The Obamacare and Obama Tax Hike Double Whammy on Seniors
No demographic was more opposed to Obamacare's passage and no group wants to see the law repealed more than America's seniors. They know that Obamacare used Medicare as a piggy bank to transfer half a trillion dollars out of Medicare, not to shore up Medicare's solvency, but to spend on a new government program. As if that were not enough, now President Barack Obama wants to raise taxes on the dividend payments that millions of seniors depend on for their livelihood. American seniors are beginning to wonder when they'll stop being target #1 of President Obama's economy-crushing policies.
Obamacare's Impact on Seniors: President Barack Obama repeatedly promised Americans that if they liked their current health plan, they could keep it. But as Heritage analyst Robert Book and Ethics and Public Policy Center fellow James Capretta detail in their new analysis of Reductions in Medicare Advantage Payments, that is demonstrably not true for millions of senior citizens. Medicare Advantage (MA) plans are the private insurance options available to Medicare beneficiaries. In 2006 (the latest figures available), Medicare covered only 59 percent of traditional beneficiary health care expenses. Ninety-one percent of all Medicare beneficiaries have some sort of supplemental coverage. Obamacare is going to change all that.
The new law imposes deep cuts in the payment rates for MA plans, beginning with a payment freeze in 2011. In addition, the other indiscriminate payment cuts to hospitals and health care providers will also get passed on to MA plans as well. Book and Capretta calculate that the average nationwide per capita reduction in the value of coverage for MA and would-be MA enrollees will total about $3,700 annually by 2017, or a nearly 27 percent cut from what would have occurred without the new law. Faced with these cuts, MA plans will be forced to raise premiums, reduce benefits or leave the market entirely. The President's own Medicare chief actuary estimated that the number of seniors with MA plans will drop from 10 million today to just 7.4 million in 2017.
The Obama Tax Hikes' Impact on Seniors: The top tax rates on qualified dividends are scheduled to jump from 15 percent to 39.6 percent on January 1, 2011. The left will claim that these tax hikes will only soak the rich while lower-income Americans will enjoy a free ride. This is false. Higher taxes on dividends will reduce the value of all corporate stocks traded in U.S. markets, regardless of who owns them. According to some estimates, the tax hike on dividends would cause stock prices to drop by more than $211 billion. The reduction in share values would happen almost immediately at the beginning of 2011, or whenever Congress makes clear it will allow the rate to rise. Seniors hold the most stock of any demographic group, so the Obama tax hike is a direct assault on the retirement security of millions of Americans.
And that's not all. Millions of seniors also rely heavily on dividends to supplement their Social Security income. And when dividend payments are taxed at a much higher rate than capital gains (as they would be after the Obama Tax Hikes), companies that return value to shareholders by paying dividends are penalized. As Heritage fellows Rea Hederman and Patrick Tyrrell detail, companies will therefore pay out less in dividends. Retirees who rely on dividend income from stocks will then see their annual income decline. For tax year 2010, seniors are almost twice as likely to report dividend income on their tax returns as any other demographic group. Low-income households are also more likely to own dividend-paying stocks than high-income households. They will all be victims of the Obama Tax Hikes.
The imminent threat to senior citizen's health care will only be resolved once Obamacare is repealed. And the only way to protect senior's retirement savings is to reject the Obama Tax Hikes.
Reprinted with permission from The Heritage Foundation
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