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Health care reform and your W2

Passage of health care reform may have ended the debate in Congress, but the misinformation continues.  Here are some of the recent bogus claims examined by the nonpartisan website, Factcheck.org:

  • Requires patients to be implanted with microchips. (No, it doesn’t.)
  • Cuts benefits for military families and retirees. (No. The TRICARE program isn’t affected.)
  • Exempts Muslims from the requirement to obtain coverage. (Not specifically. It does have a religious exemption, but that is intended for Old Order Amish.)
  • Allows insurance companies to continue denying coverage to children with preexisting conditions. (Insurance companies have agreed not to exploit a loophole that might have allowed this.)
  • Will require 16,500 armed IRS agents to enforce. (No. Criminal penalties are waived.)
  • Gives President Obama a Nazi-like “private army.” (No. It provides a reserve corps of doctors and other health workers for emergencies.)
  • “Exempts” House and Senate members. (No. Their coverage may not be as good as before, in fact.)
  • Covers erectile-dysfunction drugs for sex offenders. (Just as it was before the new law, those no longer in jail can buy any insurance plan they choose.)
  • Provides federal funding for abortions. (Not directly. But neither side in the abortion debate is happy with the law.)
  • [For more detailed explanations about why these claims are wrong, you can read their full analysis here.]

The latest falsehood making the rounds is an anonymous chain email about supposed hidden taxes in the new law.  It begins: 

“The creativity of the tax-and-spend federal government for sneaking into people’s wallets never hits a dry spell.

Starting in 2011 (next year) your W2 tax form sent by your employer will be increased to show the value of what ever health insurance you are given by the company. It does not matter if that’s a private concern or Governmental body of some sort.If you’re retired, so what; your gross will go up by the amount of insurance you get.

You will be required to pay taxes on a large sum of money that you have never seen.

Take your tax form you just finished and see what $15,000 or $20,000 additional gross does to your tax debt. That’s what you’ll pay next year. For many it also puts you into a new higher bracket so it’s even worse.

This is how the government is going to buy insurance for 15 % that don’t have insurance and it’s only part of the tax increases.”

Sigh.  Okay, part of this is actually true: starting next year the amount your employer pays for your health insurance will show up on your W2.  But this money won’t be considered part of your gross income and you will not have to pay taxes on that money.  No one will see their taxes go up a cent when their benefits show up on their W2.

Why the change then?  A couple reasons:

  1. So employees can simply see how much their health insurance is actually worth.  Most of us have no idea how much our health insurance costs, and it would be nice to have a dollar figure to put on this compensation.
  2. Eventually, under the new law people who are not insured will have to pay a tax penalty (this is called the individual mandate). The W-2 reporting requirement will help the Internal Revenue Service verify that people have coverage, both for themselves and their dependents.
  3. Years from now, some people with so-called “Cadillac” or “gold-plated” insurance plans (plans that cost significantly more than the national average) will see their benefits taxed.  The W-2 reporting will allow the IRS collect the tax more easily.  We should also point out that this tax doesn’t go into effect until 2018, there are exceptions for people in high-risk professions, and analysts expect it to hit fewer than 20 percent of all policies.

Still, the email tries to prove it’s deceptive claim that everyone will be taxed, by citing something written by the tax editor of The Kiplinger Letter, which is advertised as “a weekly business and economic forecasting periodical for people in management.”  The Pulitzer Prize winning website, Politifact, looked up the letter and found that what it actually states is:

“[The new law contains] a requirement that businesses include the value of the health care benefits they provide to employees on W-2s, beginning with W-2s for 2011. The amount reported is not considered taxable income.”

That’s right– even the website that the email cites as proof says flat out that health benefits will not be taxed.

Factcheck.org, also took a look at the email, and makes an interesting point:

Readers who followed the 2008 presidential campaign may recall that it was Republican candidate John McCain who proposed to make the value of employer-sponsored health insurance taxable. Democrats hated that idea; Barack Obama ran an ad claiming, falsely, that it would be the “largest middle-class tax increase in history.

So it is ironic that some of President Obama’s critics now claim that the bill he signed would do what his opponent proposed and he denounced. Ironic, but false.

You see this kind of thing time and time again in nearly any discussion of health care reform.  The new health care law, like any piece of legislation that complex, isn’t perfect and there are legitimate criticisms to be made.  But instead of engaging in constructive criticism, opponents of reform simply say whatever is most likely to scare people, regardless of whether or not it’s actually true (or whether it’s something they used to support).

And they often make their outrageous claims in chain emails like these.  A good rule of thumb:  if you don’t recognize the original sender… delete it.

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