Monday, March 31, 2014

PPACA: Review of the Common Ownership Aggregation Rules - also Called Controlled Group Rules

With the release of the final regulations on the ACA's employer shared responsibility, many of our clients are asking for a review of the common ownership aggregation rules - also called controlled group rules.

The legislative alert below highlights how to calculate applicable large employer status, new transition rules, the basics on counting employees, and intricacies of penalty calculations.

Common ownership rules are complex and we highly recommend clients consult with their own legal or tax advisors regarding their individual circumstances. 

Updated Group Health & Welfare Plan Disclosure Checklist

Last December, we distributed a Group Health & Welfare Plan Disclosure Checklist to assist clients with their various disclosure obligations under ERISA, COBRA, HIPAA, ACA, and other assorted federal laws. For those of you familiar with that checklist, it outlines the basics with respect to these disclosure obligations - who, what, when, and how - for group health plans sponsored by private sector employers.

In order to extend this compliance tool to our public sector (governmental) clients, we have revised the Disclosure Checklist to include a column that specifies which disclosure obligations (and, in some cases, special considerations) apply to governmental plans.

A footnote has also been added to the Disclosure Checklist to clarify the group size to which the "small group" column applies.

We hope these updates will be helpful to you and your clients. You may also refer to the Group Health and Welfare Disclosure Checklist Review Presentation from February for details about the Disclosure Checklist.

Updated Regulatory Guidance: Impact of Health FSA Carryover on HSA Eligibility

The FSA carryover feature announced by the IRS in October of last year was a welcome enhancement for many employers; however, it left unanswered questions about whether a carryover (of a year-end FSA balance of up to $500) would disqualify an otherwise eligible individual from participating in an HSA in the following year.

In an internal Office of Chief Counsel memo (number 201413005) that was released last week - - the IRS answers that question by outlining three ways in which a general purpose FSA participant who is eligible to carry over unused FSA funds to the following year may participate in an HSA:
  1. Individual election of carryover to limited purpose FSA. A general purpose FSA participant who elects high deductible health plan/HSA coverage for the following year may elect to carry over up to $500 of unused amounts remaining in the general purpose FSA at the end of the current year to a limited purpose FSA for the following year.
  2. Automatic carryover to limited purpose FSA. A general purpose FSA may be written to provide that unused amounts of up to $500 will automatically be carried over to a limited purpose FSA for any FSA participant who elects high deductible health plan/HSA coverage for the following year.
  3. Forfeiture option. A general purpose FSA may be written to allow a participant to elect, prior to the beginning of the following year, to decline or waive the carryover amount for which the participant would otherwise be eligible.
Any other carry over of general purpose FSA funds will disqualify an FSA participant from participating in an HSA in the following year, even after there are no funds remaining in the FSA.

Wednesday, March 26, 2014

It's Only a Matter of Time Before Employee Groups or Insurers Sue to Enforce PPACA as Written - Not as "Butchered"

An argument that Congressman Tom McClintock first made to me in November and that I think has gained even greater credibility over the last few months is that the Administrative magic-wand-waiving and unilateral, extra-constitutional delays to PPACA are irrelevant.  The congressman's point is simple enough: regulations and executive proclamations are inferior to statutory language.  And since PPACA was passed by congress and signed by the President, any purported changes made by IRS, HHS, DOL, or the President himself are extraneous and without actual authority.  This is true even when His Most Excellent Majesty commands that your health plan be de-un-grandfathered, as Mark Steyn so eloquently put it.  

Congressman McClintock is absolutely correct.  But I suffered a bout of cranial constipation as I struggled with the practical limitations of this rationale.  Since the executive branch has decided not to enforce aspects of the law as written, the only remaining way to compel compliance would be in a court of law.  And before a suit can proceed, we would need a plaintiff (or group of plaintiffs) with actual and tangible harm.  With every passing delay, amendment, and change that likelihood increases.  It is still not a slam-dunk, but I think there will be a real class of plaintiffs out there before too long.  

