Thursday, September 03, 2009

More Problems With HR 3200

Some interesting little provisions of HR 3200 not previously mentioned.

Restrictions on tax-deductible purchases of over-the-counter medicines with health spending accounts like FSAs and HSAs. This isn’t in the original H.R. 3200, but it did make it into Charlie Rangel’s “Chairman’s Mark.” The description can be found at, and it’s document JCX-32-09. The 8 million Americans who have a health savings account (HSA) and 30 million Americans who have a health flexible spending account (FSA) will no longer be able to buy over-the-counter medicines (aspirin, etc.) on a pre-tax basis. Contrary to the Obama rhetoric, this would change the plan people currently have, and raises their taxes in the process. This affects anyone with these types of accounts, not just those making more than $250,000 per year

No surprise. While Conservatives (and Republicans) endorse far greater use of HSA/FSA/HRA by removing limits on contributions and allowing accumulation of HSA/FSA dollars from year to year (like HRA accumulation), the Democrats want to make saving for health costs LESS desirable.

Unions absolutely despise HSA/FSA accounts--which is why Rangel inserted that provision.

The next is surprising for its placement in a HEALTH bill:

IRS Can Disallow Perfectly Legal Tax Deductions They Just Don’t Like (Page 207): If a taxpayer (including one making less than $250,000 per year) uses a perfectly-legal tax deduction the IRS doesn’t like, the IRS will be empowered to simply disallow it. The only reason the IRS has to give is that the tax break lacks “economic substance”—that is, the taxpayer is not taking the deduction for “substantial” or “business” reasons. For those wanting to engage in a legal activity to cut their tax bill, the IRS wins no matter what.

"Substantial" or "Business" reasons? We all kind of understand that--but why is the provision in this bill rather than in IRS Code? Or, if it's already in IRS Code, why another iteration here?

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