So last night, as I was trolling the Drudge Report for the latest in election news and teacher-student sex scandals, I noticed an article tilted “These are the Top 5 Worst Taxes ‘Obamacare’ Will Impose in 2013.”
Apparently, the list was first authored by the Grover Norquist-founded Americans for Tax Reform, a Section 501(c)(4) lobbying group that opposes “all tax increases as a matter of principle.”
In running through the list, I came upon #2: The ‘Obamacare’ ‘Haircut’ for Medical Itemized Deductions, which read as follows:
Currently, those Americans facing high medical expenses are allowed a deduction to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). This tax increase imposes a threshold of 10 percent of AGI. By limiting this deduction, Obamacare widens the net of taxable income for the sickest Americans. This tax provision will most harm near retirees and those with modest incomes but high medical bills.
This, as you might expect, led to a spate of misspelled, grammatically incorrect reader comments about how Obamacare unfairly punished the elderly. There’s just one problem with this sentiment: it’s not accurate.
Yes, Section 213(a) of the Code was amended to increase the AGI threshold from 7.5% to 10% starting in 2013, meaning taxpayers will now have to generate medical deductions in excess of an extra 2.5% of their adjusted gross income before they begin reaping tax benefits. This much is true. But when the Americans for Tax Reform write — This tax provision will most harm near retirees — and readers pile on by decrying President Obama’s willingness to screw over the elderly — it tells me that these people didn’t actually read the new law.
Had they bothered to continue reading a few lines further into Section 213, they would have discovered that Section 213(f) was also amended, and it now provides:
(f) Special rule for 2013, 2014, 2015, and 2016.
In the case of any taxable year beginning after December 31, 2012, and ending before January 1, 2017, subsection (a) shall be applied with respect to a taxpayer by substituting “7.5 percent” for “10 percent” if such taxpayer or such taxpayer’s spouse has attained age 65 before the close of such taxable year.
In other words, the increase to the AGI threshold will not, as the AFTR’s report states, harm near retirees or the elderly, because for the next four years, the AGI threshold is not increased if either the taxpayer or the spouse is over 65. For all of those 65 and over in 2013, their medical expenses will be treated the exact same way in they were in 2012. And let’s be honest, in today’s economy, if you’re retiring before 65, you’ve got enough money that your medical expenses probably aren’t going to exceed 7.5, 10, or even 30% of your adjusted gross income.
Now that I’ve addressed that tiny bit of legislative minutiae and done my part to stem the spread of tax misinformation among people who are so rational they are still calling for the President’s birth certificate four years after his election, I can rest knowing that I’ve left the world a slightly better place.