Section 105(h) of the Internal Revenue Code has been in effect for decades with respect to self-funded insurance plans.  It was passed to ensure that employers do not discriminate in favor of their highly compensated employees in the provision of health benefits.  PPACA looped 105(h) in and made it applicable to fully-insured plans once ACA Grandfathered Status was lost.  

This is going to create a huge mess for many health plans as many currently do discriminate in favor of their highly compensated employees.  Before March 23, 2010 we called this a "compensation-strategy."  Now it has been demonized as an unethical assault on all that is good and decent.  Because of the havoc 105(h) will cause in insured plans, the federal government has decided not to enforce it until it can write regulations presumably neutering the dictates of 105(h) much like it has done with the affordability tests in PPACA.  (On affordability, administrators wrote regulations allowing an employer to charge up to 100 percent of the premium for an employee's dependents, angering some of the most ardent supporters of the President's law). 

One area in which I can imagine banding together a group of sympathetic plaintiffs would be in response to an employer's violation of 105(h) as the statute is written.  Imagine a group of employees who have to pay 30 percent or more of the cost of their health plans while the highly compensated, executive-class pays nothing or some nominal percentage of premium.  Such an arrangement was common prior to PPACA's passage and is still quite prevalent.  PPACA's stated penalty for such a violation is $100 per person per day for all persons harmed by the employer's transgression.  In this case that would most likely be all employees that are not in the top 25% of wage earners at an employer.  If you had a 1,000 employee company that would be a fine of $75,000 per day.  

And then I read the below and began to ponder various scenarios that may allow for a group of employees or even insurers to sue to enforce the employer mandate as it is written: not as federal regulators have butchered it.  In any event, I think we are in for some rather interesting lawsuits in the upcoming months as our legal system tries to sort through the practical mess created by an executive branch attempting to legislate as it goes along. 

This is from law professor, Jonathan Alder writing at the WaPo's Volokh Conspiracy:
... Congress expressly provided that the mandate was to take effect this year. Further, if the mandate penalty is a tax — as the administration currently maintains in various PPACA-related cases pending in federal court — then the employer mandate delay constitutes more than deferring payments or declining to seek penalties. Rather it constitutes a unilateral decision by the executive branch to waive an accrued tax liability. 
The legal justification for the employer mandate delay offered by the Treasury Department has been exceedingly weak. Perhaps this is because the Treasury Department never considered whether it had legal authority to delay the employer mandate until after it made the decision to delay it. The Examiner reports:
Treasury Assistant Secretary for Tax Policy Mark Mazur, who announced the employer mandate delay in a blog post, told the House Oversight and Government Reform Committee that he didn’t remember anyone considering the legal basis for the delay. 
“Did anyone in the Department of the Treasury inquire into the legal authority for the delays?” Mazur was asked.
“I don’t recall anything along those lines, no,” he replied. He gave a similar answer when asked about the IRS and the Executive Office of the President.
This has led some to speculate that the order for the delay came from the White House, where political considerations would have trumped legal constraints. This is eminently plausible given some of the White House’s other announcements seeking to alter PPACA implementation in unauthorized ways
This would hardly be the only instance in which the Treasury Department implemented the PPACA without adequately considering the relevant legal constraints. A recent report issued by the House Ways & Means and Oversight and Government Reform Committees suggests there was little consideration of the Administration’s legal authority to authorize tax credits in federal exchanges before the decision was made and the rule was drafted. 
The PPACA was bad enough as drafted, but what we’re getting is something else entirely. 
Just this morning, I learned that another inherent conflict in PPACA might settle itself rather quickly.  The statute itself requires no newly sold small group (sub-50 employees in California) or individual plan to have a deductible of more than $2,000.  The problem is that many groups do and driving deductibles below $2,000 will price some employer plans out of reach.  Exchanges like we have in California are openly selling plans to individuals with deductibles well over $2,000.

