House Tax Plan Would Significantly Impact Older Adults and People with Disabilities

The House Republican tax plan is currently being debated by the Ways and Means Committee, and several of the provisions will have a devastating impact on older adults and people with disabilities. Most notably, the plan does away with the medical expense deduction, which allows people who spend more than 10% of their income on health care expenses to deduct the remainder of their medical expenses from their federally taxed income.

In 2015, about 8.8 million Americans used the medical expense deduction, which totaled nearly $87 billion. Of those who used the deduction, nearly 70% had annual incomes below $75,000 and more than half had a member of their household who is over 65 years old, according to an analysis of IRS data. The average medical expense tax deduction in 2014 was $9,958, according to the data.

Medicare Rights, along with other organizations, sent a letter to Congress urging them to protect this deduction. The letter highlights how this deduction helps people facing huge medical bills keep a bit more in their pockets – perhaps delaying enrolling in Medicaid, the state and federal program that covers healthcare and long-term care expenses for people with low incomes and limited assets.

The House tax plan also eliminates incentives for businesses to hire people with disabilities, including older Americans with disabilities and unemployed veterans. The current plan would even make it more costly for small businesses to hire people with disabilities and serve customers with disabilities by eliminating a tax credit for small businesses to become more accessible.

It also squeezes state and local budgets. This would put a strain on health benefits, social services, and other programs that older adults and people with disabilities need to live with dignity, while increasing taxes on seniors and people with disabilities who pay state and local taxes. Eliminating the ability to deduct state and local taxes will increase federal taxes for some, and make it harder for states to raise revenues to pay for essential services.

The House tax bill does all this, and still increases the deficit by $1.5 trillion because it massively cuts taxes for the wealthiest Americans by eliminating the Alternative Minimum Tax and Estate Tax and reducing corporate tax rates. Advocates caution that this may set up a “need” to cut spending by drastically changing and defunding Medicare and Medicaid, block granting or capping Medicaid, voucherizing Medicare, or raising the eligibility age.