Crapo motion would stop health tax increases on middle class
Washington, DC - The U.S. Senate has halted debate on H.R. 3590, the Patient Protection and Affordable Care Act, with a motion offered by Idaho Senator Mike Crapo pending on the floor. Senate Republican Leader Mitch McConnell, Crapo and Senators Jon Kyl (R-Arizona) and John McCain (R-Arizona) immediately called a news conference to decry the stalling tactics and to point out the health plan as presently written will raise taxes on middle-income Americans by hundreds of billions of dollars. Senate Leadership moved off the health bill and is now considering a catch-all Omnibus spending bill, which Crapo noted would increase spending by 12% over the previous year.
Crapo's motion would send the health care bill drafted behind closed doors to the Senate Finance Committee. By doing so, he expects the Congress will honor the President's promise to accomplish health care reform without raising the taxes of middle-income Americans. The Crapo motion specifies that "no provision" in the legislation shall result in an increase in federal tax liability for families with incomes under $250,000 annually or individuals with incomes under $200,000.
"This bill comes at a huge price, two and one-half-trillion dollars of new spending, that is offset by about $500 billion in cuts to Medicare and $493 billion in tax increases in the next ten years, and even greater Medicare cuts and tax increases in the full ten years after the spending begins," Crapo said during a speech on the Senate floor. "There is no question that much of the tax increase to pay for this new massive spending will come from people who make less than $250,000 as a family or $200,000 as individuals. It appears that at least 42 million households in America will pay these new taxes. These are people well under the income levels described by President Obama when he said there would be no tax burden on the middle class."
Crapo offered a real-world example about how one of the tax increases in this bill would affect Idaho workers who receive insurance from their employer. He said the health care bill would raise taxes on a single working woman making around $60,000 in annual compensation-broken down by $50,000 in wages and $10,000 in employer-provided health insurance. Presently, only the wages are subjected to federal taxes.
Crapo said under the new health bill, this woman's health policy would be above the $8,500 threshold in the bill for individual policies-meaning the policy will be subject to a new 40% excise tax. Rather than paying the tax, the employer would offer a less-generous insurance policy and award the woman additional wages. Crapo used the example of a $3,000 switch from insurance to wage benefits to make his point:
"If this bill is enacted, she still gets $60,000 in total compensation, but she now has to pay taxes on $53,000 of her $60,000," Crapo said. "This means she will now see a decrease in the after-tax value of her total compensation. I think if the woman knew the full consequences of this bill on the value of her compensation, she would probably have a different opinion of what we are doing here."
Crapo offered a similar amendment as a member of the Senate Finance Committee when that committee debated a health care reform bill in October. The Committee bill was later replaced with the present legislation which was drafted behind closed doors by Democrats and the White House.
Crapo pointed to reports from both the Joint Committee on Taxation (JCT) and the Congressional Budget Office in offering his amendment. He said there are clear tax increases on the middle class in several areas of the health care proposal. Those increases include:
• The individual mandate to carry insurance means that there will be an excise tax of $1,500 per family and $750 for individuals who fail to purchase insurance.
• 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 JCT, 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.
Crapo added the present bill now on hold in the Senate is similar to prior legislation in that it fails to contain health care costs. "No cost controls and one-half-trillion dollars in new taxes on the lower and middle class. That is not the health care reform Idahoans were looking for," he concluded.