What is going on?  Federal regulators have issued guidance that they will grant significant leeway to the states in crafting and approving plans so long as those plans meet the 60% actuarial value threshold.  Incidentally, according to government calculators, you can have a deductible in excess of $6,000 and meet that standard if other benefits are crafted accordingly.  How much do you think employees are going to like $6,000 deductibles?  Prepare your riot gear for those open enrollment meetings.

So once again, we have a situation where the statute and the regulators are diametrically opposed.  When employers ask me what to do, I explain the situation and the risks.  Do you comply with the statute as written or with the law as butchered?  (To be fair most of the butchering to which I refer has been from regulators understanding the horrific unworkability of massive chunks of PPACA and their effort to try and make it somewhat palatable.)  But it is a juicy steak on a garbage can lid.  No amount of grilling and seasoning will make it more appealing.

During a hilarious episode in season 8 of The Cosby Show,
Bill Cosby introduced us to the "steak on a garbage can lid" image.  
Alas, the deductible problem may go away quickly.  Just today we learned from our contacts in D.C. that language repealing PPACA’s deductible cap for small employers is being included in the Medicare provider payment fix patch legislation that has been negotiated by both parties and will be voted on by Congress over the course of the next week or so. [Update here.]

Nevertheless, I expect to see more creative law suits in this vein, much like the Halbig v. Sebelius case which was heard yesterday in the D.C. Appellate Circuit.  For more on that case hit our Oklahoma vs. Obamacare label in the nav panel to the right.

April Fools! After Explaining They Lacked Authority to Expand Obamacare's Sign-up Deadline; Obama Admin Says Just Kiddin' We Can Do Whatever We Want

It is hard to take this stuff seriously anymore. I really wish this story were from the Onion.  But it's not ... this is from David Martosko at the Daily Mail    

  • The Health and Human Services Department is allowing Americans who use to blow off the March 31 enrollment deadline
  • Republicans of all stripes are reacting with contempt, saying the president and his staff are breaking the law and defying Congress
  • Just check a box and say you tried to sign up for Obamacare before March 31, and the system will give you a few more weeks
  • The Obama administration has pulled out all the stops to boost its numbers before the six-month open enrollment period ends
  • The White House has repeatedly lowered expectations by shifting its target numbers – and by delaying talking about how many have paid for coverage  

Nebraska Unwilling to Let Obama Administration Rewrite ObamaCare

A Midwestern insurance regulator says all major medical insurance plans sold or renewed in his state after Jan. 1, 2014, must comply with Patient Protection and Affordable Care standards.

Bruce Ramge, the Nebraska insurance director, has notified health carriers that he thinks the Obama administration lacks the authority to let carriers renew policies that fail to comply with PPACA. ... 

This Would Be the Beginning of the Death Spiral: Game Over

This would be the beginning of the end it it pans out this way.  This is from David Morgan and Caroline Humer at Reuters

WellPoint Inc, which sells plans on 14 Obamacare exchanges, expects health insurance rates nationwide to be higher. Increases for the Obamacare market that has signed up about 5 million people to date is expected to outpace those in the employer-sponsored market, which serves about 170 million people.

"Looking at the rate increases on a year-over-year basis on our exchanges, and it will vary by carrier, but all of them will probably be in double digit plus," Ken Goulet, president of WellPoint's commercial business, told investors in New York on Friday.

Tuesday, March 25, 2014

Today's Oral Argument in Halbig (Legality of Obamcare Subsidies in Fed Exchanges) is Over - Split Decision Coming

Today a federal appellate court heard arguments in Halbig.  For a full history on this case navigate to the Oklahoma v Obamcare tab on the right. Oklahoma was the first state to bring this issue to court.  This case has the real chance to wholly cripple PPACA.  

