- The Washington Times - Thursday, October 1, 2009

ANALYSIS/OPINION:

I have always believed one of the major purposes of health care reform is to lower the costs of medical expenses to American families. Therefore, I was dismayed when an already bad health care reform bill in the Senate Finance Committee was made worse by the addition last week of a new tax increase that would largely hit the sick and the elderly.

The proposal, added as part of a last-minute package of modifications to Chairman Max Baucus’ bill, would increase the threshold for deducting medical expenses from today’s level of 7.5 percent of income to 10 percent. This seemingly small change is projected by the nonpartisan Joint Committee on Taxation to cost taxpayers over $4 billion per year.

Which taxpayers would suffer this tax increase? Those earning more than $250,000 per year that President Obama pledged would be the only Americans to be saddled with a tax increase under his administration? Hardly.

Of the almost 15 million families affected by this change, only 78,000 have incomes of more than $200,000. The other 99.5 percent of the victims of this tax hit would be below that figure, with many of them being far from wealthy. In fact, more than 62 percent of the taxpayers affected by this change make less than $75,000 per year.

The deduction for medical expenses has been in the tax code for decades. Its purpose is to provide relief to Americans who face catastrophic medical expenses in relation to the size of their income. It is designed so that an average or usual amount of health care costs will not trigger the relief.

For example, a family earning $100,000 this year would have to have medical expenses exceeding $7,500 before the deduction kicks in. This does not count what insurance pays, but only what the family would fork over in out-of-pocket costs.

Even for those with the most basic health care insurance, 7.5 percent of family income being spent for medical expenses is a big amount. In many cases, this much medical cost relative to income is caused by chronic health conditions or serious accidents or injuries. And this is exactly the point.

The current tax law rightly says that if a family has to pay catastrophic or near-catastrophic amounts for health care during the year, relief is available. By design, this deduction is there only for those who really need it, such as the chronically sick and the elderly.

Seniors in America would be hit very hard by this tax increase. Statistics provided by the Joint Committee on Taxation show that in 2019, 54 percent of the $4.1 billion in extra taxes paid from this change would be assessed on those age 65 and older.

So, the big question is why we would want to increase taxes on the sick and the elderly by making it tougher for them to get relief from extra high medical expenses. But the real conundrum is why we would do this as part of a bill that is supposed to rein in health care costs.

It is no wonder that Utahns and Americans everywhere are questioning the wisdom of this bill. As with so many other features of this so-called health reform plan, this just doesn’t make sense.

Sen. Orrin G. Hatch, Utah Republican, is a senior member of the Senate Finance Committee and also serves on the committees on health and aging.

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