Says "Obamacare" is "the largest middle-class tax increase in history."
On the day the U.S. Supreme Court upheld President Barack Obama’s health care reform law, Rush Limbaugh called the law "the largest tax increase in the history of the world." The conservative radio talk show host earned a Pants on Fire from PolitiFact National. The law isn’t even the largest tax increase in U.S. history, although it does rank among the top five -- as a percentage of gross domestic product -- dating back to 1968. Other critics of the law, including Wisconsin Republican Jeff Fitzgerald, also reacted on the day of the June 28, 2012, ruling. Fitzgerald, the Wisconsin Assembly speaker and a candidate for U.S. Senate in the August 2012 primary, fired away on the Twitter social networking site. He said the Supreme Court "has revealed what Obamacare really is, the largest middle-class tax increase in history!" Fitzgerald’ claim is narrower, focusing on the middle class. Is he more on the money? Fitzgerald’s evidence Fitzgerald campaign manager Steve Stanek made two arguments in defense of Fitzgerald’s claim. 1. The law’s tax is 40 percent for a typical family. Fitzgerald cited an opinion column on Forbes.com written by Merrill Matthews of the Institute for Policy Innovation, a think tank founded by former Republican U.S. Rep. Dick Armey of Texas. The Texas organization says it values "individual liberty, limited government, and free markets." But one problem for Fitzgerald is that Matthews claims the reform law is the largest tax increase in history, not the largest on the middle class. He argues that not only is the law’s penalty for not having health insurance a tax, but also that the requirement itself is a tax. Matthews then uses this math: The median U.S. family income is about $50,000, according to a USA Today news article; the cost of family health coverage "can easily run $20,000 a year"; and thus the insurance cost is 40 percent of the typical family’s income. Fitzgerald argues that a 40 percent hike "is clearly the largest on the middle class in U.S. history," although he offers no evidence of how the figure compares to other tax hikes. Hmmm. The column Fitzgerald cites describes a family that pays a premium to a private company in exchange for health insurance. That, obviously, is not a tax paid to the government. Moreover, the 40 percent figure doesn't measure a tax increase but rather an insurance premium's portion of a family's income. 2. The law raises taxes by $1 trillion over 10 years. Fitzgerald argues the reform law will raise taxes by $1 trillion over 10 years, using multiplication on a figure in the PolitiFact item on Limbaugh’s claim as his source. And he claims about "75 percent of those taxes will fall on the middle class," citing a Wall Street Journal opinion article as his source. But both articles are misquoted. In rating Limbaugh’s statement, PolitiFact National cited two nonpartisan federal agencies in reporting that by 2019, the reform law is expected to raise an additional $438 billion, according to the Joint Committee on Taxation; or $525 billion, according to the Congressional Budget Office. That’s a lot less than the $1 trillion Fitzgerald is claiming. Moreover, Fitzgerald’s claim was about taxes on the middle class, but he is citing figures on overall taxes in the health reform law. As for the Wall Street Journal opinion writer saying up to 75 percent of the "tax" would be on the middle class, he was referring not to the total revenue the law will bring in, but the penalty that would be paid by individuals who do not follow the mandate to get health insurance. The penalty is expected to raise $4 billion per year from 2017 to 2019 -- again, that’s a long way from $1 trillion. We asked Stanek about the discrepancies. He acknowledged the campaign misread the PolitiFact and Wall Street Journal articles. In short, Fitzgerald does not produce a figure for how much the reform law is projected to cost the middle class in taxes. Other considerations To be clear, the health reform law does raise taxes, as our colleagues have noted -- although two of the biggest hit high-income people, not the middle class: • Starting in 2013, Medicare payroll taxes go up for people with incomes over $200,000 ($250,000 for couples filing jointly). Also, people at this income level would pay a new tax on investment income. The 10-year cost: $210.2 billion. • Starting in 2018, a new tax on high-cost health plans, so-called "Cadillac plans" (over $10,200 for individuals, $27,500 for families), kicks in. That's expected to bring the government a total of $32 billion in 2018 and 2019. For other newly imposed taxes in the law, it’s not clear how the burden will fall -- and even less clear on how it will affect the middle class. PolitiFact National found these taxes include a fee for pharmaceutical manufacturers and importers ($27 billion over 10 years); an excise tax on manufacturers and importers of medical devices ($20 billion over 10 years); an annual fee on health insurance providers begins ($60.1 billion over 10 years); a higher floor for medical expense deductions on itemized income tax returns ($15.2 billion over 10 years); and an excise tax on indoor tanning services ($2.7 billion over 10 years). Two more things: The Washington Post Fact Checker found, using Joint Tax Committee data, that middle-class folks (individuals earning under $200,000) are expected to pay $64.6 billion in tax hikes (including penalties for not having insurance) under the health reform law -- but that they are also expected to receive $343 billion in subsidies and credits. And the Joint Tax Committee and the Congressional Budget Office told us they do not have any listing of the largest middle-class tax hikes in history. Our rating Fitzgerald said Obama’s federal health reform law is "the largest middle class tax increase in history," but the two ways he measures it are deeply flawed. In claiming the law increase taxes on the middle class by 40 percent, Fitzgerald cites figures related to insurance premiums, not taxes. And if even the law would raise taxes by $1 trillion as he erroneously claims, that’s a total figure, not how much taxes would go up for the middle class. For making an extraordinary claim and offering painfully thin evidence, we rate Fitzgerald’s statement Pants on Fire.
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