This week, Senate Republicans released the Better Care Reconciliation Act of 2017, Take 2. The revised version has been tweaked slightly from the first in an effort to win back much-needed votes. Among the most talked about? While many Obamacare-era taxes would be eliminated, at least two controversial taxes would remain in place: the net investment income tax (NIIT) and the Medicare surtax.
The NIIT is an extra 3.8% tax on certain investment income. That income typically includes interest, dividends, capital gains, rental and royalty income, nonqualified annuities, businesses that are taxed on your return as “passive activities” and income from businesses involved in the trading of financial instruments or commodities. The tax applies to taxpayers with modified adjusted gross income (MAGI) above $200,000 for individuals or $250,000 for a married couple filing jointly. The tax also applies to trusts and estates. And, the threshold for the tax, which took effect in 2013, is not adjusted for inflation.
All wages are currently subject to Medicare taxes. If you’re employed, you pay Medicare tax (1.45%) as the employee, and your employer kicks in tax at the same rate (1.45%) on your total wages; if you’re self-employed, you pay both portions. Beginning in 2014, however, high-end taxpayers also saw a Medicare surtax of .9% tacked on to wages which exceed $200,000 for individuals or $250,000 for married taxpayers.
The bill would also retain a limit on the amounts that health insurance providers could deduct for executive compensation. Allowing a tax break to insurers had been considered a “giveaway” to high-paid executives.
In yet another nod to the existing health care act, premium tax credits to help lower-income Americans afford insurance would also remain in place, even for those with so-called “catastrophic coverage.”
With so many pieces of the original health care bill remaining in place, the revised bill has been dubbed “Obamacare-lite.”
For a quick look at the House bill introduced in March, click here.
You can read the revised version of the Senate bill here.
