employee are charged could also change, especially if that company’s work force is particularly young and healthy. Those people could wind up paying more, Mr. Ginsburg said, because the legislation tries to spread the risk of covering employees with expensive medical conditions by setting new rules over how insurers can determine premiums.
The real unknown, of course, is whether any final legislation will accelerate the rise in premiums or slow it. At least one impartial analysis, by the nonpartisan Congressional Budget Office, concluded that the legislation was not going to have much of an effect on the cost of premiums either way.
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