Taxes go up with health care legislation
The federal government has put taxpayers on the hook this year for hundreds of billions of dollars to stimulate the economy and pump up the banking sector and auto industry. The out-of-control spending has mortgaged the future with historic debt and diminished present-day opportunities for economic recovery. In addition, there’s widespread frustration and anger about Washington’s policies being directed at Wall Street and hand-picked companies, with little or no relief going to Main Street or the average person.
There’s added insult and injury in pending health care legislation. It would make the typical person worse off due to higher health insurance premiums and tax increases.
Consider the facts of the health care financing proposals. The bill brought to the Senate floor most likely will contain financing provisions of the bill passed by the Finance Committee. (The bill passed by the other Senate committee isn’t paid for at all and would add hundreds of billions more to the federal deficit.) And, if a Reid bill containing the Finance Committee provisions becomes law, then the President’s promise not to raise taxes on families making less than $250,000 will be broken. In fact, the Joint Committee on Taxation (JCT) — the nonpartisan tax experts in Congress — has concluded that the Finance Committee bill would increase taxes, on average, for single people making over $40,000 a year and married couples earning over $75,000 a year.
Here’s how. The Finance Committee bill calls for a new excise tax on high-cost health insurance plans. The Congressional Budget Office (CBO) — the official scorekeeper in Congress — and JCT testified that this new excise tax would be passed onto consumers in the form of higher premiums. These nonpartisan experts said 90 percent of the consumers who would bear the burden of this new excise tax earn less than $200,000 a year.
The Finance Committee bill also limits the tax deduction you can take for medical expenses. Under the bill, you would no longer be able to deduct medical expenses that exceed 7.5 percent of your adjusted gross income (AGI). Instead, you would be able only to deduct expenses that exceed 10 percent of your AGI. Based on data from JCT, this proposal to eliminate part of the deduction for medical expenses would increase taxes on people with income between $50,000 and $75,000.
The Finance Committee bill includes two tax increases on workers who get health insurance through employers. The first tax increase is for families who contribute to Flexible Spending Arrangements. Under current tax law, a worker may contribute to an FSA on a pre-tax basis and use those FSA contributions to pay, tax-free, for co-pays and deductibles. Employers offering an FSA typically limit contribution amounts to $5,000. The Senate Finance Committee bill would limit contribution amounts to $2,500. Statistics show that the average FSA contribution is $1,800 a year. That may make the $2,500 limit sound all right, but a great number of workers who have serious illnesses contribute significantly more than $2,500. On average, these workers earn about $55,000 a year. As a result, workers with serious illnesses who earn about $55,000 would be paying more in taxes. The second tax increase is the elimination of tax-free reimbursements for over-the-counter medicine. Under current tax rules, payments for over-the-counter medicine may be reimbursed, tax-free, if a worker is covered under an FSA or health savings account (HSA). Under the Senate Finance Committee bill, this no longer would be allowed. The proposal would take away this tax benefit.
Additionally, except under limited circumstances, Americans who do not obtain government-approved health insurance would be required to pay a penalty excise tax that would be enforced by the Internal Revenue Service. The Senate Finance Committee bill specifically amends the federal tax code and imposes an “excise tax on individuals without essential health benefits coverage.” The CBO has told Congress that roughly one-half of the Americans who would be forced to pay this tax are individuals between 100 percent and 300 percent of the federal poverty level. For a family of four, that would be annual income between $22,800 and $68,400 in 2013, when the proposed legislation is scheduled to take effect
Even if the Finance Committee bill’s advance-refundable tax credits for health insurance are taken into account, taxes will go up for families making less than $250,000. According to JCT, in 2019, approximately 46 million individuals and families making less than $200,000 would face a tax increase.
Finally, the Senate Finance Committee bill would impose a fee, or an excise tax, on health insurance providers and medical device makers beginning in 2010. The CBO and JCT testified that these taxes would be passed on to health care consumers. CBO and JCT also said the taxes would result in higher health insurance premiums and higher costs for health care-related products for all Americans. According to the experts, most of these Americans earn less than $250,000 a year.
I’ve held constituent meetings in every one of Iowa’s 99 counties this year. Everywhere I go, I get asked “when is enough, enough?” It doesn’t make sense to pass health care legislation that leaves most people worse off. After a year of massive bailouts and federal spending that’s mostly gone to special interests, Congress should, like physicians, abstain from doing harm.
