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Politicians for Affordable Health Care?

April 2nd, 2008 at 10:36 am

Politicians, both Democrat and Republican continue to talk about the need to provide affordable health care for all Americans. However, by preparing your 2007 tax return and using Schedule A to itemize deductions, you get a first hand opportunity to witness the hypocrisy of our political class.

If politicians really wanted to reduce health care costs, their first act would be to remove the 7.5% of AGI deduction penalty for health care expenses. If you are married and your combined Adjusted Gross Income (AGI) is $100,000, your first $7,500 in medical expenses is not deductible from your taxes. Assuming that you are in the 25% federal tax bracket and pay a 5% state income tax rate, this “health care penalty” will cost you $2,250 in additional taxes. Eliminating this penalty would provide a 30% reduction in health care costs.

The political hypocrisy is even more evident when you consider that all of the mortgage interest that you pay for your house is deductible, but you cannot deduct most, if not all of your health care costs. If you agree that health care costs should get as least as favorable tax treatment as home mortgage costs, join me in contacting your representative to congress and your senators.

If politicians really want more affordable health care, they could easily take the first step by eliminating the “health care penalty” in our tax code.

5 Responses to “Politicians for Affordable Health Care?”

  1. ceejay74 Says:

    I completely, 100% agree, and I complain about this every year! Trying to figure out flex spending that fits the entire next year's health needs is akin to gambling. In 2006 I ended up buying a $300 pair of prescription sunglasses to make sure I didn't just throw away that unused flex spending money (but it felt kinda like throwing it away, because I didn't need prescription sunglasses really; it was all I could think of). Then this year, I underestimated and have already used up all my flex spending, and expect my out-of-pocket, not-tax-free expenses to be up to $500! Ridiculous.

    I would go even further than you and say it should be deductible even for folks who don't itemize. What would be so hard about that? I refer you to the student loan interest deduction: simple worksheet and single line item on the 1040. That way non-homeowners could also get a tax break on their out-of-pocket healthcare expenses.

    I'll try and write an e-mail to my senator and representative. Time to stop complaining to my family and start complaining to some policymakers! Thanks for this post.

  2. Stein Says:

    It is all our money, congress doesn't have their own piggy bank. If you received a 30% reduction in costs, the treasury would receive less tax money and the deficit would be larger. This would require higher taxes or less services in the future.

  3. ceejay74 Says:

    Yeah, but the fact of flex spending shows the intention to make healthcare spending more affordable by making it tax-free. It's just not a good system because you have to try and predict your costs. You should be able to pay what you need to pay and get the tax benefit after the fact. Hey, the government would get to take my taxes as a tax-free loan throughout the year versus giving me the tax break in each paycheck as they do now.

    Affordable healthcare should be a fact in an advanced society, and we're an embarrassment compared to European and other countries.

  4. finabguide Says:

    Stein seems to be saying that he supports a tax system with no deductions for any special interests including mortgages, charitable contributions, state & local taxes, etc.

    I would have no problem with that type of tax code, as it would eliminate special interest groups and their lobbyists always looking for tax favors.

    What I have a problem with is a tax system that rewards certain special interest groups (realtors and home builders) at the expense of all citizens that have medical care expenses.

    I find it especially hypocritical for our presidential politicians to talk about "affordable health care" and not address this tax code inequity.

  5. luxlivingfrugalis Says:

    Interesting topic that I hadn't even considered. Thanks Wayne!

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