| Seven provisions in the Senate Democrats’ health | | | | expects to raise $1.3 billion in additional tax revenues |
| bill would break President Obama’s promise not to | | | | from this new tax. |
| raise taxes on any American making less than | | | | Under the Senate bill, contributions to a person’s |
| $250,000 a year, says Americans for Tax Reform | | | | FSA will be capped at $2,500 a year. Right now, there |
| (ATR), a fiscally conservative group. | | | | are no limits. Congress expects to collect $14.6 billion in |
| Ryan Ellis, ATR’s tax policy director, told CNSNews | | | | new taxes through the new FSA cap. |
| that the Senate bill – which has no Republican | | | | Also under the Senate bill, people will no longer be |
| support -- would break the president’s pledge by | | | | allowed to buy non-prescription medication, except for |
| creating new some new taxes and raising some old | | | | insulin, with money they have put in either an FSA, |
| ones. | | | | HSA, or HRA. Currently, money from those accounts |
| “I can make a firm pledge,” Obama said on | | | | can be used to purchase any medication. Congress |
| February 4, 2009. “Under my plan, no family making | | | | expects to collect $5 billion in new tax revenue from |
| less than $250,000 a year will see any form of tax | | | | this “medicine cabinet tax,” Ellis said. |
| increase. Not your income tax, not your payroll tax, not | | | | “If you put money into any of these accounts, you |
| your capital gains taxes, not any of your taxes.” | | | | are doing so on a pre-tax basis,” Ellis explained. |
| But there are seven provisions in the bill that violate | | | | “And when you limit the way that the account can |
| that $250,000 pledge,” Ellis said. “The first one is | | | | be used, when you say, ‘Okay, money that’s |
| the individual mandate tax. This says that if you do not | | | | gone in there on a pre-tax basis can’t be used for |
| have qualifying health insurance, you have to pay an | | | | that purpose anymore’ -- then you’re limiting the |
| income surtax on your [IRS Form] 1040 equal to the | | | | pre-tax use of these accounts going forward. |
| dollar amounts [specified in the bill]. | | | | “You’re basically saying a tax deduction – |
| “That doesn’t exempt people making less than | | | | namely the amount you put into these accounts – a |
| $250,000 dollars [per year] at all,” Ellis said. | | | | tax deduction is going to be limited. You’ve just |
| The second new tax, on employers who do not offer | | | | taken away a tax deduction from that person.” |
| government-approved health insurance, also would | | | | According to America’s Health Insurance Plans |
| affect individuals because many small business | | | | (AHIP) – a national association of health insurers |
| owners file their taxes as private citizens, not as | | | | – there are 8-10 million Americans with HSA |
| corporations. | | | | accounts and 20-30 million with FSAs, plus their |
| “If you’re a small business, you don’t usually | | | | dependants (spouses and children) who also benefit |
| pay taxes on a separate tax form. The profits flow | | | | from the pre-tax dollars in those accounts. |
| through the owner’s [IRS Form 1040]. If that small | | | | Another controversial tax that would break |
| business is not incorporated – as most of them are | | | | Obama’s pledge is a proposal to raise the |
| not – you could find yourself having to pay these | | | | threshold for deducting costly medical expenses. This |
| taxes for not providing health insurance to your | | | | tax provision, used by cancer patients and others with |
| employees while being a business owner who makes | | | | costly, chronic diseases, allows a person to deduct |
| well under $250,000 a year.” | | | | medical expenses if those expenses total more than |
| Three other provisions would break Obama’s | | | | 7.5 percent of their taxable income. |
| pledge by limiting how much money Americans can | | | | If passed, the Senate health care bill would raise this |
| contribute to their Health Savings Accounts (HSA), | | | | limit to 10 percent, forcing a portion of the 10.5 million |
| Flexible Spending Accounts (FSA), and Health | | | | American families to pay for their entire treatment |
| Reimbursement Accounts (HRA). Limiting the tax-free | | | | costs as well as higher taxes, due to their inability to |
| contributions to these accounts is effectively a tax | | | | deduct their expenses. |
| increase because it means that more of a | | | | The final tax provision that would fall on people making |
| person’s income gets taxed, Ellis said. | | | | less than $250,000 a year is a new, 10-percent surtax |
| Under the Senate plan, if a person wants to take their | | | | on indoor tanning services. This tax, like the individual |
| money out of a HSA and spend it on non-health | | | | mandate penalty, does not exempt people making less |
| related expenses – paying a mortgage, for instance | | | | than $250,000 a year and would therefore hit anyone |
| – they would have to pay taxes on that money at | | | | who patronizes and indoor tanning facility, regardless |
| 20 percent, double the previous rate. Congress | | | | of their income. |