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Among the bribes being offered by Senate Majority Leader to his recalcitrant conference in the Trumpcare negotiations is increased flexibility for health savings accounts (HSAs). Conservatives are completely enamored with HSAs because they’re not actually health policy tools. They’re tax shelters.
Republicans will couch this as a break for lower income people, they can use their health savings accounts to help pay their (much higher than Obamcare) Trumpcare premiums. Which would be fine, if lower income people actually could afford to have HSAs to begin with. This, they believe, would look better politically than the gratuitous capital gains tax cut they were giving to the very wealthy.
And it would, if HSAs weren't just one more tax break for the well-off.
The accounts offer unprecedented tax-sheltering opportunities for high-income taxpayers because: (1) they can make tax-deductible contributions of up to $3,400 a year for individuals and $6,750 for families; (2) participants may put their contributions in stocks, bonds, or other investments, with the earnings accruing tax free; and (3) withdrawals are tax exempt if used for out-of-pocket medical or long-term care costs. No other savings vehicle offers all three tax benefits. For example, 401(k) contributions and earnings are tax-free but withdrawals are taxed. Moreover, with no income limits on HSA participation, affluent people whose incomes are too high to qualify for individual retirement accounts or who have "maxed out" their 401(k) contributions can use HSAs to shelter more funds.
HSAs mainly benefit higher-income people, who can most afford to save for health care expenses and will most likely contribute to HSAs. Furthermore, high-income people receive the biggest tax benefit for each dollar of HSA contribution because they face the highest marginal tax rates. These factors explain why 70 percent of HSA contributions come from households with incomes over $100,000, according to the Joint Committee on Taxation (JCT) (see chart), and why filers with higher incomes are likelier than lower-income filers to make considerably larger contributions as well as make the maximum annual HSA contribution.
Here's some context on who Republicans say they're "helping" by expanding HSAs. "After paying premiums and paying up front for needed medical care prior to meeting the deductible, many low-income people won’t have money left to put into an HSA," the Center on Budget and Policy Priorities. "Even if they can contribute, their tax benefit is minimal: at least 90 percent of the uninsured before the ACA were in the 15 percent tax bracket or lower, so at most they would save 15 cents in taxes for each dollar put into an HSA."
So these are the people who are both supposed to be saving in HSAs so that they'll have money to help pay their premiums, but can't afford either the premiums or to save. But boy, the people making over $100,000, things for them would work out just fine. As usual.
Trumpcare is a nightmare. Millions would lose their health insurance, rates will go up for women & people with disabilities and it ends Medicaid as we know it. Call your Republican senator at (202) 224-3121 and give them a very angry piece of your mind. Then, tell us how it went.