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Daily News Briefing: Friday, June 29th, 2012

Published by: Clark Barrow

Clark Barrow

DAILY BRIEFING - SUMMARY

  • TAX INCREASE - President Obama frequently promised not to raise taxes on anyone making less than $250,000 a year, but an analysis of his health bill finds everyone will pay more under the plan. According to Americans for Tax Reform, Obamacare contains 20 new or higher taxes on American families and small businesses. Included in this briefing is the total list of all $675 billion-plus in tax hikes in Obamacare.
  • OBAMACARE - The U.S. Supreme Court on Thursday upheld the individual insurance requirement at the heart of President Obama’s health care overhaul.
  • CONGRESS - The U.S. House voted Thursday to place U.S. Attorney General Eric Holder in contempt of Congress for not complying with a congressional subpoena.
  • CONGRESS - U.S. House Speaker John Boehner (R-Ohio) said the U.S. Supreme Court’s decision to uphold the majority of President Obama’s healthcare reform law would strengthen the resolve of the GOP to repeal it entirely.
  • WHITE HOUSE - The White House on Thursday threatened to veto a 2013 spending bill that defunds President Obama’s signature Wall Street reform bill and the 2010 health care overhaul that the U.S. Supreme Court upheld earlier in the day.
  • ABOUND SOLAR- Abound Solar Inc., a U.S. solar manufacturer that was awarded a $400 million U.S. loan guarantee, will close its doors and file for bankruptcy because its panels were too expensive to compete with Chinese products, according to the U.S. Energy Department.

WHAT WE KNOW

ECONOMIC NEWS

  • TAX INCREASE – President Obama frequently promised not to raise taxes on anyone making less than $250,000 a year, but an analysis of his health bill finds everyone will pay more under the plan. According to Americans for Tax Reform, Obamacare contains 20 new or higher taxes on American families and small businesses. Below is the total list of all $675 billion-plus in tax hikes (over the next ten years) in Obamacare:
  • Taxes that took effect in 2010:
  • Excise Tax on Charitable Hospitals (Min$/immediate): $50,000 per hospital if they fail to meet new "community health assessment needs," "financial assistance," and "billing and collection" rules set by HHS.
  • Codification of the “economic substance doctrine” (Tax hike of $4.5 billion). This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed.
  • “Black liquor” tax hike (Tax hike of $23.6 billion). This is a tax increase on a type of bio-fuel.
  • Tax on Innovator Drug Companies ($22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.
  • Blue Cross/Blue Shield Tax Hike ($0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services.
  • Tax on Indoor Tanning Services ($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons.
  • Taxes that took effect in 2011:
  • Medicine Cabinet Tax ($5 bil/Jan 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the- counter medicines (except insulin).
  • HSA Withdrawal Tax Hike ($1.4 bil/Jan 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.
  • Tax that took effect in 2012:

  • Employer Reporting of Insurance on W-2 (Min$/Jan 2012): Preamble to taxing health benefits on individual tax returns.
  • Taxes that take effect in 2013:
  • Surtax on Investment Income ($123 billion/Jan. 2013): Creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single). This would result in the following top tax rates on investment income.
  • Hike in Medicare Payroll Tax ($86.8 bil/Jan 2013): Current law and changes:
    Current Law: 1.45%/1.45% (Employer/Employee) / 2.9% self-employed
  • Obamacare Tax Hike:1.45%/2.35%(Employer/Employee)/3.8%self-employed
  • Tax on Medical Device Manufacturers ($20 bil/Jan 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax.
  • Raise "Haircut" for Medical Itemized Deduction from 7.5% to 10% of AGI ($15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI).
  • Flexible Spending Account Cap – aka “Special Needs Kids Tax” ($13 bil/Jan 2013): Imposes cap on FSAs of $2500 (now unlimited.

  • Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D ($4.5 bil/Jan 2013).

