Americans for Tax Reform today challenged Massachusetts Senate candidate Martha Coakley to defend her support for a tax increase on families with special-needs children.  Coakley has endorsed the Senate healthcare bill, which contains a new cap on flexible spending accounts (FSAs)--disproportionately raising taxes on these families.

Under current law, there is no legal cap on FSA contributions.  Most people defer $10 or $20 per paycheck to pay for eyeglasses, co-payments, and non-prescription medication.  Many families, however, defer thousands of dollars per year into FSAs to pay for special needs education on a pre-tax basis.  The Senate healthcare bill’s $2500 FSA cap won’t affect typical families, but it will especially impact families with special-needs children.

“Martha Coakley supports this tax increase on special-needs kids because she only cares about, in her words, ‘getting taxes up,’ said ATR President Grover Norquist.  “Maybe she should put her loyalty to Washington bureaucrats aside for the moment and stop to consider the pain she is causing for families with special-needs children.”

If a median-income family in Massachusetts has a special needs child whose tuition is $10,000 per year, the tax benefit from deferring this money with an FSA is $3560.  Under the Coakley FSA cap, this tax benefit would decline to $890—a tax increase of thousands of dollars on a working family with high medical bills.

“In what universe does Martha Coakley live where she thinks that raising taxes on these families is a good idea?” continued Norquist.  “Only someone who is completely detached from the everyday lives of average Bay Staters could possibly support this boneheaded tax hike.”

The provision can be found on page 1999, section 9005 of the bill.

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Posted by Ryan Ellis on Thursday, January 14, 2010 1:58 PM EST

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