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Senate Republicans Question Health Care Reform's Tax Implications

Strategic Insights

— 1 min read

Despite President Obama's promise to not raise taxes on families making less than $250,000, the current health care reform bill in the Senate Finance Committee would increase taxes on these families. The bill imposes a penalty on individuals who do not meet the Washington-imposed insurance mandate, with 71 percent of the penalty affecting those earning less than $250,000. Additionally, the bill raises the floor on medical expense deductions to 10 percent, increases the penalty for using Health Savings Accounts, and introduces "industry fees" that would lead to higher health insurance premiums.

Key Takeaways:

  • The Senate Finance Committee bill raises taxes on families making less than $250,000, including a penalty on individuals who do not meet the Washington-imposed insurance mandate.
  • 71 percent of the penalty will be absorbed by people earning less than $250,000, according to the Joint Tax Committee.
  • The bill increases the penalty for using Health Savings Accounts from 10 percent to 20 percent.
  • The bill raises the floor on medical expense deductions from 7.5 percent to 10 percent for young, middle-class Americans.
  • The "industry fees" in the bill will lead to higher health insurance premiums for millions of Americans with existing health insurance, according to the nonpartisan Congressional Budget Office and the Joint Tax Committee.

Statistics:

  • 71 percent of the penalty imposed by the Senate Finance Committee bill will be absorbed by people earning less than $250,000.
  • 10 percent of the penalty will be increased from 10 percent to 20 percent for individuals using Health Savings Accounts for non-qualified medical expenses.
  • 25 percent of middle-class families may need to dip into their Health Savings Accounts to address unexpected financial situations.
  • 7.5 percent to 10 percent increase in the floor for medical expense deductions for young, middle-class Americans.

Sources:

  • Sen. John Cornyn, Remarks On Health Care Reform
  • Joint Tax Committee estimates that 71 percent of the penalty will be absorbed by people earning less than $250,000.
  • Joint Tax Committee confirms that "industry fees" would be passed along to consumers and would ultimately raise insurance premiums.

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