How Joe Biden Deliberately Avoided Paying Obamacare Taxes

In the campaign for the 2020 Democratic presidential nomination, Joe Biden has portrayed himself as Obamacare’s biggest defender. His health care plan, released this month, pledges to “protect the Affordable Care Act” and states that he “opposes every effort to get rid of this historic law.”

However, his campaign rhetoric in support of Obamacare overlooks one key fact: For the past two years, Joe Biden structured his financial dealings specifically to avoid paying a tax that funds “this historic law,” along with the Medicare program.

While the Bidens paid federal income taxes on all their income, they did not have to pay self-employment taxes on these millions of dollars in profits. The Bidens saved as much as $500,000 in self-employment taxes by taking most of their compensation as profits from the corporation, as opposed to salary.

The Journal cited multiple tax experts who called the Bidens’ move “pretty aggressive,” and a “pretty cut and dried” abuse of the system. Given that most of their income came from writing and speaking engagements, one expert called that income “all attributable to [their] efforts” as individuals and thus wage income, rather than a broader effort by any corporation resulting in profits.

Most important to Biden’s political future is what that foregone self-employment tax revenue would have funded. Section 9015 of Obamacare increased the tax’s rate from 2.9 percent to 3.8 percent for all income above $200,000 for an individual, and $250,000 for a family. By taking comparatively small salaries from their S corporations and receiving most of their income as profits from those corporations, the Bidens avoided paying a tax that funds an Obamacare law Joe Biden claims he wants to defend.

Moreover, the other 2.9 percent in self-employment tax helps finance the Medicare program, which faces its own bleak fiscal future. According to the program trustees, the program will become insolvent by 2026, just seven years from now. If people like Joe Biden use tax strategies to avoid paying self-employment taxes, Medicare’s date of insolvency will only accelerate.

During the last presidential election cycle, Sen. Bernie Sanders repeatedly returned to Hillary Clinton’s paid speeches before companies like Goldman Sachs. Both the more than $100 million in income Bill and Hillary Clinton generated from their speeches, and Hillary Clinton’s insouciance at the vast sums she received—“That’s what they offered,” she said of the $675,000 sum Goldman Sachs paid her to give three speeches—made her look out-of-touch with the concerns of families struggling to make ends meet.

Likewise, Biden’s 2020 competitors almost certainly will use the questions about his taxes to undermine his image as “Middle Class Joe.” Few middle-class families will make in a lifetime the $15.6 million in income that the Bidens received in but two years. Moreover, how can Joe Biden claim to defend Obamacare—let alone Medicare—when he created a tax strategy specifically to avoid paying taxes that fund those two programs?

In 2014, Barack Obama, whose administration proposed ending the loophole the Bidens used to avoid self-employment taxes, attacked corporations for seeking to migrate to lower-tax jurisdictions overseas: “It is true that there are a lot of things that are legal that probably aren’t the right thing to do by the country.” In Joe Biden’s case, his tax behavior probably wasn’t the right thing to help his political future either.

This post was originally published at The Federalist.

The REAL Story Behind Obamacare’s Failed Premium Promise

This morning the Kaiser Family Foundation released a report claiming individuals will receive $1.3 billion in rebates under Obamacare’s new medical-loss ratio regulations later this summer.  A Bloomberg article this morning, quoting analysts from Goldman Sachs, cites the number at $1.2 billion.  The Kaiser study – which stated rebates would average $72-127 for the small percentage of individuals who actually receive them – admitted that the overall rebate levels are “not particularly large in many instances.”

While these rebates represent a prime political opportunity for the President to claim Obamacare is “working” during his re-election campaign this summer, the rebates ignore the bigger story about Obamacare – which is the law’s significant failure to LOWER premiums for all Americans by $2,500, as candidate Obama repeatedly promised.  For instance, in a speech on February 27, 2008, he said that “We’re going to work with you to lower your premiums by $2500 per family per year.  And we will not wait 20 years from now to do it or 10 years from now to do it.  We will do it by the end of my first term as President.”  Likewise, in July 2008, Jason Furman – who remains a senior economic advisor within the Administration – told the New York Times that “we think we could get to $2,500 in savings by the end of the first term, or be very close to it.”

Yet as the below chart demonstrates, while candidate Obama promised that premiums would go DOWN by $2,500, they actually have gone UP by nearly as much – from $12,680 in 2008 to $15,073 in 2011, according to Kaiser data.  Multiply that nearly $5,000 difference (i.e., between the $2,500 premium reduction promised and the $2,400 premium increase received) by more than 100 million American households and you have a broken promise amounting to TRILLIONS of dollars to middle-class families around the country.

When compared Obamacare’s many trillions of dollars in promised premium reductions that did not arrive, a little over one billion dollars in medical-loss ratio rebates is a relative pittance to families struggling to pay their rising premiums.  Or, put another way, a $127 rebate won’t even begin to make up for the $2,400 in premium increases families in employer plans have faced just since Barack Obama was electedThat’s the real story of Obamacare’s failure to deliver.

