"Congress Stuffs Essential Tax Bill With Pork For The Wealthy"
In the coming days, Congress will likely pass a “tax extenders” bill to “renew popular expired tax breaks,” such as the “research credit, a deduction for tuition and other college expenses, and a deduction for teachers who spend money out of their own pocket for classroom supplies.”
But Congress has decided to use the bill for partisan purposes. In closed-door negotiations, Congress “added a tax break benefiting high-income taxpayers that was never passed by either the full House or Senate.” The measure would increase the amount that individuals could contribute to Health Savings Accounts (HSAs), “thereby allowing those who could make these additional contributions to shelter even more of their income from taxation.” A look at these HSAs:
– HSAs are disproportionately used by high-income individuals. The Government Accountability Office found “that the average income of HSA users was $133,000 in 2004, compared to $51,000 for all non-elderly tax filers.”
– The higher the participants’ incomes, the larger their tax-deductible HSA contributions. According to a GAO study, the “average HSA contribution made by participants with incomes exceeding $200,000 was more than double the average contribution made by participants with incomes below $50,000.”
– Many HSA participants are use their accounts as tax shelters. In 2004, the “majority of people with HSAs withdrew no funds from the accounts…and HSA participants in the focus groups that the GAO convened spoke of using their HSAs for tax sheltering purposes.”