... During Tuesday morning oral arguments in Halbig v. Sebelius, it was immediately clear that there will be a split decision of the three-member panel, with two of the judges staking out opposing views on the subsidy question. Judge Harry Edwards, an appointee of President Jimmy Carter, accused the defendants of making a politically motivated attack on the law. Judge Raymond Randolph, an appointee of President George H.W. Bush, said the text of the law and legislative history clearly blocks subsidies from federal-run exchanges.

The subsidy question is central to the future survival of the law. Just 14 states and the District of Columbia are running their own exchanges in 2014, while the Department of Health and Human Services is operating 36 state exchanges.

About 85 percent of those signing up for insurance in federal-run exchanges have qualified for financial assistance to purchase coverage. Without those subsidies, the insurance would be less affordable, leaving those with the greatest health needs with more motivation to purchase coverage. That makes for a worse risk mix, driving up the cost of insurance to cover the sicker pool of people, creating what's known as an insurance "death spiral."

Of course, oral arguments aren't always a reliable indicator of how a judge will decide on a case. But it's safe to call Randolph's and Edwards's respective votes here, making Judge Howard Griffith as the panel's apparent swing vote. Griffith, a President George W. Bush appointee, was the only judge who didn't seem to have his mind already made up, and he challenged the Obama administration on some key points. ...

It will likely be at least another couple of months before the appeals court issues its decision. Even if the administration loses, it could then request that the entire circuit court hear the case, slowing things down. ...

Two other cases in Indiana and Oklahoma are still awaiting a decision in federal district court.

Administration Changes Course and Exempts PPACA Cost-Sharing Subsidies from Sequestration, Insurers Rejoice

Remember the sequester? That budgetary meat cleaver that indiscriminately slashes the federal budget, sparing few federal programs?

Well, the sequester also affects parts of the ACA—including its cost-sharing subsidies. These subsidies are available to people with incomes below 250% of the poverty line who buy a silver plan on an exchange. For anyone up to 400% of the poverty line, the subsidies will also cap total out-of-pocket costs at a reduced level.

Until recently, the Office of Management and Budget’s considered view was that cost-sharing subsidies were subject to the sequester and would have to be cut by 7.2% in 2014. As Loren Adler of the Committee for a Responsible Federal Budget first noticed, however, OMB released a report on Monday indicating that cost-sharing subsidies will now be exempt from the sequester.

What explains the administration’s about-face? The policy justification is obvious. Trimming the subsidies would have cost roughly $286 million in 2014 alone. Exchange plans would probably have had to eat those costs. As the Congressional Research Service has explained:

[The] ACA entitles certain low-income exchange enrollees to coverage with reduced cost-sharing and requires the participating insurers to provide that coverage. Sequestration does not change that requirement. Insurers presumably will still have to provide required coverage to qualifying enrollees but they will not receive the full subsidy to cover their increased costs.

Insurers couldn’t have been pleased at that prospect. ... 

USC Study: 42% of Americans Are Unable to Describe a Deductible

The results of a study by researchers at the USC Schaeffer Center for Health Policy and Economics and the USC Dornsife Center for Economic and Social Research illustrate the woeful inadequacy of America's basic health plan knowledge. 
  • 42% of Americans were unable to describe a deductible in late August and September 2013 when the survey was conducted, just weeks before exchanges opened to the public. 
  • 62% overall did not know a HMO plan had greater restrictions than a PPO. 
  • 37% of people did not know there was a penalty for not having health insurance. 
  • Half of Americans did not know about the Obamacare Exchanges. 
  • More than 20% had not even heard of Healthcare Reform when the survey was conducted.
SourceStone Hearth Newsletters and USC

Capping Employee Hours to Avoid Obamacare Costs Could Violate ERISA

This is from CFO Magazine reporting on a topic we first explained back in June
... One idea many companies have been toying with is to cap weekly [employee] hours worked below 30 for certain employees, thereby converting them into part-timers who do not trigger [PPACA] provisions.

