Frequently Asked Questions about the Tax Foundation's Health Care Tax Calculator

  About this calculator

This online calculator attemts to estimate the annual tax burden placed on you by the various revenue provisions of the Patient Protection and Affordable Care Act, the major health care reform legislation signed into law last March by President Obama. The Congressional Budget Office has scored the PPACA as reducing the deficit over the next ten years - in other words, the new spending it calls for is more than paid for with a combination of spending cuts and tax increases. We do not attempt to calculate the impact of the entire health care bill; we instead focus solely on the tax side.

Many of the new taxes in the bill are levied on insurance companies, and not individuals. However, ultimately, all taxes are paid by individuals - corporations pass on the cost of taxes to their workers, their shareholders, and their consumers. Economists tend to disagree on the exact incidence of such taxes, and our own incidence assumptions are necessarily somewhat arbitrary. In this calculator we've attempted to show clearly these are for each tax, while acknowledging that such judgements are often inexact and subjective.


  Frequently Asked Questions
1. What exactly do the results mean?

Coming up with an annual number is difficult for many reasons, the most important of which is that the various new taxes and other components of the bill are phased into existence in different years. For example, the 10% indoor tanning tax is already in effect, but one of the biggest taxes in the bill, the excise tax on high-cost health insurance plans (or "Cadillac" tax) doesn't take effect until 2018. This raises questions about how to properly express your annual burden in today's dollars, given projected inflation between now and 2018, the rise in the cost of health care between now and then (which is faster than overall inflation), and so forth.

In general, for tax provisions that won't take effect for many years, our method is to extropolate your current situation forward as best we can to the first year that the provision is in effect, using established economic projections from the Congressional Budget Office, the Office of Management and Budget, and other sources (for a full list click here) and estimate your tax burden in that year's dollars - we then re-adjust that number to present 2011 dollars. For example, with the "Cadillac" tax, which is levied on the total cost of a person's health insurance plan in excess of a certain threshold, we take your current costs, assume they will grow proportionally to the growth of all health care in the U.S., and use that to estimate your costs in 2018. We then figure out what the tax is in 2018 dollars, and re-adjust that figure back to 2011 dollars.

Each tax is calculated a bit differently. Some taxes are income tax changes, so the results for those simply show how much more you'll owe in income taxes each year. Others are less straightforward, taking the form of fees on various corporations, which could affect you in the form of higher prices, lowered wages, lowered dividends, and so forth. For each tax, we try to explain exactly what is being shown in the "details" box - we recommend you read these descriptions to get a better idea of what the numbers mean.


2. Why do I see additional Medicare payroll taxes even though my income is below the threshold?

These new taxes don't take effect until 2013, and we extropolate your income forward to that year for this tax. If you're near but below the threshold now, you're likely to be above it when the tax actually takes effect.


3. Where are the coverage provisions (such as the individual and employer mandates or exchange tax credits?)

This calculator is focused on the "revenue provisions" of the Affordable Care Act, i.e. those that exist specifically to raise revenue. The individual and employer mandates are indeed implemented through the tax code, but these are social policy measures whose ultimate goal is to alter people's behavior, not to raise revenue. This calculator is a "static" calculator, meaning it does not account for behavioral changes as a result of the law, so the coverage provisions are outside its scope. We may try and add them to the calculator in the future, but it's important to realize that they are fundamentally different from the revenue-raising taxes that are already included.


4. Why do you need all my income tax information?
This information helps us calculate the effects of various provisions that work by changing the definition of taxable income, such as the new restrictions on HSAs, changes to the medical expenses itemized deduction, and so forth - we calculate these by estimating how much your taxable income has changed and running the "before" and "after" numbers through our income tax calculator. You can ignore these inputs and just go with the defaults, but your final results will not be as accurate.

5. How do I go back and change what I've entered?
  You can return to previous questions using the blue tabs at the top of the right-hand box, and the results will update themselves accordingly.
   
6. Something isn't working right.
  The calculator will not work on Internet Explorer 7 or below. It has been tested on IE8 and above, Firefox 3.0 and above, as well as the latest version of Google Chrome. If something isn't working right, check to make sure you're using one of these browsers.
   
7. I have another question.
  Questions can be emailed to Nick Kasprak, the creator of the calculator.
   
 

Sources

Centers for Medicare & Medicaid Services. National Health Expenditure Projections 2010-2020.
(GDP, National health expenditure, population, insurance and prescription drug spending projections)

Congressional Budget Office. The Budget and Economic Outlook: An Update (August 2011).
(Other economic projections)

Joint Committee on Taxation. Technical Explanation of the Revenue Provisions of the "Reconciliation Act of 2010," as Amended, in Combination with the "Patient Protection and Affordable Care Act"
(Explanation of Taxes, Revenue Estimates)

Kaiser Family Foundation. Employer Health Benefits Survey 2011
(Default Insurance Amounts)

Privacy

No information entered into this calculator is stored or transmitted in any way. The calculations are written entirely in client-side Javascript and all calculations take place on the user's computer - no information entered into the calculator is ever even transmitted to our server. (To clarify, many other online calculators work by taking the user's input, uploading those inputs to a server, running calculations on that server, and transmitting the results back to the user. Ours does not do this, but instead transmits to the user's web browser all of the code it needs to make the calculation itself.)

For information on the Tax Foundation's privacy policy, click here.

Legal

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