- The elimination of the medical-expense deduction survived the House Ways and Means Committee and will stay in the bill.
- This is a deduction taken by people who spend a large chunk of their incomes on medical bills, like the elderly and people with chronic diseases.
- The GOP has rationalized eliminating this deduction by saying it will be made up for with the doubling of the standard deduction, and economic growth.
The elimination of the medical-expense deduction — the cruelest part of the House GOP tax plan — has made it through Wednesday’s markup session and will remain in the bill.
In place since 2013, the medical-expense deduction allows people to deduct part of a medical expense from their taxes if it exceeds 10% of their income. If you’re 65 or older the threshold was lower at 7.5%.
Here’s why taking this away is cruel. This deduction mostly impacts the elderly, and families in which someone has a chronic disease. In 2014, 55% of people who claimed the deduction — less than 5% of Americans — were 65 or older. Just over 18% were between 50 and 65 years-old.
Connecticut Congressman John Larson (D) tried to add an amendment that would put the deduction back in the bill during Wednesday’s Ways and Means Committee markup session, but it didn’t work.
When Business Insider called the AARP about this bill last week, they told us that Republicans on Capitol Hill were rationalizing this deduction in a couple of ways.
First GOP legislators were saying that, historically, the deduction has actually benefitted wealthier Americans. But the AARP countered that IRS data doesn’t bear that out. In 2014, for example, most people who claimed this deduction made $US75,000 or less, and 49% made $US50,000 or less.
Another way the House GOP is rationalizing taking money away from the sick, is to say that they’re being given something else to replace it.
In an interview with the New York Times’ ‘The New Washington Podcast,’ House Speaker Paul Ryan explained eliminating this deduction saying: “We’re giving people freedom to decide what to do with their money by doubling the standard deduction.”
In other words, people will be making so much money back with the standard deduction, they won’t even miss that silly old medical-expense deduction.
Tax experts quibble with that notion since the tax bill eliminates so many other deductions as well. Also from the NYT:
The Joint Committee estimated that the deduction for medical expenses would cost the federal government $US10 billion next year if it were not eliminated. That is far less than the two big deductions the Republican bill would preserve: one for interest paid on home mortgages is expected to cost $US63.6 billion, and one for charitable donations, $US47.8 billion. Most taxpayers claiming those deductions have incomes above $US100,000.
It’s also worth noting that The Joint Committee on Taxation estimated that the medical expense deduction would cost the US $US10 billion because the threshold for those 65 and older was going to be raised from 7.5% of income to 10% anyway.
Ten billion, by the way, is a lot less than the charitable gift deduction, which is staying in the bill, and would cost the US over $US47 billion. That deduction is also mostly claimed by wealthier Americans. Nothing screams ‘steal from the poor to give to the rich’ like this comparison.
Oh, and the last way that the GOP has been rationalizing this is simply by saying that it’s going to create economic growth — and isn’t that great for everyone?
“It creates a fair, simple tax code that would benefit my constituents and all Americans at every stage of their life,” Rep. George Holding (R., N.C.), said during the markup on Wednesday.
And that should fix everything.
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