One of the several tax hikes that went into effect with the new year and the Democrats' controversial health care overhaul is one that effectively penalizes middle class families for being sick.
That's the verdict of some experts toward a provision of the Patient Protection and Affordable Care Act (Obamacare) which reduces the amount of health care expenses one can deduct from their federal income taxes.
When individuals or families file their income taxes, they're allowed to deduct medical expenses that haven't already been paid for by insurance companies, or which haven't already received tax benefits --e.g., by being paid out of a tax-exempt medical savings account. Such expenses would include co-payments, travel undertaken to receive treatment, purchases of durable medical equipment, and other out-of-pocket medical expenses (excluding non-prescription medication).
But taxpayers can't deduct the full amount of these expenses without first subtracting what is a called a haircut -- a
For example, a family bringing in an income of $100,000, but reporting $10,000 in medical expenses as an itemized deduction, would have to subtract $7,500 (7.5 percent of $100,000) from those expenses, leaving them with a $2,500 tax deduction. Under Obamacare, this family must subtract $10,000 (10 percent of $100,000), leaving them with no available deduction for their out-of-pocket medical expenses.
This is a pure tax increase on those families making less than $250,000 a year, Ryan Ellis, tax policy director for Americans for Tax Reform (ATR), tells Sunshine State News, referring to Obama's oft-repeated pledge not to raise any taxes on families making less than that income threshold.
Ellis says the average family subject to this tax makes about $53,000 and will face an annual income tax increase of between $200 to $400. The law exempts taxpayers age 65 and over from the increased haircut, but only through 2016 conveniently enough, after Obama's presidential term concludes.
It is taking away a tax break that helped people who had high medical expenses. This really is a tax on the sick, John C. Goodman, president of the National Center for Policy Analysis, told The Daily Caller in December. Its hard to understand any of this, except that they just wanted money. It could be several years before the health exchanges get up and running, and thats what this money is for: to fund them.
Reach Eric Giunta at egiunta@sunshinestatenews.com and at (954) 235-9116.
