Washington Report: Payroll taxes and healthcare reform
Senate Majority Leader Harry Reid’s (D-N.V.) health-care reform bill, the Patient Protection and Affordable Care Act (PPACA) introduces a new tax increase to pay for reform. The bill includes an increase in a portion (the Medicare Hospital Insurance (HI) trust portion) of the federal payroll tax known as FICA. The bill would increase the tax to 1.95 percent from 1.45 percent on wages or self-employment income over $200,000 for individual returns and $250,000 for joint returns. There is no limit on the amount of wages or self-employment income that is subject to the tax. (The other portion of the FICA tax, the social security portion of 6.2 percent, applies only to wages or self-employment income up to $106,800.) This proposed increase is an increase in the employee’s share only. The employer would continue to pay its 1.45 percent rate share on the employee’s wages. Self-employed taxpayers would pay only an additional 0.5 percent, not a combined 1 percent. PPACA also includes a provision that would require every business to issue a Form 1099 information report of the amount paid to any vendor of services or goods to which the business paid more than $600 over the course of the year for those goods and services.
