October 01, 2009

Crapo: Middle-Class Families Hit In Health Proposal

Draft under consideration by Finance Committee would violate President's pledge to Americans

Washington, DC - Idaho Senator Mike Crapo says the conceptual health care proposal before the Senate Finance Committee creates an undue burden on the middle class by raising taxes on families making less than $250,000 a year. He says those are the families the President pledged would not pay "one dime" in new taxes under his proposal. Crapo introduced an amendment before the committee to strike such tax increases from the proposal.

"The bulk of the new taxes envisioned in this proposal, as estimated by Congress's Joint Tax Committee, will fall on the middle class," Crapo said. "We are looking at billions of dollars in tax increases that will fall on those individuals and families who the President promised to protect."

Crapo pointed to reports from both the Joint Tax Committee and the Congressional Budget Office (CBO) in offering his amendment. He said there are clear tax increases on the middle class in at least three areas of the health care proposal. Those increases include:

• The individual mandate to carry insurance means that there will be an excise tax of $1500 per family and $750 for individuals who fail to purchase insurance. The taxes are higher as incomes rise above 300 percent of the poverty level.

• Tax penalties for those withdrawing money from Health Savings Accounts (HSAs) for non-medical emergencies will double from 10 to 20 percent.

• The tax floor for families seeking deductions for medical expenses will rise from 7.5 to 10 percent of income, meaning poorer families would have to spend even more money to reach the level for deducting those health expenses. According to the Joint Tax Committee, of the 13.8 million U.S. tax filers who will be subject to these higher taxes in 2017, only 86,000 will have income above $200,000, meaning 99.6 percent of those affected by this tax increase will have income below $200,000.

Regarding HSA taxes, Crapo noted that hard economic times could force families to use money they hoped to save for health care on other needs. "Doubling the penalty for doing this is an unnecessary and unwise tax increase on these families," he added.

"In the case of excise taxes alone, the Joint Tax Committee said by 2016 that 71% of the new taxes collected will come from families making less than $120,000," Crapo said. "That's $120,000, not the $250,000 threshold that the President promised would pay no new taxes under this plan."

Crapo's amendment failed on a bipartisan vote of 11-12. He vowed to renew the effort on the Senate floor.

"Unfortunately, the Chairman seemed to be arguing that it is not possible to pass a bill that both reforms our health care system and keeps the President's promise to the American people. I disagree, and will continue to try to protect middle class Americans as this legislation moves to the Senate floor.

"If we can't do health care reform without taxing people in the middle class and the lower income categories, then we've got the wrong plan in front of us. I believe we can do major and very helpful reforms that will increase access, that will reduce costs, and will improve health care without imposing these new taxes," Crapo concluded.