The new federal health care law has cropped in attack ads, in speeches, and most recently in a three-way debate between the gubernatorial candidates.
Republican Tom Emmer said the law is flawed because it’s a federal intrusion on state’s rights. He said the law includes a lot of surprises unrelated to health care policy.
“I had somebody approach me yesterday who said, ‘Do you realize that in the federal health care bill that every real estate transaction I’m going to have to pay money into the federal health care bill to pay for it,’” Emmer said in a response to a question about his take on a legal effort to overturn the law. “On every real estate transaction. What else are we going to find out over the next few weeks?”
Emmer goes wrong in his claim by saying that “every” real estate transaction will be taxed. In fact, it appears that very few Americans will be saddled with the new duty.
Emmer’s staff did not respond to PoliGraph’s requests for more information on this claim, but it appears Emmer’s talking about an obscure provision in the law that imposes a 3.8 percent tax on money that’s made from investment income, which can include rental property and home sales.
Congress’s Joint Committee on Taxation estimates the tax will bring in $210 billion between 2013, when the levy kicks in, and 2019; the funds will be used to pay for Medicare.
But the tax comes with some important criteria.
First, it only applies to individuals making more than $200,000 annually and couples making more than $250,000 annually.
Further, profits on primary residences less than $250,000 for individuals and less than $500,000 for couples are already exempt from taxation.
So, for instance, a couple would have to make more than $250,000 a year and sell their home for more than $500,000 before the tax would become an issue.
It’s hard to say precisely how many people will be subject to the new tax. But what is clear is that the burden will fall on a narrow sliver of the population.
In Minnesota, less than 10 percent of households make more than $200,000 annually. And the average price of a home in the state is roughly $150,000. Nationally, the conservative Tax Foundation predicts the tax will only hit the wealthiest 2 percent of families.
There’s a bit of truth to Emmer’s claim because there is a new tax in the health care bill that could apply to real estate transactions. But Emmer has blown the impact of the new tax way out of proportion by saying every real estate transaction will be taxed. In fact, it appears relatively few will.
That exaggeration makes this claim false.
Minnesota Public Radio News, KSTP debate, Oct. 24, 2010
Thomas, Health Care and Education Reconciliation Act of 2010, accessed Oct. 26, 2010
The Joint Committee On Taxation, Technical Explanation Of the Revenue Provisions Of The “Reconciliation Act Of 2010,” As Amended, In Combination With The “Patient Protection And Affordable Care Act”, accessed Oct. 26, 2010
AARP, The New Health Care Law and Taxes on Home Sales, by Susan Jaffe, Oct. 11, 2010
Kaiser Family Foundation, Summary of the new health reform law, accessed Oct. 26, 2010
The Internal Revenue Service, rules for Maximum Exclusion, accessed Oct. 26, 2010
Realtor.org, September Existing Home Sales Show Another Strong Gain, Oct. 25, 2010
The Tax Foundation, Health Care Reform: How Much Does It Redistribute Income?, by
Patrick Fleenor and Gerald Prante, April 15, 2010
The Minnesota Department of Revenue, 2009 Minnesota Tax Incidence Study, accessed Oct. 26, 2010