  • $500,000 Annual Executive Compensation Limit for Health Insurance Executives ($0.6 bil/Jan 2013).
  • Taxes that take effect in 2014:
  • Individual Mandate Excise Tax (Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following:
    • 2014: 1% AGI/$95 (1 adult
    • 2015: 2% AGI/$325 (1 adult)
    • 2016: 2.5% AGI/$695 (1 adult)
  • Employer Mandate Tax (Jan 2014): If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees. Applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).
  • Tax on Health Insurers ($60.1 bil/Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. Phases in gradually until 2018. Fully-imposed on firms with $50 million in profits.
  • Taxes that take effect in 2018:
  • Excise Tax on Comprehensive Health Insurance Plans ($32 bil/Jan 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). Higher threshold ($11,500 single/$29,450 family) for early retirees and high-risk professions. CPI +1 percentage point indexed.
  • The Dow Jones Industrial Average ended off 24.75 points, or 0.2%, at 12,602.26.
  • The S&P 500 index declined 2.81 points, or 0.2%, to 1,329.04.
  • The Nasdaq Composite shed 25.83 points, or 0.9%, to 2,849.49.
COMMODITIES
  • The U.S. national average for a gallon of regular gasoline is $3.35.
  • When President Obama was inaugurated, in January 2009, the U.S. national average for a gallon of regular gasoline was $1.85. Average gasoline prices are currently 81 percent higher than they were when Mr. Obama became president.
  • Crude oil for August delivery declined $2.52,or3.1%,to end the day at $77.69 a barrel on the New York Mercantile Exchange.
  • Gold for August delivery declined $28, or 1.8%, to settle at $1,550.40 an ounce on the Comex division of the New York Mercantile Exchange.

NEWS TO WATCH

  • PROTESTORS – The Occupy Wall Street protests continue around the world, now in their 282nd day.
  • OBAMACARE - The U.S. Supreme Court on Thursday upheld the individual insurance requirement at the heart of President Obama’s health care overhaul.
  • By a 5-4 vote, The Court rejected the argument, advanced by the Obama administration, that the individual mandate was constitutional under the commerce clause of the Constitution. The Court held the mandate valid under Congress' constitutional authority "to lay and collect Taxes" to provide for "the general Welfare of the United States."
  • Although the Obama administration always asserted the penalty was valid under the federal taxing power, until Thursday no court had fully accepted that theory. Those that upheld the Patient Protection and Affordable Care Act, as the law is known, did so under Congress's constitutional power to regulate interstate commerce.
  • Chief Justice Roberts joined the court’s four liberal justices — Ginsburg, Sonia Sotomayor, Breyer and Kagan — in ruling that a penalty for refusing to buy health insurance amounts to a tax and thus is permitted.
  • Meanwhile, the Court did find one part of the law unconstitutional, saying its expansion of the federal-state Medicaid program threatened states' existing funding. The Court ruled that the federal government can't put sanctions on states' existing Medicaid funding if the states decline to go along with the Medicaid expansion. It is not clear whether states will opt out of the of the Medicaid expansion. Millions of Americans stand to gain cover through the expansion if it is fully implemented.
  • DISSENT - U.S. Justices Samuel Alito, Anthony Kennedy, Antonin Scalia and Clarence Thomas dissented.
  • The dissenters said in a joint statement that the law "exceeds federal power both in mandating the purchase of health insurance and in denying non-consenting states all Medicaid funding.” U.S. Justice Kennedy summarized the dissent in court. "In our view, the act before us is invalid in its entirety," he said.
  • CONGRESS - The U.S. House voted Thursday to place U.S. Attorney General Eric Holder in contempt of Congress for not complying with a congressional subpoena.
  • Seventeen Democrats bucked party lines and voted with Republicans to pass a criminal contempt resolution in a 255-67 vote. U.S. House Oversight and Government Affairs Committee Chairman Darrell Issa (R-Calif.) pushed that resolution as part of his 16-month investigation into the botched "Fast and Furious" gun-tracking operation.
  • The U.S. Department of Justice is not expected to enforce the criminal contempt measure against Holder. But less than an hour later, the U.S. House also passed a separate resolution allowing Issa's committee to pursue civil court action against Holder.
  • CONGRESS - U.S. House Speaker John Boehner (R-Ohio) said the U.S. Supreme Court’s decision to uphold the majority of President Obama’s healthcare reform law would strengthen the resolve of the GOP to repeal it entirely.
  • U.S. House Majority Leader Eric Cantor (R-Va.) said Thursday that the U.S. House will vote on repealing the health care law soon after the July 4 recess. The U.S. House is expected to vote on the measure on July 11, 2012.
  • Meanwhile, speaking on the U.S. Senate floor less than an hour after the ruling, Senate Minority Leader Mitch McConnell (R-Ky.) vowed that Republicans intend to use the ruling to double down on their efforts to repeal the law.
  • WHITE HOUSE - The White House on Thursday threatened to veto a 2013 spending bill that defunds President Obama’s signature Wall Street reform bill and the 2010 health care overhaul that the U.S. Supreme Court upheld earlier in the day.
  • Minutes later, the White House also warned House Republicans that Mr. Obama has deep concerns about a host of provisions in their defense spending bill as well, and also would veto that measure if it reaches his desk.
  • The U.S. House Financial Services bill containing the Wall Street and health-care provisions, as well as the defense spending measure, are heading to the floor after the July 4 break. The provisions in question have little chance of getting through the Senate, which Democrats control, so the veto threat is largely a symbolic denunciation of the House’s work.
PRESIDENT’S SCHEDULE
  • In the morning, President Obama will receive the Presidential Daily Briefing at the White House.
  • Later in the morning, the president will depart Washington, D.C. and travel to Colorado Springs, Colorado.
  • In Colorado Springs, Colorado, the president will view damage from wildfires impacting Colorado and thank responders battling them.
  • Later in the afternoon, the president will depart Colorado Springs, Colorado and return to Washington, D.C.

