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July 17, 2017

Why Congress Must Repeal The Affordable Care Act Net Investment Income Tax

As readers are certainly aware, the U.S. Senate and House currently are attempting to pass a bill to repeal many parts of the 2010 Affordable Care Act (ACA). While the Metals Service Center Institute (MSCI) has not taken a position on specific pieces of legislation that would repeal and replace President Barack Obama’s health care reform law, the organization has advocated, and will continue to advocate, for repeal of certain ACA provisions that harm the industrial metals supply chain.

That includes the tax on net investment income (NII). MSCI opposes this tax because it is harmful to small business owners and their families. The NII tax imposes an additional 3.8 percentage points of tax on investment income, including capital gains, dividends, interest, as well as certain S corporation and partnership income, for families that earn $200,000 or more a year. More and more families will pay this levy each year since the ACA failed to index the tax to inflation.

To demonstrate its opposition to this tax, MSCI recently joined a letter organized by its partners at the S-Corp Association outlining the tax’s negative consequences. The letter, available here, said, “For pass through businesses organized as partnerships and S corporations, the tax represents a drain on the capital they have to invest and create jobs. Non-active owners are subject to the tax, which means these businesses must make additional quarterly payments to cover the higher tax owed by these owners.” The letter also noted, “When added to existing individual income taxes, the surtax results in a marginal tax rates of nearly 45 percent, and even higher when state and local taxes are included.” The letter was sent to U.S. Senate Majority Leader Mitch McConnell (R-KY).

The Senate’s ACA repeal and replace legislation, which was introduced last week, would keep the NII tax in place. Click here to read more about how this tax works, and how it affects small business owners and their families.