Question and Answer: Health Care and Student Loan Takeover

The Senate Republican Policy Committee has compiled background on many popularly asked questions about Democrats’ government takeover of health care and student loans in reconciliation (H.R. 4872) and the health care bill (H.R. 3590) that was recently signed into law.

Is this bill a net tax cut for the American people?

  • This bill authorizes the U.S. Treasury to cut $460 billion in checks that go straight to insurance companies to cover health insurance subsidies for less than 10 percent of the population.
  • According to the non-partisan Joint Committee on Taxation (JCT), 73 percent of the subsidy will be paid on behalf of taxpayers with no tax liability – this cannot be a tax cut since you can’t cut taxes for people who do not pay them.
  • The 90 percent of Americans who do not receive a subsidy in the exchange will receive nothing except the status quo of rising premiums and tax increases.

Does the law adhere to then-Senator Obama’s campaign promise not to raise taxes on individuals with incomes under $250,000—“Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes?”

  • The law imposes a tax on all individuals who do not obtain health coverage through their employer or do not purchase government approved insurance offered through a government-run exchange.
  • The bills do not include an exemption for individuals with incomes under $200,000, raising taxes on 73 million Americans earning less than $200,000 and breaking a central tenet of President Obama’s campaign.

Would the legislation reduce the growth of health costs—President Obama’s stated goal for health reform?

  • An analysis by actuaries in the Obama Administration’s Centers for Medicare and Medicaid Services found the Senate bill would raise overall national health care spending over the coming decade.
  • The health reform law and companion reconciliation bill would raise the federal budgetary commitment to health care by a combined $390 billion in the next ten years, according to the Congressional Budget Office.
  • In a letter to Senator Evan Bayh, the independent Congressional Budget Office (CBO) found that premiums would continue to go up over $1,000 a year for most Americans, and would only go down for those receiving a government subsidy.

Do the student loan provisions add one trillion to the national debt over 10 years?

Does the bill raid student aid for college in order to pay for health care?

  • Approximately $9 billion in education savings will be diverted from students to help pay for the cost of the Obama Administration’s health care proposal.

Does the bill make the U.S. Department of Education one of the nation’s largest banks?

  • With Direct Loans estimated to loan out $100 billion every year (or $1 trillion over 10 years) from the federal coffers, the outstanding balance of loans at the U.S. Department of Education will now be on par with banks such as Goldman Sachs and Morgan Stanley.

Does the bill adhere to President Obama’s promise that health care legislation be deficit-neutral?

  • According to the CBO score, health reform is deficit neutral only if the federal government cuts payments to Medicare physicians by more than 21 percent in 2010, which it will not.
  • CBO found that including a so-called “doc fix,” which Democrats will surely do this year, will cause health reform to increase deficits by $59 billion.
  • The bill appears deficit neutral because of a series of budget gimmicks, which include delaying spending until the end of the budget window, the CLASS Act, which Senator Conrad called “a Ponzi scheme of the first order,” raiding $29 billion in Social Security revenue to pay for a new entitlement, and double counting $529 billion in Medicare cuts and up to $210 billion in new Medicare taxes as both improving Medicare’s solvency and paying for this massive entitlement expansion.

Do the bills adhere to Democrats’ promise that “If you like the plan you have, you can keep it?”

  • CBO found that under the law, as many as 10 million individuals would lose their current coverage.
  • In addition, the law’s massive cuts to Medicare Advantage would result in millions of seniors losing access to the critical extra benefits which these plans provide.

Will the law destroy jobs?

  • The health bill includes over $500 billion in tax increases, including $210 billion in new investment taxes and a Medicare payroll tax, and $52 billion from a new tax on employers who fail to provide government-approved health insurance.
  • CBO has said that the costs of the employer mandate will be passed to workers, who will see lower wages, fewer full-time jobs, and more outsourcing.
  • The law also includes a “fair share” mandate which the Center for Budget and Policy Priorities previously noted would discourage employers from hiring married individuals or parents raising children.
  • The government takeover of the student loan market could result in the loss of 35,000 private sector jobs, replacing them with more government bureaucrats or contractors and dramatically increasing the size of the federal government.

Will the law adversely affect some of those most impacted by the recession?

  • CBO has confirmed that the mandates in the legislation “could reduce the hiring of low-wage workers,” and could also lead to wage stagnation as wage compensation is diverted to comply with new federal taxes and mandates.
  • Harvard Professor Kate Baicker has published an analysis demonstrating that minority workers would be twice as likely to lose their jobs as their white counterparts.
  • At a time when nearly one in six African-Americans and more than one in four teens are unemployed, these harmful tax increases will hurt exactly the low-wage and minority workers that health reform is intended to help.

Will the law fund abortion coverage using taxpayer dollars?

  • Provisions in the law permit funds to flow to private plans that cover elective abortion, and create new national health plans administered by the Office of Personnel Management (OPM) that would cover elective abortions. Such provisions violate the long-standing policy of the insurance coverage offered to Members of Congress—which provides a choice of private plans, none of which may cover elective abortions.

Does the law provide immediate coverage for children with pre-existing conditions?

  • An Associated Press fact-check analysis concluded that “insurance companies still would be able to refuse new coverage to children because of a pre-existing medical problem.”