Funding Obamacare on the Backs of the Middle Class
The Senate Finance Committee version of the healthcare bill has a hidden provision that will hurt every tax paying American. It’s the Democratic version of “robbing Peter to pay Paul.” The Senate bill would reduce the limit on Health Flexible Spending Accounts (HFSA) from the current limit of $11, 000 per family to $2, 500 per family.
An HFSA is important because it allows tax deductions for out of pocket medical costs such as deductibles and co-payments. This is a tax advantage claimed by many rank and file employees, particularly those who do not itemize deductions. For example, assume an employee earns $50,000 and elects an HFSA contribution of $10,000. The employee funds the $10,000 with pre-tax dollars so that they pay taxes on only $40,000 of income. With the Democratic version of the HFSA, the employee would still have $10,000 of medical expenses but with a tax deduction of only $2,500, so their income would be much higher under the proposed bill.
Those who itemized deductions will still lose under this proposed bill. If the HFSA limit is lowered, then that will shift medical expenses from “off the top earned income” to potentially non-deductible or limited itemized medical deductions.
The Democrats claim that they want to reduce healthcare costs to help the middle class; yet, by implementing this provision they will be the very ones hurt. For example, a single mother who pays taxes counts on the HFSA to reduce her financial burden since many children need braces, eye glasses, and doctors visits. The lower to middle class is being squeezed on one hand by increased deductible and co-payments while at the same time being forced to fund healthcare reform with their hard earned wages.