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Republicans Plan Dramatic Hike in "Chronic Care Tax"
Republicans intend to repeal the medical tax deduction as a part of their tax overhaul, and the word "hypocrisy" is unavoidable. Medical deductions have been around as long as anyone can remember (1942, actually), and they have given much needed relief to those with high medical expenses. (See here for a nice history.) Republicans are now threatening to take them away.
Medical expenses over and above a medical deduction threshold (currently 10% of Adjusted Gross Income or AGI) may be deducted from income. This deduction is far more useful to lower income individuals because medical expenses more easily exceed this threshold. For instance, a person with $5,000 in medical expenses may deduct $3,000 of those expenses if his/her AGI is $20,000, but he/she may deduct nothing if his/her AGI is $50,000 or more, because the expenses do not exceed the 10% deduction threshold.
Prior to the ACA, the deduction threshold was 7.5% of AGI, but the ACA raised this threshold to 10%, slightly reducing the amount of medical expenses that might be deducted. This and numerous other tweaks to the tax code were necessary to raise sufficient revenue to pay for the ACA.
The House's American Health Care Act (AHCA) sought to repeal these various tweaks to the tax code. In particular, it would have repealed two taxes totaling 4.7% of all income above $200,000, which led critics to characterize the AHCA as "taking healthcare away from poor, disabled, and older Americans to give tax breaks to the wealthy." As a part of the AHCA tax provisions, the medical deductions would have been lowered from 10% to 5.8% of AGI, making the deduction even more permissive than before the ACA. (This would not have been a bad thing for lower and middle income earners.)
Beginning with the Senate health care bill (the Better Care Reconciliation Act or BCRA), this roll-back of the deduction threshold waschanged back to 7.5% of AGI, but it was given a divisive new name: "repeal of the Chronic Care Tax." By coining this sensationalized term, Republicans were accusing Democrats of imposing a special tax on people with chronic health conditions. (This is similar to the GOP term "death tax" -- a tax levied on people for dying.) One can either agree or disagree with the fairness of this term, but most would agree it is quite politically charged.
Of course neither the AHCA nor the BCRA passed, so the 10% threshold remains the law of the land. Now the Republicans are attempting to overhaul our tax code. One would think they would want to roll back the 10% deduction threshold to either 5.8% (per the AHCA) or 7.5% (per the BCRA) to give lower and middle income Americans a tax break. Instead, they are trying to move in the opposite direction, taking away the deduction entirely. This would place a much larger burden on Americans with large medical expenses.
So if Democrats were accused of creating a "Chronic Care Tax" by increasing the deduction threshold from 7.5% to 10%, what are we to say about the Republicans for wanting to repeal the deduction altogether -- effectively increasing the deduction threshold from 10% to infinity? Is this not a much, much bigger "Chronic Care Tax," to use their dreadful term?
Yet again, the purpose of the tax overhaul is not to ease the burden on lower and middle income earners. Rather, the primary purpose is to cut the corporate tax rate from 35% to 20% and to repeal the estate and inheritance ("death") taxes, with benefits going almost exclusively to the wealthy, especially people like the president. To make all this possible, spending would be cut by $473 billion on Medicare and $1 trillion on Medicaid over 10 years. (That's right. No matter the Republican bill, it seems to take healthcare away from the poor, disabled, and elderly to give enormous tax cuts to the rich.) And now as rancid frosting on a stale cake, lower and middle income Americans would be saddled with an enormous "Chronic Care Tax" -- the GOP's term, not mine.