That quick-and-dirty solution, however, is hardly a satisfactory one. Companies that try to feign compliance with the ACA by reducing an employee’s hours will risk running afoul of a different federal law — namely, the Employee Retirement Income Security Act (ERISA). In particular, Section 510 of ERISA prohibits companies from discharging, fining, suspending, expelling, disciplining or discriminating against an employee if the action is taken “for the purpose of interfering with the attainment of any right to which [the employee] may become entitled.”

Decreasing employees’ hours to disqualify them from full-time status, if done to interfere with their right to health-care coverage under the ACA, just might violate that ERISA provision. ...

To achieve the dual goals of managing health-care costs and avoiding ERISA liability, a company must enact any changes in its workforce management in thoughtful and measured steps. Because a Section 510 suit turns on a finding of specific intent to interfere with an employee’s health-care rights, employers must be prepared to combat any misperception that their actions were taken for that purpose. Here are a few pointers:
  • First and foremost, companies must monitor all external communications. They should coach management to avoid public statements about employment policy. To the extent public statements are unavoidable, all levels of management should be communicating a consistent message that explains a company’s business reasons for taking such actions.  
  • Companies must ensure that all internal communications about workforce management track their publicly made statements and likewise set forth the business needs served by changes in the workforce policy. 
  • To the extent possible, management should make any sensitive internal communications in a way that triggers attorney-client privilege. 
  • When making alterations to workforce hours, companies should avoid any sweeping changes. Since wholesale reductions of hours for large tiers or segments of employees are most likely to invite unwanted scrutiny, companies would be wise to leave the hours of existing full-time employees largely unchanged. If economically necessary, companies may enact a new workforce policy that caps hours only for new hires, or consider outsourcing new work to contract employees who make a smaller financial dent on a corporate budget.
Craig Martin is a partner and co-chair of the litigation department at the law firm Jenner & Block in Chicago. Nary Kim is an associate at the firm.  
Read full story here.

Monday, March 24, 2014

Deep Underground, Federal Employees Process Paperwork by Hand in a Long-Outdated, Inefficient System

This is from "The Sinkhole of Bureaucracy" by David A. Fahrenthold writing in the Washington Post.  Hat tip: The Armstrong and Getty Show:  
In BOYERS, Pa. — The trucks full of paperwork come every day, turning off a country road north of Pittsburgh and descending through a gateway into the earth. Underground, they stop at a metal door decorated with an American flag. 
Behind the door, a room opens up as big as a supermarket, full of five-drawer file cabinets and people in business casual. About 230 feet below the surface, there is easy-listening music playing at somebody’s desk. 
This is one of the weirdest workplaces in the U.S. government — both for where it is and for what it does. 
Here, inside the caverns of an old Pennsylvania limestone mine, there are 600 employees of the Office of Personnel Management. Their task is nothing top-secret. It is to process the retirement papers of the government’s own workers.
But that system has a spectacular flaw. It still must be done entirely by hand, and almost entirely on paper. 
The employees here pass thousands of case files from cavern to cavern and then key in retirees’ personal data, one line at a time. They work underground not for secrecy but for space. The old mine’s tunnels have room for more than 28,000 file cabinets of paper records. 
This odd place is an example of how hard it is to get a time-wasting bug out of a big bureaucratic system. 
Held up by all that paper, work in the mine runs as slowly now as it did in 1977. 
“The need for automation was clear — in 1981,” said James W. Morrison Jr., who oversaw the retirement-processing system under President Ronald Reagan. In a telephone interview this year, Morrison recalled his horror upon learning that the system was all run on paper: “After a year, I thought, ‘God, my reputation will be ruined if we don’t fix this,’ ” he said. 
Morrison was told the system still relies on paper files. 
“Wow,” he said. ...  

