By U.S. Senator Jon Kyl
What's on your Christmas list?
Chances are, it's not new taxes; but that's just what you might get.
Majority Leader Harry Reid's health-care "reform" bill is filled with new taxes that will hit families, seniors, the chronically ill, small businesses, those who use flexible spending accounts, and those who use medical devices. Also those who don't buy insurance and those who do. In other words, pretty much everyone.
In total, there are 12 new taxes in this bill, many of which will take effect right away if the bill passes, even though the supposed "benefits" of the bill will not go into effect until 2014. The Internal Revenue Service estimates that it would need between $5 and $10 billion over the next 10 years to oversee collection of these new taxes.
Among the dozen new taxes is one on the sickest Americans. The chronically ill and seniors, who tend to have more medical problems, would be hurt by a change in the tax code that raises the amount they must pay before they can begin to deduct catastrophic medical expenses. Many people rely on this deduction to offset major expenses that are beyond their control.
Currently, taxpayers can deduct the cost of their catastrophic medical expenses if they exceed 7.5 percent of their income; the bill would raise that threshold to 10 percent. The Joint Committee on Taxation says this change would cost taxpayers more than $15 billion over 10 years. It would raise taxes on 5.8 million taxpayers, 87 percent of whom earn under $100,000.
The many Americans with flexible spending accounts (FSAs) would also see a tax increase under this bill. Under current law, employees can make tax-free contributions to an FSA to pay out-of-pocket costs for medically necessary goods and services, like diabetes-testing supplies and orthodontia bills for braces and tooth repair, to name just a few.
Currently, there's no limit on FSA contributions, but most employers offer about $5,000. The bill would halve that and limit contributions to just $2,500, meaning families would pay taxes on medical expenses in excess of that amount. The Joint Committee on Taxation estimates this provision would cost taxpayers $15 billion over 10 years.
Many middle-income families are going to lose money on medical expenses because of this provision. The Employers Council on Flexible Compensation (ECFC) estimates the median income for the 35 million Americans holding an FSA is $55,000.
Additionally, the Democrats' bill would impose an annual, non-deductible tax on medical device makers that would cost $20 billion over 10 years. That means thousands of products, including wheelchairs, surgical equipment, contact lenses, stethoscopes, hospital beds, artificial heart valves, and diabetes-testing equipment will all be targeted by this tax.
American taxpayers will be the ones footing the bill. According to the Congressional Budget Office, the medical device tax "would increase costs for the affected firms, which would be passed on to purchasers and would ultimately raise insurance premiums by a corresponding amount."
This tax means increased costs for health insurers and, in turn, higher costs for patients. If Congress taxes a device manufacturer, the manufacturer will pass the tax on to the cost of the item a patient needs. And since the insurance companies usually have to pay for the medical device, their premiums will go up to reflect the increased costs (another reason why, under this bill, insurance premiums won't go down, but go up).
These tax increases represent only a few of the problems in the Senate health-care bill. I am working hard to ensure that Arizonans don't find a higher tax bill under the tree.