Seniors exempted from new healthcare taxes

Senior citizens would not be subjected to new taxes on their medical amendments under an amendment adopted by the Senate Finance Committee Wednesday, thanks to Sen. Bill Nelson (D-Fla.).

Under current law, anyone who itemizes their taxes can deduct medical expenses that exceed 7.5 percent of their adjusted gross income in a year. The healthcare reform bill pending in the committee, which was written by Chairman Max Baucus (D-Mont.), would raise that threshold to 10 percent, thus raising $21.7 billion in new tax revenue.

Nelson argued that seniors are a vulnerable population that faces high healthcare expenses in spite of their Medicare benefits and should be able to continuing deducting expenses at the lower threshold. "We should not raise taxes on the seniors to pay for health reform," Nelson said.

Baucus endorsed the change to his bill. "This Nelson amendment makes good sense," Baucus said. As written, the amendment would only allow seniors to deduct medical expense at the lower level for four years but Baucus said that would change. "By the time we get to the floor, this is going to be permanent," he said of Nelson's amendment.

The committee adopted Nelson's amendment 14 to 9, with Republican Sen. Olympia Snowe (Maine) joining Democrats on the vote.

To cover the lost revenue from excluding those seniors' expenses from taxation, Nelson proposed not allowing employers to claim a business-expense tax deduction for the tax penalty they would pay if they do not offer insurance to their workers.

Republicans on the panel attacked the idea of raising the deductibilty threshold to 10 percent for anyone. "I think this is the worst idea in an ocean of bad ideas," Sen. Orrin Hatch (R-Utah) said. Senate Minority Whip Jon Kyl (R-Ariz.) offered an amendment to leave the current law in place but the committee rejected it on the same 14 to 9 vote, as Snowe again voted with the Democrats.