Health Savings Accounts May Expand

, I highlighted some of the tax resistance tidbits that stacked up in my inbox while I was away in México. , some tax policy and budget news of possible interest to those of us doing tax resistance.

The biggest item of news was Dubya’s state-of-the-union push for expanded Health Savings Accounts. He made it enough of a priority that his partisans in Congress will probably work to try to make it happen, and, unlike his grandiose and botched Social Security plan, it’s a small enough nibble of a program that they might just be able to patch something together and put it on his desk.

One summary of Dubya’s plan goes like this:

Health Savings Accounts (HSAs). These are IRA-like accounts that must be used in conjunction with high-deductible health insurance. The proposals:

  • Double break for non-group high-deductible premiums. Individuals buying their own high-deductible health insurance — i.e., individuals with no employer plan — would be allowed a full above-the-line deduction for the premiums and a 15.3% refundable credit on the premiums paid. The credit is designed to give the individual insurance purchaser the same tax benefit as an employee with coverage through the employer.
  • Increase maximum HSA deduction to policy out-of-pocket maximum. Current law limits HSA contributions to the lesser of the maximum out-of-pocket costs under the plan or $5,450 ($2,650 for single coverage). The budget proposes to eliminate the dollar limits.
  • Refundable health premium tax credit for low-income individuals. A limited tax credit of up to 90% of premiums paid on high-deductible health policies would be available to single taxpayers with an AGI of up to $15,000. The credit would be 50% for taxpayers with up to $20,000 AGI, with the benefit phased out between $20,000 and $30,000. The credit would be refundable, which means it would operate as a subsidy. The credit is capped at $1,000 annually.

These items are designed to put individuals without employer coverage on the same tax footing as employees in terms of health care tax benefits. They are also designed to address criticisms that the HSA program is only good for wealthy taxpayers.

All other things being equal, this plan would be very good news for those of us tax resisters practicing The DON Method.

The latest budget to come out of the White House included a list of what it calls “tax expenditures.” The government takes money from people in taxes, and it also spends money on this and that, but then there’s this third category in which the government subsidizes one thing or another not directly but through giving tax breaks. It’s not quite government spending, but it’s something worth keeping track of.

To calculate it, they had to come up with some sort of fictional flat-tax baseline in which all income is taxed, and then figure out how much the government “loses” or “spends” by not taxing, say, charitable contributions or employer contributions for employee health insurance plans.

For more on this, see the Tax Foundation’s Tax Policy Blog.

The IRS finally finished crunching the numbers on their study of the “tax gap” — the difference between what they think people should have paid and what they did pay. The numbers were in-line with earlier estimates: “The IRS estimated that the gross ‘tax gap’ stands at $345 billion annually. The IRS recaptures about $55 billion of this through enforcement actions, leaving a net gap of $290 billion.”

The TaxProf Blog has a list of a number of papers that the Statistics of Income Division of the IRS released along with its “tax gap” report.

Constitutionalist tax protester Irwin Schiff’s lawyers are trying to convince the court that he’s insane, something his thousands of disciples probably wish they knew before they signed on to his theories.

Next time somebody talks about Big Government Democrats and salutes the Dubya Squad for starving the beast with its tax cuts, point them at this article in which Dead-Eye Dick Cheney brags that the Bush administration’s tax cuts have boosted federal government revenue:

Vice President Cheney said Thursday night that the verdict is in before the Bush administration’s new tax analysis shop has even opened for business: Tax cuts boost federal government revenue.

That assertion won applause from his audience at the Conservative Political Action Conference…