COMMENTARY
A response to a recent post of ours regarding HSA’s led to this topic. The response, from Hootsbuddy, was well said. Medical deductions on income tax returns have increasingly become of little value – and if you can really take advantage of them, you are likely too sick to really care. With schedule A deductions set at 7.5% of AGI (adjusted gross income) a person having $100,000 of AGI would need over $7,500 of uncompensated medical expenses in a single year to even reach the threshold of deductibility. If you have standard health insurance, say an 80/20 policy, you would have had to have had $37,500 in actual allowed medical expenses (insurance premiums included), meaning that billed charges likely would be in excess of $60,000-$70,000 for that year. Even with medical costs high, that is a lot of sickness you would rather not have.So what reforms in tax code are needed to assist in getting us to Real Health Reform. Here are a few suggestions.
(1) Mandate that ALL citizens file a return and pay a “minimum” tax for the privilege of living in this great nation. Even $10 would be fine. Continuing to remove persons all together from the tax rolls is political demagoguery, demeans the value of all citizens contributing to the nation and adds to the ability of illegal immigrants and others to “hide” within the country.
(2) Change the schedule A medical deductions by first allowing any payments personally made for health insurance coverage to be deducted dollar for dollar. For additional medical expenses, adjust the percentage of AGI to zero (preferred) or not more than 1% to allow more filers to take advantage of this deduction.
(3) Simplify the tax code over all. We are all wasting excessive amounts of time and money on filling out forms, figuring out tax language and/or paying accountants. Taxes should be a simple matter and the tax code should be simple. Just a few rates (if not just a flat tax). The rates should be low and social engineering via the tax code should be minimized or eliminated. All this wasted time is highly counter productive.
(4) Once and for all, set down standard rules for health care coverage so that insurers cannot deny coverage for pre-existing conditions, deny coverage to patients who are ill or who have been ill or had surgery, deny coverage based on a persons age or work status, and eliminate sub-group rating to drive premiums up on small businesses. In other words, set rates and sell to the public, no questions asked.
Real Health Reform will require many other reforms as well. Tax reform is one that is often overlooked in regard to the health equation. That should no longer be the case . . . obi jo
Topic 502 – Medical and Dental Expenses – http://www.irs.gov/taxtopics/tc502.html
Do You Need to File a Federal Income Tax Return? – http://www.irs.gov/individuals/article/0,,id=96623,00.html
Who Pays Income Tax – http://www.ntu.org/main/page.php?PageID=6
Who Doesn’t Pay Taxes – http://www.ntu.org/main/page.php?PageID=155
Taxpayer Rights – http://www.irs.gov/advocate/article/0,,id=98206,00.html
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