Updated Timeline of PPACA's Major Provisions From Jan. 1, 2014 Forward

Calendar years beginning after Dec. 31, 2013
Health Insurance Provider Fee
The health care reform law imposes an annual, non-deductible fee on the health insurance sector, allocated across the industry according to market share. The fee does not apply to companies whose net premiums written are $25 million or less.
Delayed for one year, until 2015
Additional one-year delay may apply
Employer Coverage Requirements
See 2015 section below. The employer mandate penalties and related reporting requirements have been delayed for one year, until 2015. Also, medium-sized applicable large employers may qualify for an additional delay, until 2016.
Jan. 1, 2014
Individual Coverage Mandates
ACA requires most individuals to obtain acceptable health insurance coverage or pay a penalty. Individuals may be eligible for an exemption from the penalty if they cannot obtain affordable coverage.
Individual Health Insurance Subsidies
ACA makes federal subsidies available through the Exchanges, in the form of premium tax credits and cost-sharing reductions, for low-income individuals who are not eligible for or offered other acceptable coverage.
Health Insurance Exchanges
ACA calls for the creation of state-based competitive marketplaces, known as Affordable Health Insurance Exchanges (Exchanges), for individuals and small businesses to purchase private health insurance.
Reinsurance Payments
Health insurance issuers and third-party administrators (TPAs) will be required to make contributions based on a federal contribution rate established by HHS. States may collect additional contributions on top of the federal contribution rate.
Plan years beginning on or after Jan. 1, 2014
Employer Wellness Programs
Under health care reform, the potential incentive for employer wellness programs increases to 30 percent of the premium for employee participation in the program or meeting certain health standards. Employers must offer an alternative standard for those employees whom it is unreasonably difficult or inadvisable to meet the standard. Following a governmental study on wellness programs, the incentive may be increased to as much as 50 percent.
Annual Limits Prohibited                                                                  
Plans and issuers may not impose annual limits on the coverage of essential health benefits.
Guaranteed Issue and Renewability
Health insurance issuers offering health insurance coverage in the individual or group market in a state must accept every employer and individual in the state that applies for coverage and must renew or continue to enforce the coverage at the option of the plan sponsor or the individual. Grandfathered plans are exempt from this requirement.
Pre-existing Condition Prohibition
Group health plans and health insurance issuers may not impose pre-existing condition exclusions on coverage for anyone.
Plan years beginning on or after Jan. 1, 2014
Nondiscrimination Based on Health Status
Group health plans and health insurance issuers offering group or individual health insurance coverage (except grandfathered plans) may not establish rules for eligibility or continued eligibility based on health status-related factors.
Nondiscrimination in Health Care
Group health plans and health insurance issuers offering group or individual insurance coverage may not discriminate against any provider operating within their scope of practice. However, this provision does not require a plan to contract with any willing provider or prevent tiered networks. It also does not apply to grandfathered plans. Plans and issuers also may not discriminate against individuals based on whether they receive subsidies or cooperate in a Fair Labor Standards Act investigation.
Insurance Premium Restrictions
Health insurance issuers in the individual and small group markets will not be permitted to charge higher rates due to health status, gender or other factors. Premiums will be able to vary based only on age, geography, family size and tobacco use. The rating limitations will not apply to health insurance issuers that offer coverage in the large group market unless the state elects to offer large group coverage through the state exchange. Also, these restrictions do not apply to grandfathered coverage.
Excessive Waiting Periods Prohibited
Group health plans and health insurance issuers offering group or individual health insurance coverage will not be able to require a waiting period of more than 90 days.
Coverage for Clinical Trial Participants
Non-grandfathered group health plans and insurance policies will not be able to terminate coverage because an individual chooses to participate in a clinical trial for cancer or other life-threatening diseases or deny coverage for routine care that they would otherwise provide just because an individual is enrolled in such a clinical trial.
Comprehensive Benefits Coverage
Health insurance issuers that offer health insurance coverage in the individual or small group market will be required to provide the essential benefits package required of plans sold in the health insurance exchanges. This requirement does not apply to grandfathered plans.
Limits on Cost-sharing
Non-grandfathered group health plans will be subject to limits on cost-sharing or out-of-pocket costs. ACA’s annual deductible limit applies only to insured health plans offered in the small group market, whereas ACA’s out-of-pocket maximum limit applies to all non-grandfathered health plans.
Delayed for one year, until 2015
Reporting of Health Insurance Coverage
See 2015 section below. The employer mandate penalties and related reporting requirements have been delayed for one year, until 2015.
Taxable years beginning in 2014
Small Business Health Care Tax Credit
The second phase of the small business tax credit for qualified small employers will be implemented in 2014. These employers can receive a credit for contributions to purchase health insurance for employees, up to 50 percent of premiums.
After 2014
Automatic Enrollment
ACA requires employers with more than 200 full-time employees that offer health coverage to automatically enroll new employees (and re-enroll current employees) in one of the employer’s health plans, subject to any permissible waiting period. Employers will not be required to comply with the automatic enrollment requirements until final regulations are issued and a final effective date is specified.

