Lately, we’ve been looking into the “reform” in Republicans’ Reform 2.0 (or as we call it–Deform 2.0) plan. We’ve uncovered some interesting facts about it that we thought we should share with you.
One of the Republicans’ Deform 2.0 goals is to “provide a tax deduction for individual health insurance premiums and out-of-pocket medical expenses.”
First of all, employer-provided health insurance (generally including the employee share of the cost) is already exempt from income tax, as are many medical expenses paid for with pre-tax dollars. Insurance purchased by self-employed folks is also already deductible.
Those with very large medical expenses (in excess of 5% of income) already get some relief by itemizing.
The Deform 2.0 proposal would reduce taxes for some people who buy their own insurance because they don’t receive coverage through their employer or those with out-of-pocket medical expenses not purchased through a pre-tax account. Even among these folks, there will be no benefit unless they have taxable income and–even then–the benefit of the deduction will be limited to their state income tax rate.
For example, for married joint filers with income under $33,700 or single filers with income under $23,100, the effective benefit of the deduction offered by Republicans will be only 5.35 cents on the dollar. Even for the highest income Minnesotans, the benefit will only be 7.85 cecnts on the dollar.
This is clearly an example of Republicans saying “let’s not and say we did” to providing health insurance relief to Minnesotans. This proposal is not an effective substitute for a meaningful public health care subsidy or substantive reform of the health care system.
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