HAPPENING IN THE U.S. CONGRESS

U.S. SENATE

  • The U.S. Senate is in session today.
U.S. HOUSE OF REPRESENTATIVES
  • The U.S. House is in session today.

TOPICS OF INTEREST

FEDERAL GOVERNMENT

  • CONGRESSIONAL BUDGET OFFICE - The nonpartisan U.S. Congressional Budget Office said Thursday that it will “take some time” to assess the budget impact of a Supreme Court ruling upholding President Obama’s healthcare reform.
  • There is uncertainty in how the Supreme Court’s ruling limiting the ability of the federal government to force states to expand Medicaid coverage will play out.
  • According to the latest CBO analysis, from March 2011, if the Supreme Court had struck down the entire law, the deficit would be increased over 10 years.
  • It said that repealing the law in its entirely would add $210 billion to the deficit. In CBO’s view, the Affordable Care Act would increase spending by $1.042 trillion over 10 years.
  • ABOUNDSOLAR-AboundSolar Inc., a U.S. solar manufacturer that was awarded a $400 million U.S. loan guarantee, will close its doors and file for bankruptcy because its panels were too expensive to compete with Chinese products, according to the U.S. Energy Department.
  • Abound, based in Loveland, Colorado, borrowed about $70 million against the guarantee, the Energy Department said today in a statement. U.S. taxpayers may lose as much as $30 million on the loan after Abound’s assets are sold and the bankruptcy proceeding closes.
  • The failure would follow that of Solyndra LLC, which shut down in August after receiving a $535 million loan guarantee from the same Energy Department program. Abound stopped production in February to focus on reducing costs after a global oversupply and increasing competition from China drove down the price of solar panels by half last year.

FOREIGN POLICY

MIDDLE EAST

  • SYRIA - Russia is pushing through deliveries of Russian-built helicopters to Syrian forces loyal to President Bashar Assad despite international efforts to block the sale.

    • A Russian-flagged cargo ship loaded with three Mi-25 attack helicopters is steaming toward the Syrian coast and should arrive in the country within days, Alexander Fomin, head of the federal service for military-technical co-operation.
    • U.S. Congressional lawmakers have repeatedly slammed Russian defense firms for supplying heavy weapons and support to Assad's forces. Those arms, lawmakers claim, have been used to massacre thousands of Syrian civilians and anti-government rebels during Assad's nearly year-long crackdown on opposition forces in the country.

  • IRAN - Acting at the last minute, the Obama administration on Thursday spared China and Singapore from potentially onerous financial penalties required under a strict American law on Iran sanctions, saying that both countries had earned an exemption by significantly reducing their purchases of Iranian crude oil.

    • The American waiver granted to China, Iran’s top customer of oil, was regarded as especially significant because it averted a potentially serious collision between China and the United States, which are both members of the group of six big powers that are negotiating with Iran in the nuclear dispute. Under the American law, banks of countries that are Iranian oil importers can be denied access to the American banking system.
    • The measures are sure to compound economic pain in Iran, where oil exports this year compared with 2011 have plunged by 40 percent, according to the International Energy Agency.

ASIA

  • PAKISTAN - American and NATO commanders are considering carrying out their own cross-border raids into Pakistan to root out terror cells along the country's border with Afghanistan.

    • Border clashes between coalition forces and terror groups like the Pakistani-based Haqqani Network have produced some of the heaviest fighting since the Obama administration surged more than 20,000 U.S. troops into the southern part of the country in 2009.
    • Islamabad's unwillingness to adequately seal off the border and root out terror groups seeking asylum inside Pakistan has continued to be a roadblock in increasingly strained relations between Washington and Islamabad.