Jan. 1, 2015
Employer Coverage Requirements
Employers with 50 or more employees will be subject to penalties if they do not provide health coverage to full-time employees, or if the coverage they provide is not affordable or does not provide minimum value. A full-time employee is an employee who was employed on average at least 30 hours of service per week. The employer mandate penalties and related reporting requirements have been delayed for one year, until 2015. Therefore, these payments will not apply for 2014. No other provisions of the ACA are affected by the delay.
Applicable large employers with 50-99 employees may qualify for an additional one-year delay, until 2016, if certain eligibility conditions are met.
Coverage provided on or after Jan. 1, 2015
Reporting of Health Insurance Coverage
ACA requires any person who provides “minimum essential coverage” to an individual during a calendar year to report certain health insurance coverage information to the IRS. The first information returns will be filed in 2016.

Jan. 1, 2018
High Cost Plan Excise Tax
A 40 percent excise tax (also known as a “Cadillac tax”) is to be imposed on the excess benefit of high-cost employer-sponsored health insurance. The annual limit for purposes of calculating the excess benefits is $10,200 for individuals and $27,500 for other than individual coverage. Responsibility for the tax is on the “coverage provider,” which can be the insurer, the employer or a third-party administrator.

This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. 
© 2013-2014 Zywave, Inc. All rights reserved. Permission to reprint granted via contract.  

On the California Side of Lake Tahoe, the Average Taxpayer Pays Nearly 3X the Amount His Counterpart on the Nevada Side Pays

Not a week goes by when I don't ask myself why I still live 90 minutes from the Nevada boarder. This is from Reid Wilson, "Red State Residents Pay Fewer Taxes Than Blue State Residents," Washington Post, March 18, 2014, as summarized by the fine folks at the NCPA

Residents in blue states are paying a lot more in taxes than are residents in red states, says the Washington Post.

A new study from WalletHub determined average tax bills for the typical American family with a median income in a median home in states across the country.

    • The average family pays $7,000 in state and local taxes each year, but as the figure is just an average, the actual amount paid by families varies significantly.
    • On the California side of Lake Tahoe, the average taxpayer pays nearly three times the amount that his counterpart on the Nevada side pays. And just across the Columbia River, a Portland, Oregon, resident pays twice as much as his Vancouver, Washington, neighbor.
    • The lowest state and local taxes are found in Wyoming, at an average of $2,365 per year. Alaska and Nevada also have taxes less than half the average rate.
    • But in nine states (Iowa, New Jersey, Vermont, Wisconsin, Illinois, Connecticut, Nebraska, California and New York), taxpayers are paying at least 25 percent more than the average state and local tax bill. The typical New Yorker earning $65,596 pays over $9,718 in state and local taxes -- that's 40 percent higher than the national average.

States vary in how much they rely on income versus sales taxes for most of their revenue.

    • Oregon relies on the income tax for 67.7 percent of its revenue, Virginia for 54.7 percent of its revenue and New York for 53.3 percent of its revenue.
    • But the states that rely most on sales tax revenue are Washington (60.8 percent), Florida (59.4 percent), South Dakota (58.6 percent) and Tennessee (55.2 percent).